The drinks group said European sales fell 2% to £1.357bn and volumes were down 5% due to weaker volume performance in Great Britain, Ireland and Spain.
In Great Britain, volumes declined 12% and net sales were down 9%, Diageo said.
A shift from the on trade to the off trade, a reduction in retailer funded promotions and a smoking ban in Scotland had also resulted in a volume decline of 1% in the beverage alcohol market, it added.
“In Europe, growth in our Continental Europe hub and in Russia was offset by weaker top line performance in Great Britain, Ireland and Spain and total net sales declined,” said Paul Walsh, CEO of Diageo.
“However, as in North America, price and mix improvement led to organic operating margin expansion and on an organic basis, operating profit was maintained.”