Diageo sales fall as drinks market declines

DRINKS GROUP Diageo saw its sales fall by 5 per cent in Ireland last year, as consumers opted to drink less of the black stuff.

According to the London-headquartered group, while Guinness Draught and Smithwick’s grew their share of the on-trade, or pubs market, and Harp in the off-trade, “the beer market remains in decline” in Ireland.

This led to a 5 per cent decline in net sales in the year to the end of June, in comparison with an 8 per cent rise in global sales and an outperformance by emerging markets, where sales jumped 15 per cent.

These regions now account for almost 40 per cent of Diageo’s business.

A growing African taste for spirits plus demand for scotch in Latin America and Asia, particularly de-luxe brands in southeast Asia and China, boosted Diageo’s sales, while the company said performance in its established north American and western European markets improved from 2011.

“Europe’s performance improved in the year despite the macro backdrop. We’re achieving what we set out to achieve in Europe. I wouldn’t declare victory – I think it’s still going to remain to be a challenging environment,” chief financial officer Deirdre Mahlan said.

Pre-tax profits jumped 32 per cent to £3.1 billion (€3.9 billion) for the group, and, following its strong performance, Diageo is now set to raise its full-year dividend by 8 per cent to 43.5 pence per share.

Irish whiskey continues to sell well in Russia and eastern Europe, and Diageo noted that Bushmills saw growth of more than 30 per cent in the year. While Baileys saw “weak” sales in Europe, sales of the liquor jumped 26 per cent in Africa.

Back in Ireland, Diageo reported “strong double-digit top-line growth” in Ireland for its rum product, Captain Morgan.

In 2011 the group announced a significant restructuring of its Irish brewing operations, with the loss of 70 jobs. In 2012 this restructuring resulted in costs of £11 million, up from £10 million in 2011.

Diageo currently employs about 1,500 people in Ireland.

The group is believed to be eyeing the acquisition of a minority stake in Mexican tequila maker Jose Cuervo from its owners, the Beckmann family. Its long-term distribution deal with the brand ends in June 2013, and analysts estimate that the world’s best-selling tequila brand could be worth about $3.4 billion.

“We are continuing discussions with the Beckmann family given the end period for our distribution arrangement,” Ms Mahlan said yesterday. – (Additional reporting Reuters)