Profits at Diageo slid by 15% to $3.1 billion (£2.4bn) in the latter six months of 2023 after the maker of Gordon's gin and Johnnie Walker was hit by a slump in demand for spirits that was particularly acute in Latin America, a key export market for its whisky brands.

The company, which produces more than 100 original Scotch brands, suffered a 1.4% decline in global sales to $11bn driven by a 23% crash in what is referred to as the LAC (Latin America and Caribbean) region. This territory accounts for about 11% of group sales but that figure rises to 25% in the case of Diageo's Scotch portfolio.

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Diageo had warned in November of a build-up in unsold stock in Latin America following a slowdown in demand for expensive spirits. A further decline of 10% to 20% is expected in the second half of the current financial year that ends in June.

“We describe it as a perfect storm in that we came out of a strong Covid super-cycle into an economic slowdown where there was a really rapid shift in consumer spending," president of global supply chain Ewan Andrew told The Herald.

"We had already [largely] shipped our Scotch market, so we had shipped that across from Scotland and sold it to our first-level customers, and that meant we had the wrong products in those channels and they did not pull through from a consumer perspective. That is taking longer to unwind than we expected this fiscal [year], and that is why we announced in November a change to our profit outlook."

Mr Andrew said LAC remains a "very exciting" market with net sales up 50% since 2019. The group has a "focused action plan" to address current problems in the region and is confident that appropriate stock levels will be restored by the end of June.

Elsewhere, sales of Johnnie Walker remain "super strong" with a 17% jump in European revenues during the half-year. The world's best-selling whisky brand also defied an overall loss of market share by Diageo in North America, where total sales were 1.5% lower.

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Asked about the knock-on impact in Scotland from the downturn in Latin America, Mr Andrew noted that global whisky sales have clocked up 8% growth over the last four years.

“We plan for this over years and decades, not over months and shorter-term periods," he said.

"That 8% category growth that we have seen over the last four years, that’s running ahead of our long-term distillation plans so therefore we are continuing to increase production and increase liquid stock so that we’ve got enough for that compounded growth for many years and decades into the future. I have expanded production this year, and we are not planning to slow it down.”

Elsewhere, Diageo revealed a 10% rise in net sales in Europe, despite declines in Eastern Europe. The group was also buoyed by a strong performance in Great Britain and Ireland, where sales rose by 9% and 10% respectively.

It reported continued “strong” sales of Guinness across Britain, with the drink remaining the UK’s most popular pint after knocking Carling off the pedestal last year.

However, recent weakness in gin continued, with volumes of Gordon’s and Tanqueray dropping across the Continent during the period, although this was largely offset through higher pricing.

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Trevor Stirling, an analyst at Bernstein, said the figures had amplified rather than allayed concerns that difficulties in Latin America could be more widespread than previously thought. It has also put a spotlight on new chief executive Debra Crew, who took the helm in June from Sir Ivan Menezes.

John Moore, senior investment manager at RBC Brewin Dolphin, said the results were slightly short of expectations but came as "no surprise".

"Overall, the business is performing comparatively well elsewhere against a challenging backdrop and tough year-on-year comparisons," he added. "Today’s statement provides greater clarity following the shock from Latin America last year, which will hopefully turn out to be a blip rather than an enduring problem."