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Diageo To Cut Costs As Sales Growth Slows

Published on Jan 30 2014 9:26 AM in Drinks

Diageo To Cut Costs As Sales Growth Slows

London-based Diageo, whose brands include Guinness and Johnnie Walker whisky, has been impacted by China's crackdown on extravagant gifts to officials and weakness in some other markets, most notably Thailand and Nigeria. 

Today the company said that sales rose 1.8% in the six months to the end of December 2013, the first half of the company's financial year, but the rate was slower than the 2.2% registered in the first quarter. 

Sales in the Asia-Pacific region fell 6% in the period, hit by baijiu sales in China and economic instability in southeast Asian countries. The company’s sales of beer declined 2.6%, led by Nigeria and Ireland.

Total emerging markets net sales rose 1.3% in the first half while sales in western Europe fell 1%. North American sales rose 4.6%, helping to shore up operating profit, which rose 2.9% to £2.06 billion.

Ivan Menezes, who took over as chief executive from Paul Walsh in the summer, said demand in the United States and better trading in Western Europe enabled Diageo to absorb the challenges in some emerging markets.

He added: "We reacted quickly to the changing emerging market environment, reducing inventory levels in several key markets, which led to a weaker second quarter, and tightly managing our cost base."

The drinks company said it would cut costs by £200 million by 2017.

The profit figures, which were below expectations, sent Diageo’s share price down more than 6% at £17.92 in mid-morning London trading.

© 2014 - European Supermarket Magazine by Enda Dowling

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