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Smirnoff sales down in 'challenging' British spirits market

Published:  10 February, 2011

Diageo has reported challenging trading conditions in Britain, where sales of its flagship spirit brand Smirnoff fell by 16% in the second half of last year.

Diageo has reported challenging trading conditions in Britain, where sales of its flagship spirit brand Smirnoff fell by 16% in the second half of last year.

Although the company's net sales grew in Britain as the shift continued from on-trade to off, this also contributed to margin decline for the spirits giant.

"The spirits market was flat and Diageo spirits broadly maintained share, as a gain of 0.9 percentage points in the off-trade offset a decline of 0.7 percentage points in the on trade," the company said in its results announcement for the half year to December 31.

"Net sales of Smirnoff were down 16% following customer stock building in fiscal 2010 ahead of the anticipated duty increase in the emergency budget in June, and a loss of share in the on-trade. Smirnoff also experienced negative price/mix as the on-trade contracted and price conscious consumers in the off-trade bought more on promotion."

Net sales of Baileys were up 2% and net wine sales rose by 18%, driven by price increases on Blossom Hill and strong en primeur business.

Profit before taxation increased by £219 million from £1,393 million in the same period in 2009 to £1,612 million, thanks to strong performances in emerging markets.

Chief executive Paul Walsh said: "Momentum is building in our business. Our top line performance was stronger and price/mix improved. We have increased marketing spend significantly, up 10%, but in a very focused way.

"Despite the economic weakness in much of Europe, our first half performance gives me increased confidence that we will improve on the organic operating profit growth we delivered in fiscal 2010."

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