Diageo and Remy look for lift in sales

Alcoholic drink makers Diageo and Remy Cointreau forecast improving sales this year, as they navigate past problems in China and other Asian countries that have been hitting them hard.

A Chinese government crackdown on extravagant spending has slammed sales of Remy Martin cognac and Diageo’s ShuiJingFang, a brand of the Chinese spirit baiju. At the same time, customers in other Asian countries have been reducing inventory levels, hurting the drinks companies more broadly.

The companies’ results yesterday still showed the effects of these problems, with Diageo’s Asia Pacific sales down 7.4 per cent, but the forecasts raised some investor hopes that things are slowly getting better.

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“In our view, there is a good chance this should be the worst quarter in terms of organic sales growth for the year,” RBC Capital Markets’ analyst James Edwardes Jones said, referring to Diageo.

Diageo, the world’s largest spirits company and maker of Johnnie Walker Scotch and Smirnoff vodka, said overall organic net sales fell 1.5 per cent in the three months to September 30.

The strength of higher-priced ‘reserve’ brands partially offset the impact of a 3.5 per cent decline in volume in the three months.

Remy Cointreau said it expects higher full-year sales, after declines eased slightly in its fiscal second quarter to 5.5 per cent from 5.7 per cent in the first quarter.