Diageo Q1 sales down, but hopes for full year growth

By Gemma McKenna

Published: 16 October, 2014

Spirits giant Diageo's first quarter organic net sales were down 1.5% thanks to weak emerging markets, the firm has said.

Diageo Ivan Menezes, chief executive officer, DiageoDiageo’s Q1 results show sales down 1.5%

But the firm, which makes Guinness, Johnnie Walker and Blossom Hill wines, is bullish about improving on last year's performance for by the end of its financial year.

The update also showed volumes down 3.5% for the three months to 30 September, 2014. But its more premium portfolio of reserve brands put in a strong performance, with sales up 10%.

On a reported basis, net sales declined 1.7% in the quarter, which Diageo blamed on organic movement; negative foreign exchange, mainly in respect of the devaluation of the Venezuelan bolivar against the rate used in the first half last year, offset by the effect of full consolidation of United Spirits July 2, 2014; and the termination of the transitional arrangements following the disposal of Jose Cuervo.

Diageo's Q1 results show sales down 1.5%

Europe saw sales fall 1.4%, hit by uncertainty in Ukraine which affected Russian and Eastern European sales. Western Europe saw net sales decline 1%, with the Benelux countries putting in a weak performance following price increases. Germany also put in a poor performance, and is not expected to improve until the second half of the year.

Nigerian sales were weak, but the rest of Africa put in a strong performance. Latin America also performed well (-1.4%), although Brazil declined as price increases impacted sales. In Asia Pacific (-7.4%), Diageo said the weak performance was due to "reduced inventory levels in South East Asia and the continued challenging trading environment in mainland China, although organic net sales decline there has moderated to around 20% in the quarter".

Chief executive Ivan Menezes said: "Consumer trends in most markets are unchanged and our first quarter performance is in line with our expectations given the prior year comparison of the performance of our US Spirits & Wines business and the destock we have implemented in South East Asia.

"Emerging markets' performance remains weak with further currency weakness in a few markets and specific geopolitical situations in some areas. However our brand performance has been strong in many markets including Turkey, East Africa, India and Colombia.

"We expect full year top line growth to improve on last year's performance. Our focus on our six performance drivers continues to build our capabilities and deliver the cultural change I want to see across the business. I am confident we are on the road to realise our full potential."

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