Drinks giant Diageo flags weaker demand from US and Chinese consumers

Guinness maker Diageo has cautioned over weaker demand from consumers in China and the US, meaning it could sell fewer drinks this year.

The boss of the global drinks giant, which also makes Johnnie Walker whisky and Gordon’s gin, said he was “not satisfied” with its current financial performance.

The group reported net sales of 4.9 billion US dollars (£3.75 billion) between July and September, down 2.2% from five billion (£3.83 billion) the prior year.

Sales in North America fell by 3.5% and sales in Asia Pacific dropped by 9.7% year on year, offsetting growth of about 5% in Europe.

In the US, where it generates the most sales, consumer spending was more cautious than it was expecting, leading to a tougher market for spirits.

It also noted more pressure from competitors, particularly affecting tequila – with sales dropping by “double digits”.

Diageo also flagged a sharp drop in both the volume and value of sales in China, with lower demand for white spirits including its national spirit baijiu.

On the other hand, the drinks giant highlighted sales growth for its Johnnie Walker scotch and Guinness, as well as branded cocktails and ready-to-drink labels like Smirnoff Ice.

European trading was also lifted by average prices rising by 5.3%, while it also highlighted strong sales for Irish cream liqueur Baileys across Britain.

Diageo said it was expecting organic net sales to be flat or slightly down over the full year, compared with the previous year.

It is also targeting cost savings worth 625 million US dollars (£478 million) over the next three years.

Nik Jhangiani, Diageo’s interim chief executive, cautioned over “weakness in Chinese white spirits and a softer US consumer environment than planned for”.

He said: “We are not satisfied with our current performance and are focused on what we can manage and control; acting with speed to drive efficiencies, prioritising investment and adapting more quickly to an evolving consumer environment.”

Shares in Diageo were down by nearly 3% on Thursday morning.