Irish market hampers Diageo

Adjust font size:

Manufacturing News, Source : TheManufacturer.com
Published : 31 Aug 2006 13:31
Free whitepapers: Achieve Lean Success | Supply Chain Solutions

Drinks giant, Diageo, which has reported a six per cent rise in operating profit, has blamed challenges in the Irish market for poor growth in its European operations.

The world’s biggest alcoholic drinks maker, Diageo, has reported annual pre-tax profits of £2.1 billion for the year up to 30 June, up from £1.9 billion for the same period a year ago.

The company reported that the American market continued to outperform all others, but in Europe, the decline in the ready to drink segment and the challenges inherent in the Irish beer market had adversely impacted top line growth. The spirits brands in Europe and the beer brands outside of Ireland had, however, performed well, and cost initiatives implemented in the European operations during the year had improved operating margins and driven operating profit growth.

The poor performance in Ireland, where volume declined by three per cent, was blamed on continuing changes in market dynamics from on to off trade, high levels of competitor investment, and consumer migration to value brands. Volumes in beer were down 6 per cent, although this was partly offset by growth in wine and spirits, where volume grew 18 per cent and 7 per cent respectively.

Guinness, the national drink of Ireland, was impacted by increased levels of competitor investment and the movement to the off trade where its share is lower. This led to an eight per cent decline in the volume of Guinness, while net sales declined three per cent, offset by price increases introduced in June 2005 and May 2006.