Dive Brief:
- Diageo said its sales rose just 0.4% across the globe in the year ending June 30, as the world's largest distiller struggles with a slowdown in developing markets, particularly China.
- Sales in the Asia-Pacific region fell 7% on an organic basis. News of that decline came within hours of the surprise departure of the executive in charge of operations in China and India.
- Operating profits for the company, which makes Johnnie Walker Scotch whisky, Guinness stout, Smirnoff vodka and other brands, dropped a full 20% globally.
Dive Insight:
Diageo continues to struggle with the fallout of China's anti-corruption campaign. Just like cognac maker Remy Cointreau did in its earnings a few weeks ago, Diageo points the finger at the plummeting market for its high-end booze in China as one of the major sources of its woes. It's no longer wise to bribe Chinese officials with expensive gifts, and thus the makers of expensive gifts are in trouble.
Still, there's a decidedly tiresome tone to all this. Imagine, if you will, a defense attorney who complained that his business was hurting because crime was falling, or a doctor who saw his income fall because a cure had been found for the disease he treated.
It's worth noting that it falls to Diageo, Remy, and the rest to find a way to do business in China that doesn't rely on graft. And at least so far, they have been unable to do so.
