Guinness firm sees profits rise

DRINKS giant Diageo reported stronger half-year profits today despite a six per cent fall in the volume of Guinness sold in Europe over the period.

The company blamed the the decline in popularity on the impact of economic troubles in Ireland, where sales of the stout were down eight per cent, and the preference of football fans to drink lager during the summer World Cup. The ongoing trend of pub closures in the UK also hurt sales of Guinness, the company added.

Overall sales in Europe were down three per cent in the six months to December 31, but Diageo said this was more than offset by strong growth in North America and in emerging markets as pre-tax profits rose 16 per cent to £1.61bn.

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The company behind Smirnoff vodka, Tanqueray gin and Johnnie Walker whisky increased marketing spend by 10% to £813m as it focused its efforts on key spirits brands in the United States and on new markets.

The biggest driver of overall sales growth of four per cent came from Johnnie Walker, which grew sales by 10 per cent on the back of strong demand in emerging markets.

Diageo said the UK continued to see a shift in sales from pubs and clubs towards trade in supermarkets and off-licences.

The company maintained its share of a flat UK spirits market but sales of Smirnoff were down 16 per cent as a result of stock building in the previous financial year as customers prepared for duty increases in the June budget. Price-focused consumers also bought more of the drinks brand on promotion, it added.

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Among other leading UK products, sales of Baileys grew two per cent and gained almost three percentage points of market share after Diageo launched its “Let’s do this again” television advertising campaign in the period.

Wine sales in the UK grew 18 per cent as price increases on Blossom Hill combined with strong sales of higher value products.

Despite the economic weakness in much of Europe, Diageo chief executive Paul Walsh said he was more confident that the company will improve on its rate of profits growth in the full year. Momentum is building in our business,” he added.