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China to drive Diageo growth in Asia Pacific

Diageo expects strong growth in China to drive recovery in the Asia Pacific region.

The world’s biggest drinks company is anticipating growth in excess of 10% in China as drinkers consume more Johnnie Walker Scotch and Guinness.

Diageo’s Asia Pacific chief Gilbert Ghostine told Reuters that he can foresee all economies in the region, except for Japan, rebounding strongly and is expecting a sales rise of close to 10% across the region in the financial year to the end of June 2011.

The region’s performance will be underpinned by strong growth in China, India, Vietnam and Indonesia, according to Ghostine, who expects sales to rise by a high single-digit percentage rate this year compared to just 1% rise in the financial year to June 2010.

Ghostine said: "Consumer confidence is returning quickly to Asia. Excluding Japan, the economies of Asia are rebounding back very quickly.”

The company achieves 10.4% of its total sales in the Asia Pacific region, accountable for just 6.4% of the group’s overall profits, but it is reinvesting heavily in the area in anticipation of strong growth this year.

Ghostine said Diageo’s Chinese sales grew over 10% in the first six months of 2010 and he expects a similar performance in the year to June 2011.
"In China there are 20 million new consumers who reach the legal drinking age each year. There is a very big aspiration for international spirits," he said.

Meanwhile, Diageo GB has announced it is planning to invest up to £50m on advertising and marketing for its brands in the run-up to Christmas as it seeks to recover ailing retail sales.

The company is set to spend £4.6m alone on the second phase of the "Be There" campaign for Smirnoff vodka, spanning TV, social media and experiential activity.

Outdoor advertising for the brand under the "Why Compromise?" banner will be launched in 16 cities across the UK to drive awareness of the entire Smirnoff range, including Smirnoff Lime, Smirnoff Green Apple and Smirnoff Blueberry.

Diageo is also set to invest £4.5m in the Bailey’s brand, pushing the launch of its new hazelnut variety, while a £4m campaign for its entire cream liqueur range will run from September through to December.

The marketing push comes in the wake of a 2% fall in net sales in western Europe for the year to the end of June.

Alan Lodge, 22.09.2010

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