This article has been adapted from our sister site across the pond, Fool UK.

If you were running a "vice fund" (the opposite of an ethical fund), then Diageo (NYSE: DEO) would surely be on your watch list.

A post-party hangover
That's because Diageo -- formed from the merger of Grand Metropolitan and Guinness in 1997 -- is a world-leading supplier of spirits, beers, and wines. Among its well-known brands are Baileys cream liqueur, Gordon's and Tanqueray gin, Guinness stout (which dates back to 1759), Johnnie Walker and J&B whisky, and Smirnoff vodka.

Thus, around the world, hundreds of millions of drinkers get into varying states of refreshment by consuming Diageo-produced drinks. Alas, alcoholic overindulgence leads to hangovers, as Diageo discovered in the aftermath of the global financial crash of 2007/09.

Diageo's triple miss
During the financial boom of the Noughties, everyone was gulping down premium-priced drinks. However, now that the party is over, Diageo and its customers feel slightly the worst for wear.

Hence, in its results for the second half of 2010, Diageo disappointed its shareholders by missing forecasts for sales and profits growth.

The drinks dynasty reported organic growth in net sales up 4% to 4.3 billion pounds, slightly below market forecasts. However, a 12% hike in marketing spend saw operating profit rise a mere 2% to 1.7 billion pounds, versus expected profit growth of 6.5%.

Another letdown was the all-important free cash flow, which slumped 14% to 775 pounds million on higher working-capital demands. Nevertheless, half-year earnings per share rose 17%, allowing Diageo to hike its interim dividend by 6%.

This triple miss on revenues, profits, and cash flow was not well received by investors. Diageo shares close down some 5%, reflecting Mr Market's displeasure.

A tale of two worlds
Diageo's sales performance was mixed, with growth neatly divided between developed-world stagnation and developing-world spurt. Thus, net sales rose 7% in the Asia-Pacific region and 13% in its International divisions, but sales growth was a mere 3% in North America.

Even worse was the outcome for Diageo's European stronghold, where net sales fell by 3% and operating profit dived 9%. Worst hit were Greece, Spain, and Ireland, where drink sales fell by an eighth (13%). Clearly, these countries' well-published economic woes have forced consumers to curb their discretionary spending.

Conversely, emerging markets and developing nations helped to shore up Diageo's performance. Notable hot spots were Russia and Eastern Europe (sales up 20%), Asian emerging markets (+15%), and Africa (+10%).

A stiff drink for shareholders
Diageo trades on a price-to-earnings ratio above 16, with a 3.3% trailing dividend yield. 

Given Diageo's weak sales growth and premium rating to other FTSE 100 members, cautious investors might want to hold fire until a clearer picture emerges. Diageo still has a great set of global brands, though, and is priced at a slight discount to global peers such as giant French rival Pernod Ricard. 

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Cliff doesn't own shares of any companies mentioned. Diageo is a Motley Fool Income Investor recommendation. The Fool owns shares of Diageo and has a disclosure policy.