Diageo Continues to Dominate Market

Analysts predict Diageo will continue to generate high returns for investors over the next decade

Thomas Mullarkey, CFA 15 August, 2013 | 9:29AM

Diageo has built an enviable business empire. We believe that the firm's unmatched portfolio of spirits combined with its vast distribution network, including thousands of dedicated sales people in the US, would be very difficult and expensive for any competitor to duplicate and consequently results in a wide 'economic moat'. This means it has a sustainable competitive advantage over its peer group.

Longer term, the company is making investments to grow its book of business in emerging markets such as India and China. We expect these seeds of growth will benefit investors in the long term as Diageo gains additional distribution scale in these fast-growing regions and over time as the company continues to shift additional global consumers into more premium and higher-margin brands.

In our opinion, these competitive advantages and growth prospects justify an earnings valuation above the market average.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Diageo PLC2,775.00 GBX-0.27

About Author

Thomas Mullarkey, CFA  is an equity analyst at Morningstar.

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