Diageo watered down by Smirnoff
DRINKS giant Diageo today delivered a mixed trading statement after suffering further sales declines in its important Smirnoff Ice ready-to-drink brands.
Overall, the group said operating profits growth for the full year would be 'marginally better' than the 6% made in the first six months. However, that was still way short of the double-digit growth that had been targeted for 2003 a year ago.
Meanwhile, sales volumes were set to remain at the sluggish 1% seen during the first half. Smirnoff Ice suffered badly in North America amid the cut-throat competition, with volumes likely to fall by about 12% for the full year. Other brands in the US have suffered from distributors running down their stockpiles.
In Britain, Smirnoff Ice volumes are expected to be down 3% over the year. As well as suffering tough competition in the UK, Diageo's RTD brands are also being hit by a new tax imposed last year. Some of the slide in the brand's sales has been offset by the launch of a new variant, Black Ice, which got off to a good start.
While Smirnoff Ice suffered, its parent brand, Smirnoff vodka, was one of the group's star performers, especially in Britain, where sales volumes are at an all-time high.
Guinness was also cited as a strong international growth brand. Adverse currency movements mean that Diageo will suffer a £15m hit to underlying profits for the year. It expects to take a £95m charge to its operating profits for the 2004 year to cover its £1.4bn pension deficit.
