October 16, 2014 / 6:53 AM / 5 years ago

Diageo quarterly sales fall 1.5 pct on emerging market weakness

A worker looks at a bottle of Johnnie Walker whisky at the Diageo owned Shieldhall bottling plant in Glasgow, Scotland March 24, 2011. REUTERS/David Moir/Files

LONDON (Reuters) - Diageo, the world’s largest spirits company, reported a 1.5 percent decline in first-quarter organic net sales on Thursday, hurt by ongoing weakness and currency devaluations in a number of emerging markets.

Yet the maker of Johnnie Walker whisky and Smirnoff vodka said it expects sales to increase for the full year.

In the three months to Sept. 30, the company’s smallest quarter, Diageo said sales volume fell 3.5 percent, in line with its expectations. Sales of its higher-priced “reserve” brands rose 10 percent.

Diageo has taken several big steps to expand its footprint in emerging markets, buying makers of local spirits in China, Brazil, Turkey and India, but over the last year it has been hurt by a range of issues, from the Chinese government’s crackdown on extravagance to an excise tax increase in Kenya.

“Consumer trends in most markets are unchanged,” Chief Executive Ivan Menezes said in a statement. “Emerging markets’ performance remains weak with further currency weakness in a few markets and specific geopolitical situations in some areas.”

Meanwhile French rival Remy Cointreau also said on Thursday it expects to deliver higher full-year sales, after declines eased slightly in its fiscal second quarter.

The namesake Remy Martin cognac saw sales fall more than 13 percent in the first half of the year, hurt by the ongoing impact of the Chinese government crackdown and customers throughout Asia taking on less inventory, as well as economic malaise in Western Europe.

For Diageo, sales edged up 0.1 percent in North America, were flat in Africa and fell 1.4 percent in Europe and Latin America and the Caribbean. Sales fell 7.4 percent in the Asia Pacific region.

Reporting by Martinne Geller; editing by Susan Thomas

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