INDUSTRY data showing strong sales of its ready-to-drink brands in the US helped Diageo to bounce back from recent selling ahead of next week’s full-year results from the Johnnie Walker and Guinness drinks group.
Ready-to-drink brands enjoyed booming sales when they first appeared in the US two years ago, with Diageo’s Smirnoff Ice making a regular appearance among the bestsellers. However, the latest data from AC Nielsen, the market research agency, indicates that current US sales are now eclipsing those of 2002. Figures for the four weeks to August 7 showed Diageo’s ready-to-drink brands enjoying year-on-year volume growth of 36.3 per cent, the fifth consecutive month of growth above 35 per cent.
That performance continues to be driven by Twisted V, the latest variant on Smirnoff Ice, with growth in the year to date making Diageo’s US ready-to-drink business 14 per cent bigger than in 2002. With Credit Suisse First Boston using the data to repeat its “outperform” recommendation ahead of next week’s full-year results, Diageo rose 14½p to 680p.
AC Nielsen’s research also underpinned South Africa’s SABMiller, 11p dearer at 680p. Its figures showed a 16.7 per cent year-on-year increase in US volumes of Miller Lite, the low-carbohydrate beer, with prices up 3.2 per cent. CSFB suggested that such continued strength in the US and minimal exposure to weak European beer markets make SABMiller the best choice among brewers in the third quarter.
However, Scottish & Newcastle, the Foster’s and Kronenbourg brewer, rose 5¾p to 400¾p, despite suggestions that UK lager sales continue to slide. Having taken soundings from the pub industry, Stuart Price, beverages analyst for Panmure Gordon, believes like-for-like lager sales are currently negative, reflecting both strong comparatives last year and poor summer weather, whereas like-for-like branded ale volumes are positive.
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Mr Price thinks such a pattern is a reversal of the trend seen up until the Euro 2004 football championship, when pub lager volumes rose 2 per cent and ale fell 4 per cent With the UK accounting for 38 per cent of S&N’s earnings, Mr Price thinks its second-half results could be weaker than expected, and yesterday repeated his “sell” advice. The FTSE 100 had added 54.5 points by the late morning, helped by an easing of the oil price, but finished 36.1 points better at 4,405.3.
Tomkins put on 7½p at 259p as Dresdner Kleinwort Wasserstein moderated its stance from “sell” to “hold” ahead of Thursday’s interims from the refashioned engineer. The German broker had advised caution last month on concerns of a slowdown in the automotive sector, but suggests an increase in the dividend this week will be taken positively.