Diageo boosts results with sales in emerging markets

Diageo announced a 5% growth in annual profits today, an increase that Chief Executive Paul Walsh largely attributes to its activities in emerging markets.

While sales fell in Greece, Spanish and Ireland (all economies that have struggled in the last few years), Diageo’s acquisition of the leading Turkish spirits company Mey Icki, and its performance in North America and Asia-Pacific have offset the downturn in European trade.

This makes them the latest in a line of successful global companies who are spreading the risk of underperformance in developed markets such as Western Europe by expanding into countries further afield, or the path less trodden by competitors.

Walsh expressed confidence that Diageo could still find areas of growth if there was another global recession, saying that the company was “”not immune from a fragile global economy.Thanks to our strong brands, we are able to seize opportunities in emerging markets.”

Diageo’s international growth model is based on acquisition of brands with a strong presence in the target market, which gives them a more rapid path to market in a new economy. Branching out where other companies in the same field do not already have a market share can be a good route to rapid growth.

As Miles Templeman, Director General of the IoD puts it: “With the right strategy, business of all sizes can benefit hugely from international expansion.”