Diageo reports 1.5% decline in first quarter organic net sales

Diageo, the world's largest spirits company, has been affected by ongoing weakness and currency fluctuations. The company has reported a 1.5% decline in the first quarter organic net sales.

But the maker of Johnnie Walker whisky and Smirnoff vodka is not losing hope and expects that its sales will increase for the full year. Diageo said its sales volume declined 3.5% in a quarter till September 30.

On the other hand, sales of its higher-priced brands increased 10%. Diageo is making efforts to create a niche place for itself in emerging markets. One of the several steps it has taken includes buying makers of local spirits in China, Brazil, Turkey and India.

For quite a some time now, its efforts are not able to derive the desired results owing to many issues, like the Chinese government's crackdown on lavish spending to an excise tax increase in Kenya.

Chief Executive Ivan Menezes thinks that no change has come in the markets with regard to consumer trends. Ivan stated that emerging markets performance is not up to the mark and things have become even more problematic owing to currency weakness in many markets and certain geopolitical situations in some areas.

"Consumer trends in most markets are unchanged and our first-quarter performance is in line with our expectations", affirmed Ivan.

James Edwardes Jones, an analyst at RBC Capital Markets was of the view that there are chances that the quarter proves to be the worst one when it comes to organic sales growth for the year. Spirits maker Pernod Ricard SA is expected to reports its first quarter result on October 23.

Rival Remy Cointreau SA is expecting to witness higher full-year sales, as declines eased slightly in its fiscal second quarter.