My goodness: Nigeria overtakes Ireland in Guinness sales
Category: Investors NewsBeat
August 30, 2007/ Guardian UK
Editors NOTE: Investors in the brewery sub-sector may want to read this piece of news and interprete it the best way they can. Does this mean that Guinness has more reasons to be the stock to watch or start worrying that with Nigeria the key growth centre, demand for a bigger share of the inflow will find its way out?
Read on anyway and make up your mind afterwards after talking with your financial advisor.
The News:Nigeria has overtaken Ireland as the second-largest market for Guinness as Diageo pushes the black stuff internationally
Although the world\'s biggest drinks company did not reveal precise numbers, it said net sales of Guinness in the year ending June 30 were up 18% in Nigeria.
Strong growth across Africa helped to make up for a decline in Britain - the stout\'s biggest market - and Ireland. Guinness sales fell 7% in Ireland and the volume drunk fell by 9%. In Britain, sales fell 4% as consumption dropped 6%.
Paul Walsh, chief executive, said: \"Outside these two territories, Guinness is growing extremely well, and that is the future of the brand.\" He attributed the surge in sales in Africa to a new television advertising campaign that promotes the drink as \"the home of greatness\".
Guinness sales in Ireland have been slipping for several years, leading to calls for Diageo to sell its beer business. The decline in sales in the UK and Ireland would probably have been even worse but for this summer\'s rain. Guinness drinkers often switch to lager in hot weather but, as Diageo pointed out, this has been less of a problem this year.
The US is the fourth-largest consumer of Guinness, with Cameroon fifth.
On the spirits side, sales of Johnnie Walker hit a record high. Diageo sold the equivalent of 15m nine-litre cases of the Scotch whisky in the last year, worth almost ÃƒÆ’Ã†â€™Ãƒâ€ Ã¢â‚¬â„¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¡ÃƒÆ’Ã†â€™ÃƒÂ¢Ã¢â€šÂ¬Ã…Â¡ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â£1bn.
Diageo, which was formed in 1997 by the merger of Guinness and Grand Metropolitan, also raised its guidance for organic growth for the current year to 9%. It recorded 8.7% organic growth in 2007.
But to hit this target the company will have to cope with significant rises in the cost of raw materials, as commodity prices are up across the board. Consumers have recently been warned to expect price rises for meat, bread, milk and cheese - beer and whisky could be next.
Nick Rose, Diageo\'s chief finance officer, said: \"We are feeling inflationary pressure on commodities. This is going to be a huge task to grapple with in the coming year.\"
Mr Rose said Diageo was seeing significant price rises for barley, corn, glass and aluminium. \"There may be a net inflationary impact on the business,\" he warned.
Diageo\'s pre-tax profits fell to ÃƒÆ’Ã†â€™Ãƒâ€ Ã¢â‚¬â„¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¡ÃƒÆ’Ã†â€™ÃƒÂ¢Ã¢â€šÂ¬Ã…Â¡ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â£2.095bn, from ÃƒÆ’Ã†â€™Ãƒâ€ Ã¢â‚¬â„¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¡ÃƒÆ’Ã†â€™ÃƒÂ¢Ã¢â€šÂ¬Ã…Â¡ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â£2.146bn in 2006, partly due to a fall in earnings from disposals. It plans to raise its dividend by 5% to 32.7p a share.
Shares in Diageo closed up 24p at ÃƒÆ’Ã†â€™Ãƒâ€ Ã¢â‚¬â„¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¡ÃƒÆ’Ã†â€™ÃƒÂ¢Ã¢â€šÂ¬Ã…Â¡ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â£10.42.
Diageo has begun reviewing the future of the St James\'s Gate brewery inDublin, which analysts say could be worth ÃƒÆ’Ã†â€™Ãƒâ€ Ã¢â‚¬â„¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¡ÃƒÆ’Ã†â€™ÃƒÂ¢Ã¢â€šÂ¬Ã…Â¡ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â£2bn. But Mr Walsh said: \"The value of the site is secondary to ensuring we have an efficient process in place.\" ÃƒÆ’Ã†â€™Ãƒâ€ Ã¢â‚¬â„¢ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¡ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¬ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â€šÂ¬Ã…Â¡Ãƒâ€šÃ‚Â¬ÃƒÆ’Ã¢â‚¬Â¦ÃƒÂ¢Ã¢â€šÂ¬Ã…â€œ