People Drink in Tough Times? Not True: Diageo CEO

PUBLISHED: Tue, 02 Aug 2011 08:54:24 GMT

Antonia Oprita

Source: People Drink in Tough Times? Not True: Diageo CEO

Developing markets will make up half of the world’s biggest liquor maker’s revenue in the next three years, as their consumption is rising while in some developed states consumers are suffering, the CEO of Diageo, Paul Walsh, told CNBC on Tuesday.

In Europe, Germany is doing well and Benelux (Belgium, Netherlands and Luxembourg) is “fine,” but Greece and Spain are suffering, Walsh said.

“In our business, many people joke with me that you’d think that when times are though people will drink more. Well, that’s clearly not the case,” he said.

Emerging markets are doing well, with sub-Saharan Africa providing double-digit growth for Diageo constantly over the past 10 years, Russia doing well and, in South America, Brazil rising, Walsh said.

“I think also Brazil over the last few years continues to go from strength to strength,” he said.

But Pedro De Noronha, managing director at Noster Capital, warned of hidden dangers in Brazil.

“I think Brazil’s time is now but I think they have a huge issue – their currency is becoming a real issue because Brazil is losing all its competitiveness,” De Noronha said.

“If I had earnings coming from Brazil, I’d be very worried about the potential strength of the real,” he added.

The US is also a big market for Diageo and a “two-speed economy” is emerging there, Walsh said.

“You’re going to certain restaurants [in the US], you can’t get a reservation,” he said.

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