SCOTCH WHISKY drinkers could face another hike in the cost of their favourite tipple as Diageo reviews for the second time this year the domestic pricing structure of brands including Johnnie Walker, J&B, Bell's and Buchanan's.

News of a potential increase could come as early as Thursday when chief executive Paul Walsh is expected to disclose that the group has seen a £100 million rise in its costs for items such as grain, energy, glass and packaging over the past year, which analysts expect to have taken the edge off this year's profit growth.

A spokesman commented last week: "As with any business - especially when cost prices are rising significantly - we regularly review our pricing strategy to ensure we are in line with the marketplace, have our cost and profit ratio balanced and can continue to offer customers and consumers brands which are good value. As always, we will continue to give our customers plenty of notice of any planned changes."

Drinkers have already had to cope with Diageo's last price rises in February and the effects of a 9% duty rise in the spring, which raised the tax man's share to £5.98 on a 70 cl bottle (and 28.9p on a standard pub measure) before taking account of VAT.

The Scotch Whisky Association says the price of cereals has risen anywhere between 35% and 100% in the past year, while glass bottles have increased by up to 20% and other packaging by around 10%.

These costs, though, make up a relatively small part of producing whisky and areas such as marketing and storage until maturity are far more significant.

Diageo and the other major distillers send more than 90% of their product overseas, where they have been enjoying highly profitable business because of the effects of the weak pound on dollar and euro earnings.

Diageo directly employs 4500 people in its whisky distilleries and provides employment for another 12,000 Scots who provide raw materials and help in distribution.

It is set to open a new malt dist-illery in Roseisle next spring as part of a £100m investment programme to cope with global demand that saw total industry exports soar by 14% to a record £2.8 billion last year.

"Obviously, the group concentrates much of its focus overseas, but Paul Walsh is determined to get more value out of the brands at home," said one analyst.

"Pricing is one area, although he has to be careful in the present difficult home market.

"I expect much of future marketing to be aimed at premium products, which enjoy higher margins and are less price sensitive."

Diageo, which is the world's biggest spirits firm and whose other brands include Smirnoff, Baileys, Captain Morgan rum and Guinness, is expected to celebrate its export success with news of an underlying 9% increase in operating returns and a lift in pre-tax profits from £2.06bn to £2.2bn on Thursday.

Brokers now believe the important US market, accounting for one third of sales, will have performed better than earlier fears following recent encouraging market research data from Nielsen, and they say America's profits contribution may have grown by another 5% in the second half.

But there are some concerns that the UK and Ireland may have suffered from the general economic malaise that could result in a slowdown in the European contribution, particularly at Guinness, which gained from a successful marketing programme in the earlier months of the year.

Diageo shares have moved against the market trend to rise by 13% since the early summer because investors see the company as an obvious beneficiary of the falling pound.

Followers at Deutsche Bank believe directors could underline the group's defensive qualities with a surprise 10% increase in this week's dividend payment, although they caution that the move may be accompanied by a slippage in earnings targets for 2009.

The analysts believe that profits growth may be limited to 7% to 9% for the current year rather than previous company guidance of at least 9% for 2008.

Meanwhile, there is speculation that Diageo could announce a new share buyback programme of up to £750m after splashing out an estimated £1bn to reduce its capital base in the past year.