Emerging markets stifle Diageo's growth

Diageo has announced flat sales for the nine months ended 31 March 2014 due to weakness in emerging market sales.

Organic net sales growth stood at 0.3% in the nine month period and a decline of 1.3% was registered in the third quarter of 2013/2014.

Volume declined 2% in the nine months and 1% in the third quarter.

Reported net sales were down 7.4% in the nine months due to the impact of adverse currency movements and the termination of the distribution agreement with Jose Cuervo, said Diageo.

* Organic growth recalculated at $1 = VEF49.81 (£1 = VEF83.18) for the six months ended 31 December 2013, previously calculated at $1 = VEF19 (£1 = VEF30.4)

Ivan Menezes, chief executive of Diageo said: “Our performance reflects the challenging environment we are operating in. Consumers in North America are most resilient, as are consumers of our reserve brands in most markets. In Western Europe the economy, consumer confidence and our business are all improving slowly but consistently. In the emerging markets currency volatility and caution about the outlook for GDP growth are negatively impacting business and consumer confidence.

“These results have increased our determination to deliver the operating efficiencies we have identified, to delayer the organisation and to continue to build a stronger business through our focus on our six performance drivers: premium core brands; reserve; innovation; route to consumer; cost and talent.

“The current emerging market weakness does not reduce our confidence in the long term growth opportunities of these markets and we have continued to invest to build our brands and routes to consumer for the future. Current trends will however impact top line growth this financial year, but strong management of our cost base means that we remain committed to the delivery of our margin expansion goals.”