Diageo hit by emerging markets slowdown
Drinks giant announced plans to cut costs by £200m as Chinese sales decline
Thursday 30 January 2014
Rising demand for upmarket spirits including Ciroc vodka and Johnnie Walker Super Deluxe whisky wasn’t enough to stop drinks giant Diageo from getting hammered as shares slumped 5 per cent in early trading.
The firm behind Smirnoff, Guinness and Captain Morgan saw UK sales of its premium spirits brands jump 24 per cent in the six months to December 31 as it enlists a raft of celebrities including P Diddy, model David Gandy, pictured, and singer Nicole Scherzinger to promote its drinks across a host of London nightspots including Mahiki and Bodo Schloss.
The UK market has returned to sales growth but the wider business is suffering. Diageo saw weakness in emerging markets as nervy wholesalers failed to replenish their stocks and the Chinese government’s gifting crackdown slowed sales. Nigeria’s beer market also struggled.
Sales growth slowed from 2.2 per cent in the first quarter to 1.8 per cent over the half. A 3 per cent rise in operating profits to £2.1 billion missed City forecasts and investors sold out, leaving the shares 93.25p lower at 1816.75p.
New chief executive Ivan Menezes, who abandoned Diageo’s growth target last year, attempted to steady the ship by announcing £200 million in cost cuts by 2017. Chief financial officer Deirdre Mahlan said it was “possible there will be roles impacted” among the group’s 36,000 staff.
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