The maker of Smirnoff and Guinness warned conditions in emerging markets were "more challenging" following slower growth in its Christmas quarter.
London-based Diageo, whose brands include Johnnie Walker whisky, has been impacted by China's crackdown on extravagant gifts to officials and weakness in some other markets, most notably Thailand and Nigeria.
Sales rose 1.8% across the half-year to December 31 but this was weaker than the growth rate of 2.2% recorded at the end of the first quarter.
Diageo shares fell 6% in early trading while its warning over conditions in emerging markets upset shares in those firms with an Asian focus, including Unilever, insurer Prudential and banking group Standard Chartered.
Ivan Menezes, who took over as chief executive from Paul Walsh in the summer, said demand in the United States and better trading in Western Europe enabled Diageo to absorb the challenges in some emerging markets.
He added: "We reacted quickly to the changing emerging market environment, reducing inventory levels in several key markets, which led to a weaker second quarter, and tightly managing our cost base."
Mr Menezes pledged to achieve cost savings of £200 million a year by 2017 as part of a drive to simplify and de-layer the business. More details are expected in the next couple of months.
He said that even though some markets were set to remain challenging, Diageo was was in good shape for the medium and long term.
UK net sales grew 1% over the half year, helped by strong growth for Pimm's in the good summer weather and for Captain Morgan rum.
Guinness performance was flat but price increases and competitors' pricing and promotional activity impacted Smirnoff as net sales declined 2%. The decision to hold price on Bell's meant its sales were down 21%.
Diageo was also impacted by economic challenges in southern Europe and declining Guinness sales in Ireland, with revenues down 6%. In Nigeria, consumers switched away from Guinness following the launch of rival lagers.
Across the group, operating profits before one-off items were 3% higher at £2.1 billion in the six months to December 31.
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