Sales of drinks such as Guinness and Baileys in Ireland have declined in the first six months of the year, British drinks group Diageo said today.
In a trading statement, the company said the Iraq war and outbreak of the deadly SARS virus had hit demand for its products internationally.
Irish sales have deteriorated in the second half across all categories, it said. The company predicted a five per cent fall in Irish sales for the full year.
It said: "This was a result of the increased excise duty on spirits introduced in December 2002 and the continuing slowdown in economic growth."
The maker of Smirnoff vodka, Johnnie Walker scotch also said it expected to take a charge of €225 to operating profits in its 2004 fiscal year due to its €2.02 billion pension deficit.
"Trading conditions have remained tough in the second half of the year, compounded by the Iraqi conflict and SARS (Severe Acute Respiratory Syndrome)," the British group said in a trading update for its financial year to June 30th.
It also signalled that demand for ready-to-drink spiritssuch as Smirnoff Ice was coming off the boil after last year'sexplosive growth as new competitors entered the market andgovernments hiked excise duties.
Formed in 1997 from the merger of drinks group Guinness and food and spirits firm Grand Metropolitan, Diageo has been shedding its conglomerate past. In December it completed its transformation into a pure spirits group after it sold fast-food chain Burger King.
But the switch has coincided with a slide in consumer spending growth in many of its markets, particularly Latin American countries and Ireland.
Diageo said it did not expect to improve on the one percent growth in organic volumes and four percent growth in organic net sales achieved in the first half of its financial year.
But organic operating profit growth was likely to be "marginally better" than the first half's six percent, it said.