Carlsberg and Diageo affected as sliding oil prices hits drinks industry in Russia

The country was once a high-growth market

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The Independent Online

Russia’s troubled economy and a collapsing rouble gave a hangover to the brewer Carlsberg and drinks giant Diageo, which produces tipples ranging from Johnnie Walker whisky to Smirnoff vodka and Guinness.

Once a high-growth market, Russia is heading into a lengthy recession as sanctions hit consumer confidence and a tumbling oil price savages the currency of a country largely dependent on oil exports.

The malaise has forced Carlsberg to close two of its 10 breweries, cutting 600 jobs at the sites where the popular Baltika beer brand is produced and 15 per cent of the Danish group’s capacity in Russia.

  Diageo, meanwhile, is selling less whisky in Russia, with sales down by 17 per cent in a market where, it admits, consumer confidence is low. The company, which sells little of the much more popular cheap vodka in Russia, has been “focusing on lower price points” for its whisky, according to the finance director, Deirdre Mahlan.

The news was little better elsewhere for Diageo as it was forced into deeper price cuts in the US – its biggest market – where vodka is slipping out of fashion. The distiller has also been plagued by volatility in emerging markets, from a crackdown on extravagant spending in China to an economic slowdown in Brazil.

Meanwhile, weaker currencies – in Russia and other emerging markets – are expected to shave £85m from its profits this year.

Overall, the group’s first-half operating profits fell by 18 per cent to £1.67bn in the six months to 31 December, on lower-than-expected sales of £5.9bn.

Underlying sales were down 0.1 per cent as an improved second quarter failed to offset a 1.5 per cent slide between July and September. Diageo also followed the lead of National Grid in scrapping quarterly interim management statements from June.

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