Diageo sales flat at 1.8% on mixed emerging markets

A slowdown in key emerging markets takes its toll on the world's biggest drinks company.

by Elizabeth Anderson
Last Updated: 30 Jan 2014

A slowdown in Asian markets such as China weakened sales, but Diageo said a strong demand for premium spirits in North America and an improving performance in Western Europe helped make up for it.
 
Diageo reported net profit of £1.6bn ($2.65bn) in the six months to the end of December, compared with £1.52bn a year earlier. The north American market was particularly strong, with sales up 4.6%.

'Sustained performance in the U.S. and improved performance in Western Europe enabled Diageo to absorb the current challenges in some of our emerging markets,' said chief executive Ivan Menezes.

In particular, the maker of Johnnie Walker whisky, Smirnoff vodka and Guinness stout has been hit hard by anti-corruption measures and a crackdown on lavish spending in China, which helped push sales down by 10% in the Asia Pacific region.  

Diageo said beer was the only category to decline, helped by falling sales in Ireland. Nigeria has also been a tough market. Beer sales fell as low government spending and high inflation put pressure on drinkers' disposable incomes and they opted for cheaper lagers.

Diageo also announced plans to cut costs by £200m a year until 2017 to offset the challenges in emerging markets. Ivan Menezes took over from longstanding CEO Paul Walsh in July.  In December, Diageo was named Britain's Most Admired Company for the third time. Almost 30% of its business comes from newly affluent middle class drinkers in Latin-American and Asia but the group has been pursuing the latest big international growth opportunity, Africa.

Diageo shares fell 4% when markets opened this morning.

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