LONDON, Aug 1 (Reuters) – Diageo’s dip in annual
sales volumes was largely related to its business in East
Africa, where the world’s biggest spirits maker raised prices to
keep up with inflation and currency devaluations, its finance
chief told Reuters.
The company, which reported results on Tuesday, said
full-year organic sales volumes declined by 0.8%.
“Volume across the globe was actually flat,” finance chief
Lavanya Chandrashekar said. “There was a significant impact of
devaluation and inflation in those (East African) markets – we
took up the prices to offset a portion of that inflation.”
Diageo’s East Africa business includes Kenya, Tanzania and
Uganda. Kenya’s shilling has repeatedly hit lows this year as
demand for dollars weighed on the local currency, which had been
under sustained pressure from oil importers and the
manufacturing sector. Tanzania’s shilling is also down over the
past year.
Chandrashekar also said there was a “significant increase in
excise taxes which also led to us having to take the right
pricing action and that impacted the business in East Africa.”
“But even within East Africa, I mean, our Scotch business
grew 9% So good strong growth there. It was really beer that was
more impacted.”
East Africa net sales declined 2%, Diageo said, as growth in
spirits was more than offset by a volume decline in beer
following price and duty increases. Spirits growth was primarily
driven by scotch, particularly Johnnie Walker.
“It’s never kind of straight lines (in Africa), right?
There’s periods of economic difficulty that the markets tend to
go through. But overall, it’s a very healthy business.”
Beer rival Heineken on Monday reported that it
sold 5.6% less beer in the first half of the year, with declines
in all regions. Over half of the drop was due to Vietnam and
Nigeria, with price increases also having an impact.
(Reporting by Richa Naidu in London
Additional reporting by Aaron Ross in Nairobi
Editing by Mark Potter)
