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Analysts speculate over Diageo results

The drinks industry and beverage analysts alike are awaiting Diageo's results, due out on Thursday, with baited breath, writes Sheetal Mehta.

Speculation is that the drinks giants will have to raise the price of scotch, having seen a £100 million rise in its costs for items such as grain, energy, glass and packaging over the past year.

At the same time, while the interim statement of 9% organic growth for the current fiscal year is expected to still hold good, speculation remains over how the current global economic climate is affecting operations.

According to some analysts, it may still be too soon to see what affect a slowing economy is having on the drinks giants. According to beverage analyst Bruce Davidson of Blue Oar Securities: ³We've only seen three or four months of difficult trading in the US so Diageo can still hide behind the numbers. It may not be until February next year that we see the real results."

Davidson added: "The US accounts for around 40% of its operating profit. It¹s where they've pushed premiumisation. But Pernod and Diageo have really only emerged since after the last recession in the 1990s. So what no-one knows is how robust the push for premiumisation will be.

"Within Diageo's results what we can at least look at is how that organic volume growth looks against the organic value growth, If premiumisation is working we would expect value to be in the order of 2% higher."

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