Diageo, the world's biggest spirits group, said trading in Europe was weaker as it met forecasts with a 5% rise in first-quarter underlying sales driven by growth in emerging markets.
The British maker of Guinness, Smirnoff vodka and Captain Morgan rum also stuck to its forecast to see higher profit growth this year than last as Russia, Latin America, Africa and Asia help offset difficult conditions in Europe.
Chief executive Paul Walsh said today the group faced tough trading in Greece, and Spanish net sales were down markedly year-on-year, reflecting the debt crisis crippling these southern European economies.
'The consumer environment in Europe is slightly weaker than we expected in the prior year,' Walsh said in a trading update for its July-September first quarter.
The European region produces nearly a third of the group's profit. Spain is one of Diageo's three key markets in Europe along with Britain and Ireland, which together make up over half of the group's European sales.
The group reported a strong performance from operations in Latin America, Africa and Asia Pacific, while North America posted stronger growth than in the previous year.
The group's growth, met forecasts for an average 5% rise in underlying sales in and showed a pickup in growth from the 2% seen in its last year to end-June 2010.
Analysts said Diageo's strong recovery in sales reflected a very poor previous first quarter when sales fell 6% in the midst of destocking caused by the global economic downturn, and continued the recovery seen so far in 2010.
Diageo suffered throughout most of 2009 as the global downturn prompted drinkers to move to cheaper tipples and wholesalers to use up stocks rather than order new, before trading started picking up the early months of 2010.
The company reiterated its annual target for operating profit to grow faster in the year to June 2011 than the 2% in the previous year, pinning its hopes on emerging markets.
Rival Pernod Ricard reported similar sales growth to Diageo at 2% in the year to June 2010 but double the operating profit growth at 4%, as it saw signs of good growth in markets such as Asia and Latin America.
The Paris-based maker of Absolut vodka and Chivas Regal whisky will report its first-quarter (July-Sept) sales on October 21, and give its annual profit target for its year to June 2011 at its annual general meeting on November 10.
