By Richa Naidu
LONDON (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)
