China bribes crackdown eats into Diageo’s sales

THE Chinese crackdown on bribery in government has hurt Smirnoff and Johnnie Walker maker Diageo, which missed third quarter sales forecasts.

The world’s largest drinks firm saw a 19pc fall in Asian sales, citing weaker performance in Chinese white spirits, wiping up to 5pc off shares during trading.

The shares corrected, closing down 3.74pc, or 71p, to 1,829p.

Diageo owns Shui Jing Fang, a brand of the Chinese drink baiju, traditionally given as a gift to Communist party officials. But a government clampdown on lavish gestures has had a direct impact on Asian sales.

The weak quarter in Asia Pacific was also affected by the political instability in Thailand, and lower confidence across several key emerging markets, including Russia, South Africa and Kenya. This dragged down group sales for the quarter, which fell 1.3pc, significantly lower than the 2pc increase analysts had expected.

The weakening of Venezuela’s currency on the back of a new foreign exchange system also reduced growth. Chief executive Ivan Menezes, said: ‘The third quarter saw currency and economic weakness impact consumer confidence across many emerging markets.

‘Our performance reflects the challenging environment we are operating in. The current emerging market weakness does not reduce our confidence in the long-term growth opportunities of these markets.’

French spirits firm Remy Cointreau also warned full-year operating profit would fall, by 3540pc, citing the problems in China.