Diageo Hit by China Slowdown

LONDON-- Diageo PLC on Thursday said weakness across emerging markets led to a fall in full-year profit as the U.K. liquor maker suffered from a huge drop in demand in China, the world's biggest liquor market.

The maker of Johnnie Walker whisky and Smirnoff vodka reported net profit of GBP2.25 billion ($3.81 billion) for the year to June 30, compared with GBP2.45 billion a year earlier, on revenue 8.5% lower at GBP13.98 billion.

"Emerging market weakness, often currency related, but also including some specific issues, such as the anti-extravagance measures in China, has led to weaker top line growth," said Chief Executive Ivan Menezes.

Diageo is the latest major spirits company to take a hit on China, nearly two years after the Chinese government banned extravagant gift giving and scaled back state-funded banquets.

Diageo acquired Shui Jing Fang, a Chinese producer of baijiu-a spirit made of sorghum-in 2013. The company said sales of Shui Jing Fang declined 78% in the year. But for the first times, some of Diageo's international brands felt the heat in China, with sales of Johnnie Walker Black Label falling 28%.

French giants Rémy Cointreau SA, the maker of Rémy Martin cognac, and Pernod Ricard SA have both issued warnings in the last year on continued weakness in China, the world's biggest liquor market by volume.

Write to Peter Evans at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires