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Diageo GB results provide global giant with rare good news

Published:  30 July, 2015

Diageo GB has announced a rise in net sales of 3% in the year to end 30 June, despite mixed fortunes for the group elsewhere in the world.

Iconic brand Guinness has returned to growth after years of significantly declining sales. Net beer sales rose by 2% - against a background of a UK and Ireland beer market that has shrunk by 20% in volume in the last six years, according to research firm, Euromonitor.

Diageo's luxury spirits portfolio grew by 43% year on year. Ciroc vodka nearly doubled in size, aided by the successful launches of Ciroc Amaretto and Ciroc Pineapple. Sales of Tanqueray No. 10 are up 82.9%.

The core spirits portfolio has also had a good year. Captain Morgan net sales are up 15%, while market leader Smirnoff is up 1%.

Other successful launches during the year included Guinness Golden Ale, Pimm's Cider Cup, Captain Morgan White Rum, and Smirnoff Ice Double Black.

Worldwide, Diageo continues to face significant headwinds. Organic net sales were flat for the second year running. Its 5% rise in net sales to £10.8bn is attributed to the acquisitions of India's United Spirits Ltd and tequila brand Don Julio.

Organic sales have fallen by 1% in North America and 2% in Asia-Pacific. Shipping volumes are also down 1%.

Andrew Cowan

Jeremy Cunnington, senior alcoholic drinks analyst at Euromonitor International, commenting on the global results, said: "Diageo's weak results come from a combination of historic failings and weak global conditions.

While there have undoubtedly been errors in judgement such as slowness in developing a high-end bourbon, spirits is a long game and judgement should not be rushed. Short sighted solutions such as divesting its beer operations would only make the situation worse." 

The SEC recently announced an investigation into Diageo's business practices in the US, amid claims that it is artificially boosting sales.

Sales in China have been hit by a government crackdown on gift-giving and corruption.

In June, Diageo was rumoured to be a target for takeover by Brazilian billionaire Jorge Paulo Lemann in association with private equity firm 3G Capital.

Innovations from Diageo over the last year