Diageo probed over artificial sales inflation

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Diageo's flavored vodka is faring poorly in US.
Diageo's flavored vodka is faring poorly in US.

Alcohol giant investigated for fraudulent practices in midst of sales slump

Diageo is being scrutinized by the US Securities and Exchange Commission (SEC) over its distribution practices.

The British drinks giant is being probed over whether it has been shipping excess inventory to its US distributors, allowing it to report higher sales and shipments.

As reported by the Wall Street Journal, sending more alcohol than is required would boost Diageo's financial results. Diageo told the newspaper it had received an enquiry and was co-operating with the investigation.

A spokeswoman said: "Diageo is working to respond fully to the SEC’s requests for information in this matter."

Diageo houses some of the world's biggest spirits and alcohol brands, including Johnnie Walker, Guinness, Smirnoff and Captain Morgan. 

North America down
North America accounts for a third of the British firm's net sales in 2014, and 45% of the company's operating profit.

CEO Ivan Menezes has admitted the company has been underperforming in the region recently. During interim results  for the second of 2014, Menezes said pricing for Smirnoff and Captain Morgan were too high for a saturated market, denting their share.

He said Smirnoff, the leading flavored vodka brand, also took a hit from the growing popularity of flavoured whiskey.

The investigation comes after management upheaval at the firm. North American president Larry Schwartz is set to retire at the end of the year. The chief marketing officer for the region, Peter McDonough, also stepped down and has been replaced by global reserves managing director James Thompson.