The Americas help Diageo offset sluggish Asia growth

Strong sales of alcohol in the Americas have helped European drinks firms to offset sluggish or non-existent growth in Europe and Asia.

Diageo, the world’s biggest spirits company, reported a 3.1% rise in sales for its first quarter, which ran to the end of September.

While sales rose by 10.9% in Latin America and the Caribbean, 5.1% in North America, they grew by only 1.3% in Africa, Eastern Europe and Turkey and by 0.6% in Asia Pacific — markets whose growth drinks firms have been relying on as austerity-hit Western Europe struggles. Sales in Western Europe fell by 1.1%.

Several analysts said Diageo’s results were below consensus expectations for an overall sales rise of 4%.

Investec analyst Martin Deboo said the results for the maker of Johnnie Walker whisky, Guinness stout and Smirnoff vodka, fitted his sell thesis “that emerging markets are set to make life difficult for Diageo for a while”.

Both Diageo and France’s Remy Cointreau cited a Chinese government crackdown on gift-giving as a drag on sales there.

Remy, which generates about 40% of its operating profit from cognac sales in China, said wholesalers were reducing inventories after sales fell short of expectations during the Chinese New Year.

The maker of Remy Martin cognac said revenue declined 5.3% on a like-for-like basis to €294.4m in the three months to the end of September, compared with a 2.3% decline in the previous quarter.