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Diageo results: sales and profits slide but western Europe stabilises

Published:  31 July, 2014

Diageo released is year-end financial results ending on 30 June 2014 and show that net sales declined and operating profits took a big hit for the 2014 fiscal year.

Net sales declined by 9% dropping from £11.3 billion down to £10.2 billion. Operating profits fell by 20% dropping from £3.4 billion down to £2.7 billion in 2014.

The company's stalled growth is primarily due to under performance in emerging markets, particularly in Asia.

Ivan Menezes, chief executive at Diageo, said: "This year our business has faced macroeconomic and market specific challenges that have impacted our top line performance. 

"Emerging market weakness, often currency related, but also including some specific issues, such as the anti-extravagance measures in China, has led to weaker top line growth. "

Diageo's chief financial officer Deirdre Mahlan added:  "Economic weakness in the emerging markets contributed to a challenging overall environment. There have also been some specific issues which have impacted our top line performance: the anti-extravagance measures in China, which impacted both our international and local spirits brands; the tougher consumer and competitive environment in Nigeria which we didn't read well; tax increases on Senator keg in Kenya and our decision to reduce stock levels in certain markets."

Diageo also confirmed that the company took a write down on the value of its Shui Jing Fang, its premium baijiu brand.

On the upside, Western Europe is stabilising and is showing growth for specific brands according to Menezes: "Although Western Europe remains challenging, performance was much stronger this year. The economies have improved but share gains, for example on Smirnoff in Great Britain; Tanqueray in Spain and Captain Morgan in both GB and Germany have also contributed to the improvement in performance."

According to Andrew Cowan, country director for Diageo Great Britain, Smirnoff, Johnnie Walker and Captain Morgan rum all saw market share growth.

Cowan said:  "The successful launch of Smirnoff Gold and its signature serve, Apple Bite Gold, was launched in Great Britain adding 20 bpts to total Smirnoff value share and making it the brand's biggest trademark extension.

"Smirnoff net sales declined but the brand saw gains in both volume and value share. The Johnnie Walker range grew across GB, helped by the launch of the 'Johnnie and Ginger' serve.  Captain Morgan continued to perform well in GB, growing 13% (Nielsen) and is now 52% of the golden rum category in the on-trade [CGA on trade volume, MAT to June 2014]. "