Diageo drink sales decline in UK

Drinks giant Diageo today said sales in the UK were falling behind its continental neighbours - although Britons are still lapping up vodka and Baileys.

Smirnoff and whiskey and cream-based liqueur Baileys remained popular in the six months to December 31, but overall sales still declined in the UK and were flat in Europe, which was supported by double-digit growth in France and Germany.

Diageo, which saw a 12% rise in pre-tax profits to £1.8 billion in the period, said UK sales were hit by a decision to hold firm on prices and cut the number of promotions.

Elsewhere, Latin America remained the company's strongest market with 23% sales growth, compared with 12% growth in Africa, 10% in Asia and 5% in North America.

Diageo is exposed to several struggling eurozone economies, such as Spain, Greece and Ireland, which have all posted declining sales as the wider problems flowing from the sovereign debt crisis lead to a squeeze in consumer spending.

Andrew Morgan, Diageo Europe president, said: "The economic environment, particularly in southern Europe, has impacted our performance in Western Europe, while in the emerging markets of Europe we have delivered strong growth."

Smirnoff vodka was up 8% in the period, driven by sales in the UK and Germany, while Captain Morgan grew by 25% in the region, although it has a relatively small hold in Europe compared with regions like the US.

The company, which employs 20,000 staff worldwide, has fully integrated its recently bought Mey Icki raki brand in Turkey as it looks to increase its exposure overseas.

Diageo, which sells its drinks in 180 countries across the globe, also has high exposure to emerging markets which have supported the half-year performance.

In Africa, Guinness sales were 10% ahead, while scotch label Johnnie Walker was up 32% and in Latin America the performance was driven by a 32% rise in Smirnoff sales.

Shares in Diageo fell more than 1% after the trading update was published.

PA