Business

Asia will drive growth, says spirits maker Diageo

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Media captionThe boss of the whisky distiller Diageo explains why he's looking to Asia for growth

Despite the recent volatility in its Asian business, the chief executive of the world's largest spirits maker, Diageo, says 50% of its products' sales growth will come from the region.

The fundamentals in the region were still very strong, Chief Executive Ivan Menezes told the BBC.

Factors such as 60 million people in the region turning the legal drinking age every year will drive that growth.

A crackdown on extravagant spending in China dented Diageo's sales last year.

The British firm reported lower-than-expected sales for the second half of 2014 in January at £5.9bn ($8.7bn), while its profits fell by 18% to £1.7bn.

In China, the company said sales of Scotch whisky were down 22% as a result of the government's austerity drive.

Asian growth

Mr Menezes said Asia accounted for 20% of Diageo's current business. He sees that growing to 25% with good growth prospects in China, India and South East Asia.

"Our focus in China is to build a consumer-led business, to get our brands resonating with the consumers," he said.

"It's a very attractive market as the emerging middle class is yet to come through strongly."

Diageo makes Johnnie Walker whisky, Smirnoff vodka and Guinness, as well as a number of malts.

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'Bright spots'

With low growth in developed markets of the US and Europe, Diageo is turning to emerging markets to drive growth in the next decade.

Mr Menezes said Africa and India, in particular, were "hugely attractive" markets, because the penetration of spirits among the growing middle class was still very low.

"When consumers cross about $5,000 a year in purchasing power terms in the middle class, that's when its very attractive for our business," he said.

"The next 10 years about a billion consumers are going to cross that threshold, so I see those markets really being big difference-makers for Diageo in the next decade."

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