Drinks giant sees net sales drop 5% in six months

THE continuing contraction of the pub trade sector of the Irish drinks market led to an 8% year-on-year decline in net sales — and an 8.6% volume decline — for Guinness here in the last six months of 2010.

A breakdown of international drinks giant, Diageo’s first-half results (for the six months to the end of December) show total volume for the group — in Ireland — was down slightly on a year-on-year basis, with net sales taking a 5% hit.

The group put this down to Ireland’s continued under-performing economy and a further move from the on-trade to the off-trade, in terms of consumer spend. Diageo still maintained its 51.1% share of the long alcoholic drinks market here and increased its share of the spirits market — across the island of Ireland — chiefly on the back of strong performances from the Captain Morgan rum and Smirnoff vodka brands. This performance, management said, was against a declining market and “very tough market conditions”.

Diageo’s Irish brewing operations also benefited from a return to global growth (sales up 1%) for the Bailey’s brand. Some 35% of all Diageo’s global brewing is carried out in Ireland, with Bailey’s being exclusively made here.

“Across the island of Ireland, the decline is being driven by the on-trade, as the off-trade is actually now in growth for beer and close to flat for spirits; driven by lower retail pricing and long- term consumer trends.

“This adversely impacts Diageo Ireland as draught beer is our more profitable business segment,” the company added with regard to its Irish operations.

However, its business in Ireland “is proving resilient, despite the difficult economy.” Ireland remains Diageo’s third largest market, contributing around 7% of annual group profit.

No downsizing is anticipated at Diageo’s Irish operations in the foreseeable future, but equally there is no prospect of the company moving its global headquarters here for tax purposes.

Speaking in London, yesterday, group chief executive, Paul Walsh, said that management is not compelled to move headquarters from London at present (the majority of Diageo’s employees and shareholders are based outside of Britain), but added that the British government has a long-term duty to make its corporate tax climate more competitive.