Guinness maker Diageo sales squeezed under ‘competitive pressure’

In the first quarter of its financial year, Diageo, the maker of Guinness, reported sluggish sales growth amid "competitive pressure" in its top markets. The FTSE 100 group, which owns Guinness, Johnnie Walker and Tanqueray, saw net sales increase by 1.2% year-on-year to $4.9bn. However, organic growth, excluding currency fluctuations and the sale of East African Breweries to Asahi, only grew by 0.6% at 0.6% higher.

Unfortunately, Diageo's sale volumes experienced a slight decline, dropping 0.1% in the July to September period. This decline was primarily driven by a drop in North America, which constitutes 36% of the group's business. US sales decreased by 3.7% and volume fell by the same amount.

Diageo's Chief Executive, Sir Dave Lewis, emphasized that the company is focusing on making its offering more competitive in North America, acknowledging it as the biggest challenge. Sales of premium brands Don Julio and Casamigos plunged double digits in North America, while tequila declined double digits in Mexico. However, this was somewhat offset by double-digit growth in beer and ready-to-drink canned cocktails in the region.

In Europe, Middle East and Africa (EMEA), which accounts for 26% of Diageo's business, organic sales grew by 2.4% driven by a 4.4% increase in volumes. Despite a 4.4% rise in beer bottle sales across Europe, Diageo earned 2% less per bottle due to deliberate price cuts and promotions. The hot UK weather negatively impacted beer sales in EMEA, with a low-single-digit decline in Britain and Ireland attributed to the unusually hot weather and competitive pressure.