Drinks giant Diageo (LSE: DGE.L - news) will hit its target of generating half of its revenue from fast-growing emerging markets in 2013, two years early, amid booming sales in Africa, Asia and Latin America.
The maker of Johnnie Walker whisky and Smirnoff vodka posted a 5pc rise in half-year net sales to £6bn despite a severe slump in Southern Mediterranean markets such as Spain. Price rises helped push pre-tax profit up 5pc compared with the same period last year, to £1.96bn, leading to a 9pc increase in the interim dividend to 18.1p.
Growth was particularly strong in Latin America and the Caribbean, where net sales surged 18pc during the six months to December 31. The group also reported sales growth of 5pc in the more developed US market, as North American drinkers buy upmarket brands such as Cîroc vodka and Bulleit Bourbon (Paris: FR0004548873 - news) .
Paul Walsh, chief executive, said Diageo was “way ahead of the curve” on meeting its target, adding: “This year we will be at 50pc of our revenues coming from new high-growth markets. Most people, myself included, thought that would be 2015.”
The company is scaling back investment in embattled southern European markets, where net sales fell 19pc during the half-year.
In the UK, sales were flat as Britons continue to rein in spending. But Mr Walsh said the problems in southern Europe were “inconsequential” in the context of the wider group.
From the second half of the year, Diageo will report results from harder-hit Western Europe separately from high-growth markets in Eastern Europe, Russia and Turkey for the first time.
Mr Walsh used the results to warn that countries in the European Union are in danger of being “outcompeted” unless Brussels reins in the bureaucracy it imposes on businesses.
“Let us make sure that we ease the regulatory burden, which many parts of the world are not facing, whether that is workers’ hours or a myriad of regulations that get created in Brussels and handed down to member states,” said the drinks chief, a former member of the Prime Minister’s business advisory group.
“Also let’s cut back on the sheer number of staff that we have to contend with in Brussels. If we can do that you will see improving competitive performance in all European member states.”
Diageo recently ended takeover talks with the Jose Cuervo tequila brand, and said it would end a long-running distribution deal with the Mexican company.
Mr Walsh said he could “organically” fill any gap in Diageo’s portfolio following the deal’s termination in June, by producing its own tequila.
The drinks giant is currently awaiting regulatory approval for a £1.3bn deal to take a majority holding in India's United Spirits.