Diageo volumes down in all regions but Africa

29 January, 2015

Diageo has reported negative trading for the first half of its 2014/2015 financial year, thanks to volume declines in all of its regions except Africa.

For the six months ended December 31 2014, volumes dropped 1.9% and organic net sales stood at -0.1% compared with the year before.

Johnnie Walker was down 9% in volumes and dropped 12% in organic net sales and Smirnoff was down 3% by both measures for the period, while Captain Morgan was -2% and -4% and Guinness fell 4% by volume and value.

Tanqueray was the only “Global Giant” in growth, with 9% volume growth and 12% value growth.

By region, North America dropped 2% in volumes, driven by Smirnoff (which was -5% in volume and -7% in organic net sales in the region), Johnnie Walker (-14%/-15%) and Captain Morgan (-7%/-8%). Diageo blamed a shirinking spirits market. 

Europe saw a 1% slide in volumes due to “tough trading conditions in Russia and Eastern Europe”. Though Turkey, Great Britain, France and Italy were all in growth.

Latin America and the Caribbean saw a 10% drop in volumes and value was down 4% due to “currency volatility” which has impacted Scotch sales, particularly in Venezuela.  

Asia-Pacific experienced volume decline of 7% and a value drop of 5%, and was heavily influenced by weakness in Scotch in China, a market which saw overall volumes drop 20% and Johnnie Walker slip 16% by volume and 17% by value.

Africa though provided positive news, with volumes up 9% and net sales up 5%. Nigeria was the star market here with volumes gaining 14%. Johnnie Walker increased 19% in volumes and 15% in value across the region.

Ivan Menezes, chief executive of Diageo said: "We have improved our performance during the half and we have again shown: the strength of our brands, which is driving our share gains; our strong innovation capability, which has enabled us to access new growth opportunities; and our focus on cost. We delivered the planned savings from our global efficiency programme together with procurement benefits in marketing spend which we have reinvested in our brands and we increased our investment in our routes to consumer while again expanding our margins.

"We have already taken action to improve the performance of those brands and markets that have not performed as well as we would expect. This contributed to our stronger second quarter performance and I expect to maintain this momentum through the year.

“The half saw Diageo acquire control of USL, putting us in the position to create an iconic leader in spirits in an attractive market. We have also reached agreement to acquire all of Don Julio, which will significantly strengthen our position in one of our fastest growing categories.

"The quality of these results in a tough environment, with depletions ahead of shipments and improving cash flow, reinforce my confidence that Diageo can realise its full potential and deliver our performance ambition.”

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