Diageo sales have rocky start to the yearBy Becky Paskin
Diageo is confident it can still improve on last year’s sales performance, despite a weak start to the year.
The drinks group recorded 1.5% net sales decline in the first quarter of its financial year as destocking in China combined with uncertainty in Russia and Ukraine continued.
Overall volume was also down 3.5%, while North America was the only region to show growth, albeit a minimal 0.1%.
The Johnnie Walker-owner blamed “weak consumer confidence in average income households” for poor sales growth of its mainstream brands, although it added the stagnant results were against a “very strong” first quarter in 2013.
Despite the fall, the group claimed it could still better last year’s poor performance, which saw sales fall 10%, or £1.1 billion.
The majority of Diageo’s sales decline came from Asia Pacific, particularly China where organic sales fell 20% in the quarter. The group also cited a decision to reduce inventory in South East Asia as another reason for Asia Pacific’s overall 7.4% sales decline.
Sales in Latin America and Caribbean and Europe both declined 1.4% due to political tensions in Eastern Europe, and price increases in Benelux and Brazil.
Ivan Menezes, CEO of Diageo, said: “Consumer trends in most markets are unchanged and our first quarter performance is in line with our expectations given the prior year comparison of the performance of our US Spirits & Wines business and the destock we have implemented in South East Asia.”
Despite the poor Q1 performance, Menezes was bullish on Diageo’s 2014/15 full-year results. “We expect full year top line growth to improve on last year’s performance. Our focus on our six performance drivers continues to build our capabilities and deliver the cultural change I want to see across the business. I am confident we are on the road to realise our full potential.”