Newspaper article International New York Times

Emerging Markets Hinder Diageo ; Slower Growth Reported for Regions That Are Pillars of Its Expansion Strategy

Newspaper article International New York Times

Emerging Markets Hinder Diageo ; Slower Growth Reported for Regions That Are Pillars of Its Expansion Strategy

Article excerpt

The world's biggest distiller joined other consumer brands in saying that weaker growth in developing economies last year hurt its business.

Selling beer and liquor in emerging markets has for a long time been investors' main attraction to Diageo. On Thursday, some investors sold their shares because of it.

Diageo, the British maker of Smirnoff vodka and Johnnie Walker Scotch, joined other consumer brands in saying that slower growth in developing economies last year hurt its business. Its sales in the six months through the end of December rose 1.8 percent, about half of what a group of analysts polled by Bloomberg News expected.

Shares in Diageo fell as much as 6.5 percent in London on Thursday morning, and were trading 4 percent lower in late trading.

Diageo, the world's biggest distiller, said it was facing more difficult market conditions in China and Nigeria, countries that are central to the company's emerging-markets strategy. In Nigeria, consumers are drinking less beer and turning to less expensive brands, while a government crackdown in China on extravagant spending prompted a 66 percent drop in sales of its baijiu liquor.

Faster sales growth in the United States, helped by new premium products like Ciroc Amaretto and Johnnie Walker Platinum, only partially offset the slowdown in emerging markets, Diageo said.

As the pace of economic growth slows in emerging markets and consumers become more selective, companies like Diageo that have been seeking growth there to compensate for tighter markets in Europe and the United States are suffering.

Unilever, one of the world's largest consumer products companies, whose products include Dove soap and Knorr soups, warned this month that global markets would continue to be volatile this year. L'Oreal of France recently decided to phase out certain products in China and its rival, Revlon, plans to exit the market completely after failing to win sufficient market share. …

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