UK’s thirst quenched

Is the British public drinking less? According to Diageo, it would seem so.

In its half-year results announced yesterday, the world’s biggest drinks group reported that overall sales in the UK were on a downward curve.

The company said UK sales, which fell 2% overall in the six months to 31 December 2011, had been hit by a decision to hold firm on prices and cutting back on promotions.

Diageo did, however, state that the British still have a penchant for vodka and Baileys cream liqueur.

The company said the figures gave further credence to the argument that UK consumers are drinking less, but better.

Andrew Morgan, president of the drinks multinational’s European business, highlighted how many consumers were trading up within certain categories, notably to more expensive brands such as Tanqueray gin and Cardhu single malt whisky.

Explaining the drop in UK sales, Morgan added: “This year we have not got into the deep discounting that has been a feature of the grocery channel.”

This will be welcome news to critics of the heavy discounting which has been blamed in some quarters for encouraging people to drink more alcohol than they normally would, and also serves as a reminder to the UK government and the health lobby that the industry is making significant efforts – to the detriment of company profits – to aid the fight against alcohol abuse in the country.

One must remember that, as a listed company, Diageo’s primary responsibilities are to its shareholders and to this end it would be reasonable to expect the company to be doing all it can to maximise sales through aggressive marketing and promotion.

Diageo reduced the “depth and frequency” of offers it was willing to fund as it tried to shift the focus of its marketing from price to product quality.

The fact it has sacrificed its duty to maximise sales and has been prepared to accept a slump in UK sales is to be applauded.

Not that the shareholders had all that much to be worried about, however. Diageo said growth of more than 10% in France and Germany had helped to offset the UK slump as well as problem markets such as Spain and Greece, where consumers have reduced spending on luxuries such as alcohol.

As a result, sales at its European arm were unchanged at £1.5 billion for the six months to 31 December.