Diageo misses the mark in all markets

Diageo has fallen below analysts’ revenue estimates in every region this quarter, as overall sales dropped unexpectedly.

Ivan Menezes

Ivan Menezes, Diageo CEO, said there were “tough conditions” in emerging markets and “subdued demand” in developed ones (Photo: Diageo)

The global drinks giant, which produces top brands like Smirnoff vodka, Guinness and Johnnie Walker whisky, struggled in the three months to March 31.

Revenue fell 0.7% organically in the period, well below the average 2% growth expected by Bloomberg. Organic sales in the Asia-Pacific region fell 6%, topped only by the 10% slide in Latin America / Caribbean.

A continuing anti-corruption drive is affecting Scotch sales in Asia, and overstocking in South America have been to blame for these poor results.

Europe accounted for a 1.3% drop in sales for the company due to “subdued demand”, according to Diageo CEO Ivan Menezes.

Commenting, he said “tough conditions in the emerging markets and subdued consumer demand in some developed markets” caused problems for the company.

In developed markets, poor economies in some or low inflation in others – the later being the case in Diageo’s home market, the UK – did not play well for Diageo, according to Menezes.

In Britain, a difficult comparison with last year’s high sales meant “high single-digit” sales decline in the quarter’s results.

In the States, the company’s largest market, revenue growth was weaker than expected at 0.9%, as lower fuel prices and a more favourable economy didn’t have the desired effect on sales.

Africa made for more encouraging revenue growth at 8.2% for the period, but this is from a small base and still missed analysts’ expectations of 9.2% according to Bloomberg.

Importantly, this is the last quarterly result that Diageo will publish, as the company moves to half-yearly reporting from the next financial year.

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