Diageo sales flat as drinkers shun premium brands

Even record overseas sales of Guinness - and British boozing - fail to put some fizz in Diageo's figures.

Last Updated: 06 Nov 2012

Bad news from the booze industry today, as Diageo presented a fairly lacklustre set of results: sales across the group were down 2% to £5.2bn in the six months to December 31, and profit was down a smidgen too. Smirnoff vodka and Johnnie Walker whisky are failing to hit the spot with customers, with sales of premium brands (i.e. the real money-spinners) plummeting in the first half as recession-hit punters plumped for cheaper, own-brand alternatives. However, Diageo boss Paul Walsh should be cheered a little by the fact things improved towards the end of the second half. And we Brits are still boozing in great numbers…

On the surface of it, Diageo’s figures don’t make pretty reading: profits fell by 1% to £1.39bn in the first half. Walsh admitted it had been a ‘challenging six months’ for the global drinks business – revenues were flat across the group, but sales were down by 5% in Europe (not helped by a decline of 12% in recession-hit Spain and 10% in Ireland) and 6% in North America.  Not surprising really, since some of its big brands really struggled – Christmas favourite Baileys was down 11% worldwide, while J&B and Jose Cuervo fared even worse, slipping 14%. Ouch.

But it’s not all doom and gloom. Guinness bucked the trend – it was the only premium brand to grow (albeit by a measly 2%) thanks to a marketing drive to promote its 250th birthday. Strong sales of the Irish stout in Africa also helped Diageo’s international division chalk up growth of 8%, prompting Diageo to step up distribution in emerging markets. Closer to home, domestic sales fared pretty well too, with sales in the UK up 5% as Brits continued to drink their way through the recession. Sales of spirits were up over Christmas – and apparently we can’t get enough of Blossom Hill wine, believe it or not.

Walsh certainly seems more upbeat than he was a year ago, bravely claiming that Diageo is in the ‘early stages of recovery’ and predicting that premium sales were also likely to bounce back soon. This may well be true (let’s hope so for Diageo’s sake); but with the economic squeeze likely to continue for a while yet, it may have a tough time prying Sainsbury’s own-label gin from the hands of cash-strapped customers this year.

In today's bulletin:

BT's giant pension deficit will take 17 years to plug
Diageo sales flat as drinkers shun premium brands
Thomas Cook cashes in on dodgy Redknapp advert
Browne: CEOs need better work/ life balance
Editor's blog: The not-so-beautiful game

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