Diageo sees UK sales return to growth but faces challenges in emerging markets

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Despite sales in Diageo Great Britain’s returning to growth (1% net sales increase) Diageo results are not as rosy as they might have been due to a slow down in emerging markets such as China. The maker of Johnnie Walker, Smirnoff and Guinness posted net sales growth of 1.8% for the six months to December 31, its first half, following 2.2% growth in the first quarter. The company also revealed that a £200m cost cutting exercise which will be implented between now and 2017
Andrew Cowan, Country Director, Diageo Great Britain, commenting on the results said, “Diageo Great Britain’s return to growth (1% net sales increase) was the result of a continued focus to deliver our strategy of driving value through profitable growth. Our reserve brand portfolio performed strongly, up 24%, driven by the luxury vodka brand, Cîroc and Talisker. Successful product launches, including Cîroc Red Berry, Smirnoff Gold and Baileys Chocolat Luxe all contributed to outstanding growth in Innovation of 76%.
 
Pimm’s net sales nearly trebled, driven by the good summer weather and the launch of Pimm’s Blackberry and Elderflower, whilst Captain Morgan performed well, aided by increased media activity from the new “Live like the Captain” campaign. Net sales in Smirnoff declined by 2% but there are signs of improved momentum for the brand, also helped by the launch of a new signature serve, Smirnoff Apple Bite, and Smirnoff Gold.
 
Guinness performance was flat in a declining beer market , however Guinness Draught saw volume and value share growth as we continue to invest behind the brand via our “Made of More” platform, the new counter mount, and an on trade quality accreditation scheme aiming to improve and highlight the quality of Guinness in 18,000 outlets.
 
Marketing investment on Baileys increased as the brand launched its first Christmas TV commercial in 5 years, “Christmas with Spirit” and the successful launch of Baileys Chocolat Luxe, which dramatically outperformed expectations. Strong performance on Johnnie Walker Red Label was delivered by the launch of a new multi-million pound campaign, “Where Flavour is King”.

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