We have said for several months that Diageo's DGE premium positioning means that any rebound in demand may be sluggish, and the firm's interim trading statement for the first half of fiscal 2011 bears this out. We're maintaining our fair value estimate.
Internal revenue grew 5% in the first half, in line with our expectations. Diageo remains an emerging markets story, with the Asia Pacific region driving growth. Interestingly, the firm said that the North American market had stabilised from the prior year. The fragile economic recovery in Europe is taking its toll on consumer confidence, however, and we expect further weakness in the next six months at least, as austerity measures in the key markets of Spain, Greece, and the UK begin to bite.
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