Drinks giant Diageo has reported a 1.4% decline in global sales to $20.3bn in the year to the end of June, the group’s first fall in sales since the COVID pandemic.

The Guinness owner also reported an operating profit of $6.0bn, down 4.8% on an organic basis.

Despite falling trade globally, sales climbed by 5% in Britain, an increase credited to the rise in popularity of Guinness and related endeavours including the alcohol-free version and its Nitrosurge home-pouring technology.

Alongside Guinness, Diageo owns several brands of spirits including Johnnie Walker Scotch whisky, Gordon’s gin and Smirnoff vodka, as well as other well known alcoholic drinks brands including Don Julio tequila and Baileys Irish Cream.

Diageo chief executive, Debra Crew, described the last fiscal year as “challenging” for both the group and wider industry, amid continued macroeconomic and geopolitical volatility. Crew also noted the last year was heavily impacted by a “materially weaker” performance by the firm in the Latin America and Caribbean (LAC) region.

“Excluding LAC, organic net sales grew 1.8%, driven by resilient growth in our Africa, Asia Pacific and Europe regions,” Crew said. “This offset the decline in North America, which was attributable to a cautious consumer environment and the impact of lapping inventory replenishment in the prior year.

“We have taken actions to manage the inventory issues in LAC. We have strengthened our consumer insights and redeployed resources towards the best growth opportunities, we have stepped up our route-to-market across several markets, including our most significant transformation in at least a decade in our US spirits organisation, we have delivered record productivity savings of nearly $700m, and we have generated $2.6bn in free cash flow while increasing strategic investments.

“We are confident that when the consumer environment improves, the actions we are taking will return us to growth.”

Diageo’s latest trading statement also revealed that the group had still either grown or at least held a total market share in over 75% of total net sales in measured markets, including in the US.

The drinks company has also increased its recommended full year dividend by 5% in the last year, to 103.48 cents per share.

Equity analyst at Hargreaves Lansdown, Aarin Chiekrie, commented: “Although progress in LAC has improved over the financial year, sales still fell at double-digit rates as customers here consumed less and switched to cheaper alternatives. And because this region’s one of the group’s higher-margin territories, it’s having a pronounced effect on operating profits.

“Taking a step back, investors should remember that Diageo has a world-class portfolio of brands, including Guinness, Smirnoff, Johnny Walker, and Tanqueray. That’s helped Diageo hold or grow its market share in over 75% of the regions it operates in, despite the current challenges for the wider industry.

“While there remains some short-term uncertainty in the drinks market, Diageo’s cash flows remain extremely healthy, and the dividend has been bumped up by 5% to reward investors for their patience.”

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