The key to Diageo's success is its focus on higher-margin, premium-priced alcoholic beverages. Brands include Smirnoff vodka, Captain Morgan rum, Johnnie Walker scotch and Seagrams whiskey.
Diageo generates its revenues from North America (29%), Europe (42%) and international markets (29%) including fast-growing China, India and South America.
While North America is both the most profitable and most developed market for premium alcoholic drinks, it is also one of the markets with the greatest untapped potential. In particular, the U.S. is experiencing a sustained increase in the youth market population (from legal drinking age to 30 years old).
In Europe, the number of people entering "young adulthood" is falling. Also predicted is a net exodus from the European working age population within the next 10 years.
Although Great Britain, Ireland and Spain now account for 60% of Diageo Europe's sales, the company anticipates attractive growth from France, Greece, Germany and notably Russia. Annual net sales growth in Russia currently exceeds 50%.
Diageo's international business segment comprises a culturally diverse group of geographies. Specifically these are Africa, Australia & New Zealand, Asia and Greater China, Latin America & Caribbean, the Middle East and last but not least India. In these emerging markets, the company's leading brands continue to excel with annual net sales growth well over 40% in Brazil, India and China.
And The Winner Is...
With annual revenues exceeding US$17 billion, Diageo has shown slow but steady growth over the past 5 years. Although Diageo has a high debt load when compared to its competitors, the company is among the most profitable alcoholic beverage producers generating the highest earnings for its shareowners.
Diageo's success is driven by the growing cohort of wealthy baby boomers, the most powerful consumer group in the world today. With deep pockets, this group isn't likely to stop enjoying premium drinks because of Middle East strife, North Korean missiles or African rebellions.
Diageo is listed on both the New York Stock Exchange(DEO) and the London Stock Exchange(DGE). With Diageo's diverse portfolio of popular premium drinks that are sold globally to a vast number of countries, one might consider adding a modest sampling of Diageo to diversify one's own stock portfolio.
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Source: www.diageo.com
