Diageo sales hit by China slowdown

Diageo said anti-extravagance measures in China had affected its performance

Drinks giant Diageo's sales have been hit by a slowdown in China and other emerging markets.

The UK-based makers of Johnnie Walker whisky and Smirnoff vodka said net sales fell 9% to £10.3bn for the year to 30 June.

Sales volume fell 5% in its Asia Pacific and Africa, Eastern Europe and Turkey divisions,

Sales were also slightly down in North America and Latin America, while Western Europe was flat.

Gross profit for the year fell from £6.9bn to £6.2bn.

Weak spots included China and South East Asia, where volume fell 20% and 25% respectively, and Venezuela, where a currency devaluation and inflation cut Scotch whisky sales by 47%.

Diageo said anti-extravagance measures in China had "severely impacted" the on-trade, and had continued to affect the performance of both its Chinese white spirits and Scotch businesses.

South East Asia was impacted by tax increases and social unrest in Thailand.

North America, Diageo's most profitable region, delivered top-line growth, driven by 5% growth in US spirits and wines.

'Mixed results'

John Kennedy, president Diageo Europe, described the results as "mixed" but said the company still had great hopes for business in emerging markets.

He said: "We know that the fundamentals around consumer demographics and wealth creation mean that we're going to have about half a billion new, what we call, high net worth individuals over the next few years and over a billion people coming in to the category where they can afford our premium brands.

"So there may be volatility from year to year but we feel very confident about the long-term growth prospects."

He added that the prospects were particularly good for the high end of the Scotch whisky category, with sales of single malts up 18% compared with the previous year.