Diageo 'Cautious' As UK Drinks Sales Decline

Drinks company Diageo has reported a decline in UK sales, prompting its chief executive to tell Sky News he "remains cautious" about the future.

The firm, which owns whisky, beer and vodka brands such as Johnnie Walker and Smirnoff, said sales in the UK were falling behind the rest of Europe.

But despite the fall, Diageo posted a 12% rise in pre-tax profit to £1.8bn in the second half of 2011.

Smirnoff vodka and cream-based liqueur Baileys remained popular in the UK.

Smirnoff vodka was up 8% in the period while sales of Captain Morgan rum grew by 25%.

Paul Walsh, chief executive of Diageo, told Sky News: "We've had some challenges in the UK but the encouraging thing is that we are seeing some encouraging signs.

"A year or so ago there were a lot of pubs closing down. That seems to have improved, and off-trade sales have stabilised, so there are some encouraging signs in GB."

Diageo is exposed to several struggling eurozone economies, such as Spain, Greece and Ireland, which have all posted declining sales as wider debt problems lead to a squeeze in consumer spending.

Wider sales across Europe were flat.

It was growth in sales in emerging markets such as India, China and Brazil that supported Diageo's encouraging half-year performance.

Latin America remained the company's strongest market with 23% sales growth, compared with 12% growth in Africa, 10% in Asia and 5% in North America.

In Africa, Guinness sales were 10% ahead, while Johnnie Walker whisky was up 32%.

In Latin America, the performance was driven by a 32% rise in Smirnoff sales.

Diageo was concerned over its performance in the UK when it posted results last year.

The drinks firm warned that sales were declining as the UK became "a nation of wine lovers".