DGE Diageo Plc

Diageo PLC (DGE.LN) Monday said sales in Greece could be hit should the country exit the euro, even as the world's biggest liquor maker by revenue stands ready with contingency plans amid Europe's sovereign debt crisis.

"There could be a marked impact on sales in Greece [should an exit occur]," Andy Fennell, Diageo's chief marketing officer, told reporters at a briefing.

Economists and foreign companies are concerned that an exit would lead to rapid depreciation of the drachma--the currency that Greece would adopt thereafter--hitting trading of businesses like Diageo, which will face rising import costs. The drinks giant is totally reliant on imported spirits into the country, including whisky, gin, vodka and tequila.

Still, Fennell said Diageo is vigilant and well prepared to deal with any fallout from a Greek exit, amid wider concerns for the future of the European single currency, including any potential contagion across troubled Southern European economies like Spain and Portugal.

Fennell also noted that Greece represents less than 1% of the group's total global sales.

Diageo's sales in Greece have fallen around 50% in the last three years, as a crimp on domestic spending due to austerity-led tax increases, spending cuts and unemployment hits demand for premium spirits. Still, Fennell said the company is gaining share and outperforming the sector in challenging trading conditions, including for purchases of Johnnie Walker, one of its best-selling Scotch whisky brands.

Diageo is scaling back marketing in Southern Europe, but is still diverting money to stronger European countries, including France and Germany.

It is also channeling more investment to developing economies, including Brazil, Russia, India and China, as global economic growth shifts toward emerging markets.

In February, the maker of Smirnoff vodka and Captain Morgan rum said it spent just 4% more on marketing in Europe in the first half of its fiscal year, as sales declined in Greece, Spain and Ireland. This compared with a 25% increase in Latin America, a 13% rise in Africa and 10% growth in Asia-Pacific. The percentage calculations exclude any acquisitions, disposals or currency movements.

U.K.-based Diageo's recent growth has been driven by its operations in booming economies in Africa, Asia-Pacific and Latin America, where it continues to ramp up its spend and staffing resources.

It expects those regions, with rising adult and middle-class populations, to contribute half of its global sales in the next few years as thirst for spirits increases.

At 1052 GMT, Diageo shares were down 25 pence, or 1.6%, at 1539 pence in a lower London market.

-By Simon Zekaria, Dow Jones Newswires; +44 207 842-9410; simon.zekaria@dowjones.com

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