Diageo blames political instability as growth stalls

Diageo’s interim results show only 0.3% growth over the last nine months, with organic net sales down 7.4%  to Q3.

Despite a 3.7% increase in organic sales in North America in the nine months leading up to the end of Q3, March 31, 2014, and a 5.7% gain in Latin America and Caribbean, a decline of 9.4% in Asia Pacific eliminated any gains the company made in other regions.

“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,” said  Ivan Menezes, chief executive of Diageo.

Asia Pacific in the three months of Q3 showed a 19% decline in net sales. The fall is attributed to political instability, not the crackdown on gift-giving that several other drinks giants have blamed in recent months for poor performance.

“It was a weak quarter in Asia Pacific with South East Asia seeing further negative impact from the political instability in Thailand and lower trade confidence across a number of markets,” said the report.

Brazil was the major driver of the strong performance in Latin America and the Caribbean.

Emerging markets have also been challenging for Diageo. “In the emerging markets currency volatility and caution about the outlook for GDP growth are negatively impacting business and consumer confidence,” said Menezes.

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