Diageo in high spirits despite slower demand

Kasmira Jefford
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DIAGEO, the drinks giant behind Johnnie Walker and Smirnoff Vodka, posted weaker-than-expected third quarter sales yesterday, blaming a slowdown in demand in key emerging markets.

The FTSE 100 firm said net organic sales grew four per cent in the three months to the end of March – one per cent behind forecasts – due to weakness in Brazil, as consumers feel the pinch of a struggling economy and high inflation. Nigeria was also weak, as was South Korea, where the scotch market has been in decline as consumers trade down.

Instead, Diageo toasted to the success of its US spirits business, its biggest division, where price increases on brands helped drive North American sales up six per cent in the nine months to the end of March.

And despite a slowdown in Brazil, its Latin America and Caribbean arm grew sales by 14 per cent in the nine month period, against a four per cent sales rise in western Europe.

“Despite consumer weakness in three markets, Korea, Nigeria and Brazil, Diageo’s performance for the nine months is in line with the first half and our expectations,” Paul Walsh, chief executive, said.

“Strong performance from our biggest business, US spirits; the continued growth of spirits in Africa; share gains across our markets in Asia Pacific and double digit growth of Johnnie Walker, Crown Royal, Buchanan’s, and Tanqueray are the highlights of the quarter,” he said.