Diageo braced for challenging 2010

Net sales increased by 15% to £9.3bn for the year ending 30 June 2009. Profit before tax decreased 3.7% to £2bn and the company has recognised 2010 will be “challenging”.

Sales of Smirnoff, Captain Morgan, Jose Cuervo, Guinness, Buchanan’s, Windsor, C_roc, Cacique and Harp all grew, supported by innovation and effective marketing. The addition of Ketel One vodka, Zacapa rum and Rosenblum Cellars wine also widened the company’s portfolio during the year.

“We’ve launched new smaller pack sizes on a number of big brands to keep them accessible to consumers who’ve less to spend, but do not want to trade down,” said chief executive Paul Walsh.

The company announced £120m restructuring initiatives in February, which was followed by a second £40m initiative in July.

“We took action quickly to manage these difficult times, reducing our cost base and refocussing marketing spend as consumer trends changed,” said Walsh.

Diageo Scotland is currently in talks with a Scottish government taskforce over the future of its Johnnie Walker bottling site in Kilmarnock.

This week the taskforce proposed that Diageo should develop a new, smaller bottling plant in Kilmarnock in order to retain jobs in the area.

It follows Diageo’s announcement in July that it would cut more than 700 packaging jobs out of a total of 900 redundancies at its Scottish operation to ensure long-term sustainability.

The Kilmarnock packing plant in Ayrshire will be closed by the end of 2011 and Diageo will consolidate packing operations with its other facilities in Glasgow and Fife.

Last month more than 20,000 protestors marched through Kilmarnock against Diageo’s planned closure of the bottling site.

DIAGEO FULL-YEAR RESULTS
Results for the full-year ending 30 June 2009, £m

Turnover 9,311 (2008: 8,090)
Operating profit 2,443 (2008: 2,226)
Profit before tax 2,015 (2008: 2,093)

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