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Spirits not so high at Diageo

Thursday, January 30, 2014 - 01:25

Jan 30 - Sales growth at Diageo, the world's biggest distilled spirits company, slows. As Sonia Legg reports the maker of Johnnie Walker whisky, Smirnoff vodka and Guinness beer is suffering from weakness in China, Thailand and Nigeria.

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Almost half its business is with emerging markets. And it's weakness there that's hit sales growth at Diageo over the past six months. Demand in China fell by a fifth and there was a 10% drop in Nigeria. Overall, second quarter sales were around 1.6% compared to a previous rise of 2.2%. Diageo's shares dived 6% as a result. Edward Hadas is from Reuters BreakingViews (SOUNDBITE) (English: EDWARD HADAS, ECONOMICS EDITOR, REUTERS BREAKINGVIEWS, SAYING: "We are a little puzzled by that, and it does look like investors are just thinking "emerging markets!" Diageo has been growing steadily in recent years - it's now the world's largest distilled drinks company. It makes Johnnie Walker whisky, Smirnoff vodka and Guinness beer. But the business is changing. (SOUNDBITE) (English: EDWARD HADAS, ECONOMICS EDITOR, REUTERS BREAKINGVIEWS, SAYING: "Diageo has outgrown it's merger phase and isn't planning any more mergers and investors are very sceptical about companies in the spirits beverage business. They are sceptical about their ability to grow without acquisitions and especially if the emerging market story is going, so we think this combination of doubt has lead to the shock drop." Shares in Pernod Ricard and Remy Cointreau also fell between 2 and 3 percent. A Chinese crackdown on gift-giving is partly to blame. Diageo's now planning cost savings of 200 million pounds a year. But it hasn't yet decided if jobs will be cut.

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Spirits not so high at Diageo

Thursday, January 30, 2014 - 01:25