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Diageo upbeat on Scotch prospects despite category downturn - just On Call

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The head of Diageo has forecast a return to growth for the company's Scotch whisky stable in its new fiscal year.

Scotch whisky sales have slowed in the last two years

Scotch whisky sales have slowed in the last two years

In results for the 12 months to the end of June yesterday, Diageo saw sales of its Scotch brands fall by 5% in value terms, and by 4% in volumes. Reported net sales for the Scotch portfolio were down by 9%.

Speaking to press yesterday following the release of the results, CEO Ivan Menezes said he remains confident in the growth prospects for Scotch. "Around 80% to 90% of the decrease is because of the destocking over the last couple of years in South-East Asia and West LAC (Latin America & Caribbean)," he said.

"We've come through two years of volumes coming down because of our shift to get closer to the consumer and to the customer. We're not going to let the stock build back. I'm very confident that the category is healthy. In fiscal-2016, I fully expect us to get Scotch whisky back into growth.

Late last year, just-drinks exclusively revealed that slowing Scotch sales had led Diageo to adjust the timing of its production expansion programme in Scotland.

"We slowed down the pace at which we were laying down whisky purely to adjust for a couple of years of lower volumes," said Menezes yesterday.

CFO Deirdre Mahlan, who will move to head up the group's North American operations later this year, added: "(Prior to the move,) we had raised our long-term assumption, but then and we brought it back. We slowed down the build-out of distillery expansion, so we can manage our supply and demand. When we see that we'll need the whisky then we'll start them back up."

In 2014, export sales of Scotch whisky dropped by 7% in value terms as the category suffered in the US, according to figures released by the Scotch Whisky Association.


Sectors: Company results, Spirits

Companies: Diageo

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