Diageo, the world's biggest maker of alcoholic drinks, cut its growth forecasts for 2009 yesterday and gave warning that the slowing economy would lead to the middle classes drinking at home instead of in bars and pubs.

Paul Walsh, the chief executive of Diageo, said that he was still relatively bullish about the next few years, although he acknowledged that slowing economic growth was the group's biggest challenge.

He said: “We are not seeing the middle classes move away from drink. The middle consumer group is under pressure but what we're seeing there is a migration from the on-premise [pubs and bars] to the off-premise. For the average person of 35 with a young family and household income of less than £40,000 a year, a night out at the pub these days is expensive. We have to capture that off-premise occasion.”

In the next year these consumers will be affected by planned price increases of Diageo's key brands, including Guinness, Smirnoff and Johnnie Walker, as margins are hit by an average increase of 3 per cent in the price of commodities such as oil and grain. The company would not detail the price increases yesterday.

The Dutch rival Heineken said that it had increased prices in Western Europe by 4 per cent in the first half of this year to recoup higher expenses for barley, aluminium and energy.

Diageo reported operating profits of £2.2 billion in the year to June 30, meeting its 2008 target of 9 per cent growth. Its shares closed up by 2 per cent, or 20.5p, to £10. However, it is faced with falling sales for whisky and rum in Spain and declining draught beer sales in Britain and the Irish Republic - where smoking bans have reduced pub trade - and has lowered its growth target for next year to between 7 per cent and 9 per cent.

Mr Walsh was confident that high-end customers would continue to buy “super premium” spirits, such as Ciroc, a vodka marketed jointly with Sean “P. Diddy” Combs, the rapper, and the gin Tanqueray No Ten.

He said that the company, which owns Blossom Hill, Britain's bestselling wine, was interested in buying more New World wine brands. It was considering some of the assets put up for sale by Foster's, the Australian wine and beer company.

Philip Morrisey, a Citigroup analyst, said that Diageo shares, which have held up well as a defensive stock in the past year, could be in for a rougher ride, based on the downturn in the “problem housing-market economies” of the UK, Spain, the Irish Republic and the US, which deliver 55 per cent of the company's profits among them, and on increasing signs of slowing growth in certain emerging markets.

Mr Walsh maintained that sales in emerging countries would continue to drive sales growth in the company.

He added that there was no sign that growth would plateau in these markets.

Diageo, which through Smirnoff has an endorsement deal with the forthcoming James Bond film Quantum of Solace, has no plans to reduce its famously large marketing budget in the event of a downturn.

Mr Walsh said: “I don't wish to be immodest but we're pretty good at it.”

Heady mix

— Diageo was formed in 1997 after the merger of GrandMet and Guinness. It has its headquarters in London

— The company operates in more than 180 markets and employs more than 22,000 people in 80 countries

— The word Diageo comes from the Latin for day (dia) and the Greek for world (geo)

— Brands include José Cuervo, Baileys, Tanqueray, Guinness, Crown Royal, Beaulieu Vineyard and Sterling Vineyards wines, and Bushmills Irish whiskey

— Market value is £24.6 billion

— Baileys Irish Cream accounts for more than half of all spirits exported from Ireland

— Top shareholders include Capital International, Legal & General Investment Management, Barclays Global Investors, M&G Investment Management and Harris Associates

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