just On Call: Europe “not getting any easier” for Diageo
Western Europe will continue to drag on Diageo's performance for some time yet
The economic strife affecting western Europe is continuing to give Diageo a headache, with uptake in the south of the region in particular bouncing along the bottom.
Announcing its first half figures earlier today (9 January), the drinks giant boasted a strong set of numbers from the emerging markets of Asia Pacific and Latin America. But, a 2% slip in volumes and net sales for the six months to the end of December in Western Europe dominated press coverage of the firm's performance.
Speaking to media at a results briefing in London today, Diageo's president of Europe, Andrew Morgan, warned that a return to growth in the region was still a way off. “I've said before that it will take us a couple of years to get back into sustained growth in Europe,” Morgan told journalists. “The outlook is looking a bit less certain now than nine months ago. Things are absolutely not getting any easier for us in many parts of Europe. We're not seeing any improvement at all in consumer uptake in southern Europe.
“We've made great progress in stabilising the business and getting it out of the decline we suffered in our last financial year,” Morgan added.
When asked how effective he felt the 9% marketing spend increase for the region in the first half had been, Morgan clarified: “Remember, Europe includes the high-growth markets of Russia, Eastern Europe and Turkey,” he said. “We've seen a very polarised picture here. We've done a lot of very detailed … work on where we can get great returns for our marketing in Europe, and that's delivered quite a polarised set of outcomes.
“We've got a 33% increase of our marketing in Russia for instance, and we've been reducing our marketing spend in places like Greece and Spain where the consumer is finding it tough to get out there and buy our products. There's no point spending a lot of money on marketing in markets like these.”
Looking to the short-term future for the region, Morgan remained positive but realistic: “We're continuing to improve brand equity and maintain market share in key categories around Europe,” he said. “That's a very important priority for us.
"It's tough to call; it's not getting any easier. I would not suggest that we are suddenly going to find ourselves with a high-growth business in Europe – it's hard yards for the foreseeable future.”
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