Diageo slashes growth targets

Diageo, the world’s biggest alcohol group, has cut its growth targets for the next year despite reporting a 9% rise in operating profits to £2.2bn for the year to June 30.

The company, which owns brands including Guinness and Smirnoff, has reduced its operating growth target from 9% to between 7% and 9% for next year due to the weak economic environment, particularly in Europe, and rising input costs.

It saw just 3% growth in Europe, including the UK, over the period despite increasing marketing spend in the region by 6% – the biggest increase across all its markets. Smirnoff and Johnny Walker performed particularly well in Europe with sales up by 5% and 11% respectively.

In North America it has seen strong performance of its priority and reserve brands but weak sales in value brands. Its marketing spend in this region was up by 3% and its net sales rose to 5%. While in Asia Pacific, its overall performance was affected by a number of factors, including the loss of its import licence in Korea for part of the year, and operating profit went down by 12%.

Its iconic Guinness brand grew net sales by 6%, with over 50% of that growth coming from Africa although it also continued to perform well in the US and Europe.

The company increase marketing by 5% overall and has invested in some “great campaigns” that have helped its brands to grow their market positions, although it has reduced marketing spend on ready to drink products to maintain the profitability.

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