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Diageo Sales Decline In North America And Are Expected To Remain Weak In Short Term

July 30, 2015

Diageo endured declines in both volume and net sales in North America in its recently completed fiscal year, and the incoming head of its North American unit says the situation isn’t likely to improve much in the coming months.

Diageo’s volume fell by 3% on an organic basis in North America for the 12 months ending June 30, while its net sales dropped by 1%. Most of the spirits giant’s leading brands suffered net sales declines, including Smirnoff (-3%), Captain Morgan (-12%), Johnnie Walker (-15%), Baileys (-5%) and Ketel One (-2%). Two notable exceptions were Cîroc (the upscale vodka’s net sales grew by 4%) and Crown Royal, which, propelled by its fast rising Regal Apple extension, enjoyed 12% net sales growth. The company’s Bulleit Bourbon also continued its rapid rise, with a 36% net sales jump.

Diageo PLC chief financial officer Deirdre Mahlan, who will be replacing the retiring Larry Schwartz at the helm of Diageo North America in the next few months, said results in the region for the first half of the company’s current fiscal year will also be “relatively weak,” according to the Wall Street Journal.

After Diageo recently received an inquiry from the Securities and Exchange Commission regarding whether the spirits giant has been shipping excess inventory to distributors in an effort to enhance its results in North America, Diageo PLC chief executive Ivan Menezes said the company will be shifting its focus on performance from shipments to depletions.

Globally, Diageo’s organic net sales growth was flat in its recently completed fiscal year, although the integration of its United Spirits Ltd. business in India—Diageo gained control of USL in July 2014—led to an overall 5% bump in reported net sales.

 

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