LATIN AMERICA: Diageo to see five-year sales surge - analyst

By | 8 November 2012

Diageo held an investors conference in Miami this week

Diageo held an investors conference in Miami this week

Diageo looks set to boost its sales in Latin America by 75% over the next five years as its Scotch portfolio taps into the region's burgeoning middle-class, according to an analyst.

LatAm is the group's fastest growing region, with the company seeing itself as twice the size of its nearest competitor, analysts Nomura said in a note yesterday (7 November). And with a strong outlook in most of its markets in the region, profit growth could even outpace sales, Nomura said.

“(Diageo) has just completed its five-year plan for the region,” the analyst said following Diageo's two-day investor conference in Miami this week.

“This includes strong growth for most countries in the region, which we estimate equates to at least a 75% increase in net sales over the next five years. This would suggest that annual revenue can increase by low teens with profits potentially faster.”

Diageo's growth will be driven by the new middle-class “which will aspire initially to standard Scotch and local premium brands”, the note said. However, an increase in affluent consumers will help push luxury brands.

Brazil is the largest market for Diageo's Johnnie Walker Red Label Scotch whisky and the company accounts for eight out of 12 Scotch brands sold in LatAm, Nomura said.

Meanwhile, the group is upping its involvement in local brands such as Pampero and Cacique rums in Venezuela and Ypióca cachaça in Brazil, it said

A Nomura analyst told just-drinks Diageo's nearest competitor in LatAm is likely to be Pernod Ricard.

Diageo also believes a move in LatAm consumers' mindsets towards greater independence “favours spirits at the expense of beer”, Nomura said.

At the Miami conference on Tuesday, Diageo said it will add six more Brazilian cities with populations of over 1m to its distribution footprint between now and the end of next year. 

Expert analysis

Brazil - ISA Country Report

This report contains detailed forecasts and analysis for Brazil, including trade and investment analysis, economic forecasts, political risk assessments and demographic trend analysis. Each ISA Country Report contains detailed economic data and forecasts, analysis of trade and investment opportunities and coverage of the key political issues facing the country. Moreover, each ISA Country Report is easy to integrate into reports, presentations and newsletters.

Sectors: Beer & cider, Emerging markets – BRIC, Spirits, Wine

Companies: Diageo, Johnnie Walker, Pernod, Ricard

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