Diageo’s sales fall due to excise hike

GUINNESS, Bailey’s and Smirnoff producer Diageo’s sales of its products have fallen by 5% in Ireland as a result of an increase in excise duties imposed by Finance Minister Charlie McCreevy, the company claimed yesterday.

Global drinks group Diageo, who employ 2,800 in Ireland, yesterday said its geographic diversity and brands have provided a firm platform for top and bottom line growth even in the challenging environment which international consumer goods companies have faced in the last 12 months. The company said trading conditions have remained tough compounded by the Iraqi conflict and SARS.

However, the full year organic operating profit growth is currently anticipated to be marginally better than the 6% achieved in the first half of the year.

The company said organic volume and net sales growth for the full year is not expected to improve upon the 1% organic volume growth and 4% organic net sales growth achieved in the first half.

Commenting on the Irish market the company said: “Across this market, the beverage alcohol industry, which has been in decline, has deteriorated further as a result of the increased excise duty on spirits introduced in December 2002 and the continuing slowdown in economic growth. In this context, volume performance of Diageo’s brands deteriorated in the second half across all categories with volume expected to fall 5% in the full year.”

The company disclosed that Irish made Bailey’s is a one million case brand in Britain.

Diageo, formed from the merger of drinks group Guinness and food and spirits firm Grand Metropolitan said its problems had been exacerbated by the Iraq war, when drinkers tended to stay at home at night and the SARS virus, which hit spending in Asia.

Yesterday, Diageo also signalled that demand for ready-to-drink spirits such as Smirnoff Ice was coming off the boil after last year’s explosive growth as new competitors entered the market and governments hiked excise duties.