Chinese abstinence hits drinks firms Diageo, Remy

Thu Oct 17, 2013 10:03am EDT
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By Martinne Geller

LONDON (Reuters) - China's crackdown on corruption, and with it luxury gift-giving, has again hit quarterly sales of spirits, European drinks groups Diageo Plc (DGE.L: Quote) and Remy Cointreau SA (RCOP.PA: Quote) said on Thursday.

In contrast, brewer SABMiller Plc SAB.L said sales of lager in the last three months jumped 10 percent by volume in China, one of the markets that helped the maker of Peroni and Grolsch beers post a 6 percent rise in net sales by value, up from a 2 percent rise the previous quarter.

"We see this as a solid result in tough market conditions," said Numis Securities analyst Wyn Ellis.

Stifel Nicolaus analyst Mark Swartzberg also said SABMiller was "navigating better than Diageo".

Diageo, the world's biggest spirits company as well as the maker of Guinness and Red Stripe beers, posted a 3.1 percent rise in sales for its first quarter, ended September 30, which analysts said fell short of their expectations for a 4 percent rise. Sales rose 5 percent in the previous quarter.

Meanwhile Remy, which generates 40 percent of its operating profit from cognac sales in China, said wholesalers were reducing inventories after sales fell short of expectations during the Chinese New Year.

Remy said revenue declined 5.3 percent on a like-for-like basis to 294.4 million euros ($397.2 million) in the three months to September 30, its second quarter, compared with a 2.

Remy's shares were down 3 percent at 71.48 euros by 1239 GMT, when shares in Diageo were up 0.3 percent at 1944 pence and shares in SABMiller were up nearly 4 percent at 1358 pence.   Continued...

A signage is seen on the outside of Diageo offices in west London in this October 10, 2008 file photo. REUTERS/Toby Melville/Files