Diageo marketing spend down by 2% as it reveals cost saving measures of £200m a year
As it announced cost saving measures of £200m a year until 2017, Diageo has revealed that it lowered its marketing spend by 2 per cent for the first quarter of its financial year to £903m, but still saw a 1 per cent increase in operating profit of £2,040m.
The alcoholic drinks giant has released its interim first half financial results for six months leading up to 31 December 2013, and although it saw a 3 per cent organic growth of its marketing budget during the period, spend was still down on the previous year's figure of £918m.
Diageo also reported a decline in reported growth in net sales of 1 per cent at £5,932m, while its operating profit before exceptional items, which included transactions and integration costs of new acquisitions, was up by 3 per cent to £2,060m.
Western Europe saw a 1 per cent increase in marketing spend of £177m although operating profit for the period fell by 7 per cent to £370m, with
Great Britain seeing a growth in net sales of 1 per cent, with Captain Morgans benefitting from an increase in media activity.
The UK sales performance of Guinness was flat, while Smirnoff saw net sales decline by 2 per cent as a result of a price increase and competitor promotional activity. Benefitting from a warm summer was Pimms, the company added.
In North America, marketing expenditure for the period dropped by 2 per cent to £293m, although the region still reported an operating profit increase of 3 per cent of £850m.
Ivan Menezes, CEO of Diageo said that the company's portfolio continued to show "strength" during such a global "challenging" period, where emerging market performance was absorbed by the improved performance of Western Europe and sustained performance within North America.
"In the first half the organisation has aligned behind the six key performance drivers which I identified when I was appointed CEO; premium core brands, reserve, innovation, route to consumer, cost and talent. This clarity of focus at a market level enables me to take the changes I have already made to the operating model to the next level. Over the next two months we will set out detailed plans to simplify our processes and de-layer our organisation. This will create a more agile, accountable and effective organisation to deliver our performance ambition. I expect this to deliver cost savings of £200m a year by the end of fiscal 2017."
He added that the board did expect to see top line improvement within the figures for the second half of the year, with a focus upon the six key performance drivers.