U.S. and emerging market drinkers lift Diageo sales

LONDON Wed Oct 17, 2012 6:14am EDT

A man walks past barrels outside the Diageo Shieldhall facility near Glasgow, Scotland August 26, 2010. REUTERS/David Moir

A man walks past barrels outside the Diageo Shieldhall facility near Glasgow, Scotland August 26, 2010.

Credit: Reuters/David Moir

LONDON (Reuters) - Diageo (DGE.L), the world's biggest spirits group, posted a 5 percent rise in underlying quarterly sales, driven by demand for brands including Smirnoff vodka and Captain Morgan rum in the United States and across emerging markets.

The Britain-based group, which posted a 9 percent rise in the same period in 2011, said on Wednesday it had made a "solid" start to its financial year in the July-September first quarter, with volume up 2 percent.

Diageo shares were down 1.8 percent at 1,750.75 pence at 0955 GMT.

Underlying quarterly sales in North America, which accounts for around a third of group sales, grew by 6 percent. Sales rose by 16 percent in its Latin America and Caribbean region, 11 percent in Africa and 2 percent in the Asia Pacific.

Europe declined by 1 percent as double-digit percentage growth in sales across Turkey, Russia and Eastern Europe was dragged down by weak trading in western and southern regions, with consumer demand in France hit by January's duty increases.

Underlying sales exclude the impact of acquisitions.

The maker of Johnnie Walker whisky, Guinness beer and Tanqueray gin expects half its turnover to come from fast-growing Asian, African and Latin American markets by 2015 compared with nearly 40 percent in its last financial year.

Diageo is in talks to acquire a stake in Indian billionaire Vijay Mallya's United Spirits Ltd (UNSP.NS), reviving an on-off courtship that would ramp up its presence in the world's largest whisky market.

The group, which has long coveted an expanded presence in India, is looking initially to buy a 15 percent stake from Mallya's UB Group, which owns about 28 percent of United Spirits, and a further 10 percent from other shareholders, one banker familiar with the matter told Reuters last month.

As part of its growth strategy, Diageo is also believed to be eyeing the acquisition of a minority stake in Mexican tequila maker Jose Cuervo from its owners, the Beckmann family.

Diageo's arch rival and world No.2 spirits group Pernod Ricard (PERP.PA) reports on its first quarter on October 25. (Reporting by Neil Maidment; Editing by Rhys Jones and Mark Potter)