DGE Diageo Plc

RNS No 2646w
DIAGEO PLC
18th January 1999


                           TRADING UPDATE

Diageo, the international branded food and drinks company, is today releasing 
the following trading update in respect of the six months to 31 December 1998
ahead of the Interim Statement to be issued on 11 March 1999.

Since the preliminary results were announced in September there has not been a
material change in market trends.  While many areas of the world continue to
experience economic uncertainty, important markets such as the US and Europe
continue to perform well.  Trading for the six months has been in line with
expectations in most areas.   Diageo has made further progress towards its goal 
of accelerating the long term growth of the group by allocating resources to the
key value drivers.  Further changes have been announced to outsource operations
and dispose of non strategic businesses to generate value.  The cost synergy
announced at the time of the preliminary results is being achieved and merged
operations are functioning smoothly.

Tony Greener, Chairman, commented:

"In the important markets of Europe and the US we continue to make progress.
As anticipated the difficult economic environment in some areas of the world has
had an impact on the overall trading performance.  However as stated in our
preliminary statement, in September 1998, we expect to generate organic growth
for the full year.  In the last six months Diageo has continued to take those
actions which will improve the long term underlying growth rate of our key
brands and create value."

Spirits and Wine

Spirits and Wine will, as expected, report lower first half profits than 
achieved for the comparable period last year.  This is due to brand disposals,
mainly Dewar's and Bombay, the impact of the economic crisis in Asia which
affected trading there from the middle of the second quarter of 1997/98,
tougher trading conditions in Latin America (primarily Columbia and Brazil) and
adverse exchange rate movements.

UDV North America continued to generate strong organic growth through mix
improvement with stronger performance on most core brands.  The effect of price
increases implemented in the US also improved margins.  The devolved North
America structure has been implemented during the period and the proposed
consolidation of certain North America production facilities was announced on 13
January 1999.  Europe continued to generate organic growth primarily driven by
Spain.  In the UK pre-Christmas shipments were below expectations however
consumer offtake was satisfactory.  Price increases were implemented in certain
markets as part of our strategy to harmonise European prices and in preparation 
for the introduction of the Euro.

Packaged Food

As announced in September, profits in Packaged Foods will be lower in the first 
six months than the comparable period in 1997/98.  In the Desserts and Baking
Mix and Canned Vegetable categories, volumes are down against prior year due to
continued competitive activity.  Volumes in Old El Paso also continued to
decline.  Within Refrigerated Baked Goods volume in higher value added products
increased. Breakfast products, Progresso ready to serve soup and core
Haagen-Dazs products performed well.  Haagen-Dazs operating profits will however
be affected by the increase of cream costs during the period.  Going forward,
margins will improve at Haagen-Dazs as cream prices have reduced and the cost
benefits of the decision to outsource some production and to enter into a joint
distribution arrangement are realised.  Competitive activity is increasing price
pressure, however lower raw material and packaging costs will mitigate the
effect on reported profits.

Bakeries and Foodservice performed strongly with volumes up.  The acquisition of
the bakery products division of Heinz, the sale of the dehydrated potato
business and the move to outsource some of the Foodservice flour business will
create value. International volumes, including those through joint ventures,
were slightly up due to improved performance in Latin America and Europe,
despite lower volumes in Asia.

Beer

Total Beer volumes grew 2%.  Guinness brand volumes grew 5% worldwide due to
strong performance in the Republic of Ireland, Great Britain, Africa, and 
continued double digit growth in the US.  In Great Britain total volumes
declined by about 1% however Guinness brand volumes grew by 3% and market share
increased.  In Asia volumes are down 18% against prior year.  Mix improvement
and cost reduction have improved margins for the Beer business and the growth in
reported profits will be ahead of recent trends.

Fast Food

Burger King comparable store sales growth for the six months was 3% in the US.
Worldwide comparable store sales also grew 3% as growth in Europe and Latin
America offset lower sales in Asia. 459 new stores were opened.  Reported 
profits in the first half will be affected by investment in infrastructure
during the period  which will support US and international expansion plans.
Burger King has also begun to take action to dose underperforming stores in the
US.

Exchange rates

Exchange rate movements are estimated to have reduced trading profit by
approximately #60 million in the six months to 31 December 1998.

Investor Relations enquiries:
Catherine James                          0171 927 5272

Media enquiries:
Murray Loake                             0171 927 5967


END


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