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Diageo hit as growth of key brands slows

LONDON - Diageo has been hit by a slowing of sales for its key brands and sales of its recently launched alcopop brand Captain Morgan Gold have failed to meet expectations.

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Diageo backed the launch of Captain Morgan Gold in the US in May with a $65m (£44.5m) advertising campaign created by Grey Worldwide. The new drink follows in the footsteps of Smirnoff Ice, Diageo's successful January 2001 debut in the US ready-to-drink category.

In its end-of-year trading update, Diageo went on to warn that its performance in key markets in the second half has been hit by the worsening economic and political situation in Latin America, which has hit the overall performance of Johnnie Walker Red.

It said that its performance in the four major markets of North America, Great Britain, Ireland and Spain, was in line with expectations. Growth in J&B, which had seen buying-in in Spain in the first half ahead of a price increase, slowed in the second half, as did the growth in Baileys. Stronger performance by both Johnnie Walker and Guinness in the second half reversed the declines reported in the first half.

Smirnoff Ice led the growth in the ready-to-drink products and it said that new products in this market have performed well, even as the market place has become more competitive.

Diageo said the process to sell off Burger King began in March 2002 and is progressing as planned. During the second half, Burger King continued to show good signs of improved performance.

Diageo CEO Paul Walsh said: "For the third consecutive year, Diageo has achieved strong top-line growth in premium drinks. In the year to come, we will maintain our consistent approach to continue to generate growth. Our performance will benefit significantly from our newly acquired brands, particularly Captain Morgan, Crown Royal, Windsor and Cacique."

The company was giving a trading update for the year to June 30, with full results due in early September.

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