China will be ‘growth engine’ for Diageo
Diageo has predicted China will turn into a “growth engine” for its spirits business next year, following dramatic declines in the region.
Ivan Menezes has predicted China will turn into a “growth engine” fir Diageo by next yearBloomberg reports that during a trade conference, Ivan Menezes, CEO of the UK drinks giant, said he remained “confident in the medium- to long-term trends” in China.
Announcing its full-year 2013/14 financial results, Diageo said its sales had been “severely impacted” by China’s on-going campaign of austerity, which was launched by president Xi Jinping towards the end of 2012 in a bid to crackdown on government corruption.
The group saw organic sales in China plummet by 31% as both local and international brands declined – contributing to its overall £1.1 billion net sales drop.
In particular, the group was forced to write-down the value of its Shui Jing Fang baijiu brand, which declined by 78% in China last year due to “pricing pressure from other leading brands”.
“The overall high-end spirit market continues to be challenging, but I’m very confident in the medium- to long-term trends in China,” Menezes said. “GDP is strong, the emerging middle class and urbanisation trends are strong. China’s very important for us.”
Menezes also said that Diageo’s sales over Chinese New Year were “a bit better” than 2013/14, but gave no specific figures.
He predicted India and Southeast Asia to push the company’s international growth, alongside China, forecasting that the Asia Pacific region will make-up 25% of Diageo’s total sales by 2020, up from the current 20%.
Just last week, French drinks group Pernod Ricard reported that its Cognac sales had grown 7% in China over the New Year period following significant declines, however volumes sales of its Scotch brands slipped 11%.
