Diageo on track to gain half its sales from emerging markets
Diageo will beat French rival Pernod Ricard to the goal
By CFOWorld staff | CFO UK | Published 10:48, 11 June 12
Diageo looks set to secure half of its sales from emerging markets beating French rival Pernod Ricard to the coveted goal.
The British drinks giant is leading the race into growth markets ahead of Pernod as it snaps up producers of baijiu, cachaca and raki in China, Brazil and Turkey to drive sales in the world's fastest growing economies, but Pernod is hamstrung by massive debts taken on four years ago to buy Absolut vodka.
Diageo's next goal is a firmer grip on the world's biggest tequila producer, Jose Cuervo, which would provide important access to the emerging Mexican spirits market and a stronger offering there to go with its Johnnie Walker whisky and Smirnoff vodka brands.
Both rivals make around 40 percent of their sales in emerging markets and analysts expect Diageo to be first to hit the 50 percent mark boosted by recent deals, while Pernod admits it is some time away from joining the serious acquisition trail.
Diageo chief executive Paul Walsh says he is seeing faster growth in emerging markets than his rivals driven by buoyant Scotch whisky sales and expects to meet his target to get half group sales from these fast growing markets by 2015.
"We are absolutely on track. I will be personally disappointed if we do not get there earlier," he said, stressing growth was coming from a wide range of emerging markets, giving him confidence that this performance was set to continue.
The London-based group is tapping into the strong growth in local spirits sold for under $10 a bottle which make up 80 percent of the worldwide spirits market, and which also gives it a distribution base to introduce its top international brands.
Diageo's sales grew in the last half of 2011 by 8 percent while those in emerging markets were up 18 percent and set to be boosted further as it bought Turkey's Mey Icki for £1.3 billion and a stake in China's Sichuan Shuijingfang last year, and Brazil's Ypioca earlier this year.
Diageo is looking at a potential listing of its shares on the Hong Kong stock exchange to help boost its expansion plans in Asia, a company spokesman said.
Pernod's chief executive Pierre Pringuet has ruled out big acquisitions over the next year as the company cuts debts after buying Absolut owner Vin & Sprit in 2008 for €5.7 billion euros ($7.2 billion), but expects to hit the 50 percent mark in two to three years.
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