Key brands disappoint for Diageo

Despite the successful implementation of further cost efficiencies, group margins were hit by a sharp reduction in whisky shipments, along with the one off impact on sales from the change in the distribution system in Canada. Profits were also held in check by negative translation effects brought about by sterling’s appreciation against a range of emerging market currencies. And while Diageo did report improved trading during the second quarter, the group is still faced with unfavourable demand trends in the key US market.

Diageo generates around a third of its sales in North America, but a fall-away in demand for the Captain Morgan, Smirnoff and Johnnie Walker brands meant that regional sales were down by two per cent on last year. The Smirnoff label continues to suffer as drinkers across the Atlantic have apparently lost their taste for vodka. Meanwhile, consumer demand for Johnnie Walker - another of Diageo’s ‘global brands’ – was not only sluggish in the US but also in China, hitherto a key growth market. Sales for the blended whisky were down 15 per cent - enough to leave chief executive Ivan Menezes with an enduring hangover.

BTIG Research Estimates forecast adjusted 2015 EPS of 101p.