Drinks giant Diageo has warned it was looking at raising prices after tough trading conditions continued to impact on the business.
In a statement ahead of annual results, the group, whose brands include Guinness and Smirnoff, said it hoped to enforce price increases in the United States in the coming year after suffering a slowdown in the US ready-to-drink market.
It said the consumer spending environment throughout Europe had worsened, although the business was starting to benefit from an efficiency drive.
Diageo, which also owns Scotland's Gleneagles hotel hosting the G8 world leaders meeting this week, said continental sales, which dipped one per cent in its July-December 2004 first-half, were set to be down further in its second-half.
The "renewed focus" on pricing, together with the impact of its recent cost efficiency programme, would lead to a further improvement in operating margins.
Operating profit growth for the year to June 30 2005 was likely to be about six per cent, as indicated at its interim results.
The group expected growth in sales volumes in the new financial year to be similar to those achieved in the last year.
During the year, there was a slowdown in the performance of Diageo's beer brands but its wine brands continued to grow strongly in its key US and UK markets.
Diageo trades in about 180 countries, employs 24,000 people globally and 5,000 in the UK. Brands range from J&B and Captain Morgan to Beaulieu Vineyards wines.
The company said a costsaving programme was on track to deliver the forecast benefits of about £50 million during the next financial year.
It also revealed it was in talks about an exceptional payment of about £150 million this year to cover all future payments to the Thalidomide Trust, to which it contributes annually.
Analysts said Diageo was now unlikely to meet the trends seen in the first-half when underlying volumes rose three per cent and net sales by about five per cent. They forecast annual volumes up two per cent to three per cent and sales about four per cent ahead.
Most held their forecasts stable with broker Cazenove looking for earnings per share of 47.9p in 2004/2005 and 51.2p in 2005/2006.