Diageo leads Pernod in race into emerging markets

Sun Jun 10, 2012 10:40am EDT
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By David Jones

LONDON (Reuters) - British drinks giant Diageo (DGE.L: Quote) is leading the race into emerging markets ahead of French rival Pernod Ricard (PERP.PA: Quote) and looks set to be first to get half its sales from these growth areas as it serves drinkers from Moscow to Mumbai.

While Diageo has been snapping up producers of baijiu, cachaca and raki in China, Brazil and Turkey to drive sales in the world's fastest growing economies, 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 pounds ($2 billion) and a stake in China's Sichuan Shuijingfang 600779.SS last year, and Brazil's Ypioca earlier this year.   Continued...