Drinks giant Diageo yesterday reported a 5 per cent drop in Irish sales, a decline the company blamed on the smoking ban and an increased tendency for people to eat and drink at home.
The 11 per cent increase in the group's so-called off trade business - sales from off-licences and supermarkets - in Ireland in the year ended June 30th, failed to offset a 5 per cent decline in the on trade business, said Michael Ioakimides, managing director of Diageo Ireland.
On trade accounts for 53 per cent of Diageo's business in Ireland and almost 90 per cent of the group's Irish sales of Guinness stout.
Although Guinness stout volumes declined by 3 per cent in the 12-month period, net sales increased 4 per cent after the company raised the price of its flagship products.
From this month, all Guinness for export to the UK and other parts of Europe, will be produced in Dublin after Diageo closed its brewery at Park Royal in west London.
The company is investing €23 million in the St James' Gate site to cater for the increased production.
London-based Diageo's Irish operations account for about 7 per cent its total profit.
In spirits, Smirnof held its position as Ireland's number one vodka brand, with an 11 per cent increase in volumes, while Baileys volumes rose by 2 per cent.
"We are still seeing a decline in the number of people drinking out, but the decline is slowing substantially," said Mr Ioakimides said and went to say that the Irish business should start to show sales growth in the next few years.
He also said Diageo Ireland hopes to take advantage of the group's recent €300 million acquisition of Co Antrim-based Bushmills Whiskey to increase the presence of its brand in Northern Ireland.
Across the whole group, Diageo delivered a 7 per cent decline in pretax profit to £1.82 billion (€)2.67 billion. Operating profit before exceptional items rose 1.7 per cent to £1.94 billion. Total sales rose 1.6 per cent to £9 billion.
Geographically speaking, a strong performance in the US helped offset what the company described as challenging conditions in Europe.
In Europe, volumes slipped 1 per cent, sending sales down 2 per cent. Elsewhere, international volumes rose 4 per cent, pushing sales up 9 per cent.
Overall the group is forecasting volume growth of 3 per cent and a 4 per cent increase in sales in fiscal 2006.
Analysts were generally pleased with the group's results. Nigel Popham at Teather & Greenwood in London said he expects the group's business in Europe to improve over the coming year as consumer spending in the region picks up.
Diageo also announced plans to spend as much as £1.4 billion buying back shares, a move which while pushing the share price upwards also prompted Moody's to consider lowering its ratings on the company's debt.
The stock rose 13 pence in London, to 805p.
