Britain's Diageo group, the world's biggest alcoholic drinks group, warned today that its costs will rise faster in its next financial year compared with its current year due mainly to increases in energy and grain costs.
The London-based group said its input costs will rise by 3% or around £90m sterling in its current year to the end of June 2008, but the rise would be higher in its following year to end-June 2009.
'Next year's rise will be above £90m, but we hope to mitigate this rise by a number of measures,' said Diageo's managing director for global supply and global procurement David Gosnell.
Gosnell said the group hopes to reduce the impact of this rise by greater efficiencies in its operations, such as its bottling plants, reducing the level of its inventory stocks and better procurement of its key inputs.
Diageo, which makes Smirnoff vodka, Johnnie Walker whisky and Guinness beer, has seen the biggest commodity price rises from European natural gas, grains such as wheat, barley and corn, and also crude oil.
It expects many of these commodity prices to be 'challenging' in its 2008/2009 financial year.
Last week, the company said it would close breweries in Kilkenny and Dundalk after a review of its Irish businesses, but brewing of Guinness would continue at St James's Gate.
