Diageo hangover could be good news for economic growth

DRINKS MAKER DIAGEO'S (Johnnie Walker, Smirnoff, Guinness) share price dropped almost 5% below expectations on release of half-year results. All is not doom and gloom however. European consumers may be adopting a more temperate lifestyle but Russian and Asian drinkers are continuing their collective bender showing that Diageo’s brand building and sponsorships in the former Soviet countries, India and China are paying off. Even the share price fall has to be seen in context. During recession investors look for safe haven stocks like drinks and supermarkets which are largely immune to low growth in the economy. As the green shoots of recovery appear they switch to more exciting sectors which promise higher yields and it is this market sentiment that is driving the smart money back to financial stocks and emerging markets. - 11/2/2011

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