Diageo said it had enjoyed a sales boost from distributors stocking up on alcohol ahead of the football World Cup, offsetting deep declines in the drinks group’s key US market as the company battles a downturn in spirits demand.
Group sales grew 0.3 per cent on an organic basis, well ahead of the expected 2.3 per cent decline in the three months to April, the FTSE 100 company said on Wednesday.
The sales uplift marks an early win for Diageo’s new chief executive Dave Lewis, who is working on a strategy to overhaul the ailing drinks giant – whose brands include Smirnoff, Don Julio and Guinness – amid a wider downturn in the spirits sector.
Weak sales in the US were offset by gains in Latin America, where distributors ordered in more product than usual in preparation for the football tournament.
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Sales in Latin America and Africa grew 16.2 and 17.1 per cent, respectively. In Europe, sales increased 8.8 per cent, buoyed by Guinness.
In its North American market, which makes up about 50 per cent of group profits, sales fell 9.4 per cent, driven by a 15.4 per cent drop in spirits.
“North America remains our biggest challenge, where market conditions are soft and our offer needs to be more competitive,” said Lewis, who joined in January. “Actions are already under way to address this.”
Diageo’s shares rose 6 per cent in early trading following the update.
At Diageo’s half-year trading update for the six months to the end of December, Lewis slashed the dividend, sending the share price down 13 per cent.
While Lewis has not yet laid out his full strategy, he has indicated the company will need to lower prices and invest in more mass-market brands and formats.
The approach is a departure from the “premiumisation” strategy the company has pursued for more than a decade – built on the premise that consumers will drink less but pricier spirits.
At a company town hall for employees last week, Lewis announced a strategic push into ready-to-drink cocktails and mixed drinks.
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