China sales of Shui Jing Fang plunge after Beijing clamps down on spending by officials to ease unrest about corruption
Weakness in emerging markets slowed sales at Diageo, the drinks company that makes Guinness and Johnnie Walker whisky, in the final three months of 2013.
Diageo said sales rose 1.8% in the six months to the end of December, the first half of the company's financial year, but the rate was slower than the 2.2% registered in the first quarter.
Total emerging markets net sales rose 1.3% in the first half while sales in western Europe fell 1%. North American sales rose 4.6%, helping to shore up operating profit, which rose 2.9% to £2.06bn.
But investors took fright at the weakening performance in emerging economies such as China after Asian stock markets fell overnight. Diageo shares fell 4.4% to £18.26 in early trading, making the company the biggest faller in the FTSE 100.
In Asia Pacific overall, Diageo's net sales were down 10%. Political unrest, large tax rises and a weaker economy hit sales in Thailand severely and other markets also had lower sales because of economic uncertainty and weakening currencies.
Diageo was also affected by falling sales in Nigeria as government spending cuts and high inflation sent consumers towards bargain brands and away from Guinness and Harp.
The company's strong position in emerging markets is seen as one of its long-term strengths but investors are increasingly jittery about those markets as the US tightens monetary policy, making Asia, Africa and Latin America relatively less attractive investment prospects.
China's weakening manufacturing performance is also a big worry.
Asian stock markets fell heavily and central banks in India, Turkey and South Africa have raised interest rates in attempts to support their currencies.
Ivan Menezes, Diageo's chief executive, said: "We have continued to demonstrate the strength of our broad portfolio and diverse global business in a period which saw a more challenging emerging market environment.
"Sustained performance in the US and improved performance in western Europe enabled Diageo to absorb the current challenges in some of our emerging markets. We reacted quickly to the changing emerging market environment, reducing inventory levels in several key markets, which led to a weaker Q2 [second quarter]."
Net sales in Greater China fell 22% in the first half, mainly because of plunging sales of Shui Jing Fang, Diageo's brand of baijiu, the 52% proof white spirit that is drunk to seal business deals.
Diageo said: "Greater China performance largely reflects the impact of the government's anti-extravagance measures. The Shui Jing Fang business was most affected, with significant price discounting by competitors in the baijiu category driving a 66% decline in net sales."
Xi Jinping, the Chinese premier, has sought to rein in ostentatious spending by officials on gifts, banquets and alcohol-fuelled receptions to ease public unrest about the corruption and extravagance among the country's elite. Reported by guardian.co.uk 13 hours ago.
Weakness in emerging markets slowed sales at Diageo, the drinks company that makes Guinness and Johnnie Walker whisky, in the final three months of 2013.
Diageo said sales rose 1.8% in the six months to the end of December, the first half of the company's financial year, but the rate was slower than the 2.2% registered in the first quarter.
Total emerging markets net sales rose 1.3% in the first half while sales in western Europe fell 1%. North American sales rose 4.6%, helping to shore up operating profit, which rose 2.9% to £2.06bn.
But investors took fright at the weakening performance in emerging economies such as China after Asian stock markets fell overnight. Diageo shares fell 4.4% to £18.26 in early trading, making the company the biggest faller in the FTSE 100.
In Asia Pacific overall, Diageo's net sales were down 10%. Political unrest, large tax rises and a weaker economy hit sales in Thailand severely and other markets also had lower sales because of economic uncertainty and weakening currencies.
Diageo was also affected by falling sales in Nigeria as government spending cuts and high inflation sent consumers towards bargain brands and away from Guinness and Harp.
The company's strong position in emerging markets is seen as one of its long-term strengths but investors are increasingly jittery about those markets as the US tightens monetary policy, making Asia, Africa and Latin America relatively less attractive investment prospects.
China's weakening manufacturing performance is also a big worry.
Asian stock markets fell heavily and central banks in India, Turkey and South Africa have raised interest rates in attempts to support their currencies.
Ivan Menezes, Diageo's chief executive, said: "We have continued to demonstrate the strength of our broad portfolio and diverse global business in a period which saw a more challenging emerging market environment.
"Sustained performance in the US and improved performance in western Europe enabled Diageo to absorb the current challenges in some of our emerging markets. We reacted quickly to the changing emerging market environment, reducing inventory levels in several key markets, which led to a weaker Q2 [second quarter]."
Net sales in Greater China fell 22% in the first half, mainly because of plunging sales of Shui Jing Fang, Diageo's brand of baijiu, the 52% proof white spirit that is drunk to seal business deals.
Diageo said: "Greater China performance largely reflects the impact of the government's anti-extravagance measures. The Shui Jing Fang business was most affected, with significant price discounting by competitors in the baijiu category driving a 66% decline in net sales."
Xi Jinping, the Chinese premier, has sought to rein in ostentatious spending by officials on gifts, banquets and alcohol-fuelled receptions to ease public unrest about the corruption and extravagance among the country's elite. Reported by guardian.co.uk 13 hours ago.