Diageo sales decline in Western Europe slows

By Gemma McKenna

Published: 30 January, 2014

The decline of sales in Western Europe is beginning to slow down, says Diageo, after reporting a fall of 1% for the six months to the end of December.

Global net sales grew 1.8% in the first half, following growth of 2.2% in Q1. North America performed well, delivering growth of 4.6%, while emerging markets hit trouble, with increases of just 1.3%, affected by weakness in baijiu in China.

Diageo's chief excecutive Ivan Menezes Ivan MenezesDiageo's chief excecutive Ivan Menezes said Western Europe's perfomance was improved, while the firm faced fresh challenges in emerging markets.

Overall its super and ultra premium lines delivered strong growth, with its reserve brands portfolio, which includes Johnnie Walker Blue Label, Cîroc Vodka, and Tanqueray No. TEN Gin, up 18.5%.

Marketing investment was boosted by 2.7%, ahead of net sales growth, to 15.6% of net sales. Beer was the only category to decline - it fell 2.6%. Weaknesses were attributed to Ireland and Nigeria, traditionally strongholds for Guinness.

Diageo's chief excecutive Ivan Menezes said Western Europe's perfomance was improved, while the firm faced fresh challenges in emerging markets.

The company's free cash flow was £326 million and its interim dividend was increased by 9%.

Diageo is planning further operating efficiencies to "de-layer the organisation" and is continuing with plans to make savings of £200 million a year ending June 2017 in order to fund "future change programmes, investment in growth and improved margin".

Ivan Menezes, chief executive, said: "We have continued to demonstrate the strength of our broad portfolio and diverse global business in a period which saw a more challenging emerging market environment.

"Sustained performance in the US and improved performance in Western Europe enabled Diageo to absorb the current challenges in some of our emerging markets. We reacted quickly to the changing emerging market environment, reducing inventory levels in several key markets, which led to a weaker Q2, and tightly managing our cost base to deliver improved operating margins in line with our expectations.

"We continued to invest in the business increasing marketing spend ahead of net sales growth and keeping our strong focus on innovation and route to consumer improvements."

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