British food and drinks giant, Diageo Plc, said yesterday it was set to return cash to shareholders via share buybacks from the excess cash produced by its Johnnie Walker scotch and Smirnoff vodka spirits arm.

Diageo, formed from the Guinness-GrandMet merger late last year, created by far the world's largest wines and spirits company, United Distillers and Vintners (UDV), with a prodigious ability to produce cash beyond what it could reinvest.

"Our spirits business is producing so much cash we do not believe we can use that in a value-creation way, so we will look to return it to shareholders," said Diageo's chief executive, Mr John McGrath. However, Mr McGrath said the company still needed to demonstrate that UDV would grow faster than the competition and also faster than the two separate businesses could have done since the £24 billion Guinness-GrandMet merger.

Diageo will be going through all its spirits brands country by country and preparing to sell off "tail-end" brands that do not produce economic profits, while still driving top-line volumes ahead and making its assets work harder, he added.