Diageo’s luxury brands mask Guinness slump

 

Britons are splashing out on upmarket spirits like Ciroc vodka — a favoured tipple of Prince Harry — even as Guinness sales struggle, the world’s biggest drinks company said today.

The blue-chip’s UK sales were flat in the year to June but a 14% rise in luxury brands like Ciroc, Ketel One and Johnnie Walker Gold Label Reserve proved a stark contrast with a 3% fall in sales of the black stuff.

The Ciroc “halo” — when a bottle served at a table in a gleaming metal ring is rocked to pour the vodka into the glass — is a feature of London nightclubs such as Mahiki, the Rose Club and Zuma. Chief financial officer Deirdre Mahlan said: “The clubs in the biggest cities around the world are the ones where we want our brands positioned.”

Diageo’s Johnnie Walker whisky is now selling 20 million cases a year, with a bottle of Johnnie Walker Platinum retailing at £66. “Even in difficult times consumers look for affordable luxuries,” Mahlan added. Guinness — mainly drunk in pubs — is struggling with a “difficult macro backdrop”, she said.

Western Europe — where sales fell 4% — remained the toughest market for the company in the first set of results since chief executive Ivan Menezes took over from long-serving Paul Walsh earlier this year. Diageo grew profits 8% to £3.53 billion in the year to June, but overall sales were up 5% — short of its medium term 6% target set in August 2011 — despite strong spirits sales in the US. Investec analyst Martin Deboo warned: “Chronic weakness in Southern Europe and trouble spots in Korea, Brazil and elsewhere are contriving to impede recovery.”

Anheuser-Busch InBev, the world’s largest brewer and maker of Budweiser, Beck’s and Stella Artois, sold less beer but made more money than expected in the second quarter as drinkers absorbed price hikes and traded up to premium lagers. Underlying profits rose 6% to a higher than expected $3.9 billion in the second quarter.

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