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Menezes positive about growth

Diageo sales slip as tough vodka market takes it toll

Johnnie WalkerExchange rates and heavy discounting by some rivals hit sales at Diageo which were lower than expected in the first half of the year.

The company behind Johnnie Walker whisky and Guinness experienced a particular softening in the US which is its biggest market where sales of Smirnoff vodka were hit by tough competition.

Sales fell 1% over the six months to £5.9 billion and were also impacted by a slowdown in emerging markets. Brazil slowed and the Chinese authorities have taken action to stop extravagant spending by officials.

The company said volumes increased in the second quarter. It declared the interim dividend would rise 9% to 21.5p per share.

Diageo came in for criticism earlier this week for delaying its payment terms to suppliers. The company said it was necessary to do this as part of its cost control measures.

Ivan Menezes, chief executive, said:  “We delivered the planned savings from our global efficiency programme together with procurement benefits in marketing spend which we have reinvested in our brands and we increased our investment in our routes to consumer  while again expanding our margins.

We have already taken action to improve the performance of those brands and markets that have not performed as well as we would expect.  This contributed to our stronger second quarter performance and I expect to maintain this momentum through the year.

“The half saw Diageo acquire control of USL, putting us in the position to create an iconic leader in spirits in an attractive market.  We have also reached agreement to acquire all of Don Julio, which will significantly strengthen our position in one of our fastest growing categories.

“The quality of these results in a tough environment, with depletions ahead of shipments and improving cash flow, reinforce my confidence that Diageo can realise its full potential and deliver our performance ambition.”

 

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