DIAGEO chief executive Ivan Menezes has insisted that falls in whisky volumes are a "temporary phenomenon" as its flagship Scotch brand Johnnie Walker suffered its first sales reverse for four years.
The company set out a £200 million cost-cutting plan after investors, spooked by falling sales in China sent its shares plunging 4.7%.
The London-headquartered group also said it is carrying out assessments on the potential impact of Scottish independence.
Diageo's Scotch whisky sales rose 2% in the six months to the end of December but declined 4% in volume terms.
Mr Menezes, who took the helm at Diageo in July, said of the volume fall: "We see it very much as a temporary phenomenon."
Mr Menezes said that Diageo, which has 29 distilleries in Scotland, took a "deliberate decision" to maintain pricing and ride out destocking in tough markets in Latin America and South East Asia, insisting that demand from end consumers remains "robust".
Johnnie Walker was down 1% in net sales terms while volumes were off 3%.
Mr Menezes said: "Our confidence in the consumer opportunity for Johnnie Walker in emerging and developed markets continues to be strong."
He said there would be no alteration to its expansion plans in Scotland, which include a new malt distillery at Teaninich in the Highlands, as it seeks to lay down stock in anticipation of future demand from emerging markets.
"We have major investment plans for Scotch that we will continue to do," Mr Menezes said.
He noted that in North America, where Johnnie Walker has benefited from a marketing drive and the launch of several new variants, sales were up 13% on the same period last year.
Meanwhile, in China demand for its most expensive whiskies continues to soar with sales of Johnnie Walker Blue up 21% year-on-year.
Diageo said its first television advert for Johnnie Walker Red in the UK for 50 years had helped to double sales in its home market.
Meanwhile "our malts are on fire," Mr Menezes said, with net sales growth of 22%. The recently launched Talisker Storm whipped up sales of the Talisker brand by 44%. The Singleton and Lagavulin contributed net sales growth of 28% and 22% respectively.
Net sales of J&B declined 9%, as the Spanish economy struggles.
Buchanan's net sales increased despite a 20% volume decline due to price increases in Venezuela to offset high inflation.
Windsor, down 7% in volume and 1% in sales, was credited with an improved performance in its primary market of Korea.
Mr Menezes said the company is "very active" in considering the implications of this year's independence referendum. "We are clearly assessing all the implications of various scenarios here," he said.
"We are not engaged in picking sides," he added. But Diageo is seeking reassurance on areas such as European Union membership, currency and industry regulations.
Diageo, which gets 42% of its sales from emerging markets, said total sales rose a weaker-than-expected 1.8% in the first half of its financial year. With growth having been 2.2% in the first quarter, analysts estimate that it slowed to 1.6% in the final three months.
Underlying operating profit was £2.060 billion against £2.001bn for the same period last year.
Diageo had a particularly torrid time in China where sales plunged 23% as a government anti-extravagance campaign hit sales of white spirit, including Shuijingfang in which Diageo has a majority stake.
Mr Menezes would not be drawn on how many jobs would be lost as part of his £200m cost-cutting drive that will see a layer of regional management stripped out.
"In the last six months it has become apparent that the organisation is not structured to deliver out performance ambition."
He added: "We need a more decentralised and agile business while retaining the benefits of scale."
Diageo's shares closed down 90p at 1820p.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article