Weak demand for whisky hits Diageo

Diageo, the world's biggest distiller, has reported an improvement from three disappointing years, although sales and profits were still down.

There was growth for bourbon, gin and tequila.

But demand for its dominant Scotch whisky brands remained weak over the past year.

The London-based global company published full-year results to the end of June, showing sales up 2.8% on a like-for-like basis.

Volumes were up 1.3%.

Reported net sales were down from £10.8bn to £10.5bn. Pre-tax profit was down from £2.93bn to £2.86bn.

Its figures were hit by currency fluctuations, but following the recent weakening of sterling, it is expected by investors to see a boost, as the 94% of its business outside Britain is translated into pounds next year.

With 40% of the Scotch whisky market, Diageo reported flat sales, except for an 8% rise in the volume of sales for its collection of single malts. Scotch represents nearly a quarter of all Diageo sales.

The Johnnie Walker brand saw a 1% increase in sales value, mainly due to better sales of its premium gold, blue and green label bottlings.

However, the volume of sales for the biggest Scotch brand was down 4%.

China dips

In South America, there was sales growth for Johnnie Walker in Mexico and Colombia, but decline in Brazil. In Asia, the south-east countries and India saw growth, but that was offset by falls in the Middle East, in sales through airports and ports and in China, where disapproval of gift-giving has hit Scotch sales hard.

Net sales across the whisky brands grew in North America, Europe and Latin America and the Caribbean. Net sales declined in Africa; primarily in Angola, and in Asia Pacific driven by declines in China and Korea.

Among other brands, White Horse was down 11% by volume and 15% by sales value. Bell's sales value fell by 10% while volumes were flat, and J&B was down 6% by volume and 12% by value.

Following publication of the annual results, Ivan Menezes, chief executive of Diageo, urged the British government to keep trade routes open for whisky, "to keep what is one of the jewels of business in the UK and Scotland healthy and thriving".

Across all its output, including gin, vodka, bourbon and Guinness, British net sales were up 4%. Baileys was up 11%, supported by marketing effort. Smirnoff vodka sales in Britain were up 1% and Guinness net sales were up 1%. With increased interest in premium gin in Britain, Tanqueray net sales grew by more than 10% and expanded its market share.

Across different spirits sold worldwide, vodka sales grew only 1%, while there was 8% growth for North American whiskey, gin and tequila.

Beer, which represents 18% of Diageo sales, grew by 6%, driven largely by African markets.