Whisky maker Diageo yesterday reported a 1.3% decline in third-quarter sales after volatility in emerging markets curbed demand for its alcoholic drinks.
The world’s largest spirits company said currency and economic weakness hurt consumer confidence in many markets, including Russia and South Africa.
Diageo, whose whisky brands include Johnnie Walker, Bell’s, Buchanan’s and J&B, generates 42% of its sales from developing economies.
In Asia, sales were hammered by political instability in Thailand and an anti-corruption crackdown on gift-giving by the Chinese government.
That crackdown has been especially painful for French rival Remy Cointreau, which warned yesterday that full-year profits would fall by as much as 40%.
Diageo chief executive Ivan Menzes said: “Our performance reflects the challenging environment we are operating in.
“Consumers in North America are most resilient, as are consumers of our reserve brands in most markets.
“In western Europe, the economy, consumer confidence and our business are all improving slowly but consistently.
“In the emerging markets, currency volatility and caution about the outlook for GDP (gross domestic product) growth are negatively impacting business and consumer confidence.”
Mr Menzes said Diageo was still optimistic about its prospects in emerging markets but added: “Current trends will impact top-line growth this financial year, but strong management of our cost base means that we remain committed to the delivery of our margin expansion goals.”
There was no update from Diageo on Glasgow-based whisky brand Whyte and Mackay (W&M), in which it has a controlling stake through its shareholding in India’s United Spirits.
US drink company Brown-Forman is one of a number of firms thought to be chasing a £350million deal to buy the business.
Other suitors are believed to include private equity firms Lion Capital and TPG Capital Management, Stolichnaya vodka owner SPI Group and Italy’s Campari.
Diageo, which also makes Guinness and Smirnoff vodka, took control of United from United Breweries Holdings (UBH) in a £1.3billion deal last year.
W&M’s owner is believed to be selling the business to satisfy the UK’s Office of Fair Trading, which has expressed competition concerns.
In the three months ended March 31, Diageo saw organic net sales rise in North America, western Europe and Latin America, but tumble 19% in the Asia-Pacific region.
Sales fell by 5.2% in Africa, eastern Europe and Turkey.
Sales by volume fell 1% in the quarter, compared with the same three months last year.
Diageo said it expected adverse currency moves to shave £330million from operating profits for the year to June 30.