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Big brands lift Diageo sales

By Chris Mercer , 29-Jun-2006

Blockbuster brands helped the world's largest alcoholic drinks firm, Diageo, to a six per cent sales rise over the last year, but trading in Europe remains tough.

International brands like Smirnoff and Johnnie Walker have driven growth for Diageo over the last year, the group said in a trading statement before its full year results release in August.

Diageo's performance has beaten some analysts' forecasts. Operating profit was up seven per cent on the year before, it said, suggesting the group has largely contained rising input costs.

Paul Walsh, Diageo chief executive, said: "As the year closes we have successfully delivered on our objectives. We are building a superior position in North America, investing strongly behind our brands in International and continuing to reduce costs in Europe."

Big spirits brands have increasingly pushed sales forward for the major alcoholic drinks firms.

Pernod Ricard, Diageo's biggest rival, recently announced "spectacular" double-digit growth for its Chivas, Jameson, The Glenlivet and Martell brands for the second half of 2005.

Most of the growth for Diageo and Pernod has come from North America and Asia.

Diageo said this week the consumer environment in Europe remained "subdued". This, together with increased regulation, "continues to have a negative impact on beverage alcohol sales", it said.

The group has also been hit in Europe by the shrinking market for Scotch whisky in Spain, and disruption in Russia, where problems implementing a new duty stamp system for spirit drinks have been holding up supplies since January.

Diageo added that sales of ready-to-drink brands have also continued to fall in Europe.

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