Spirits maker blames a slowing global economy for a fall in sales
Diageo’s shares have plunged after the Johnnie Walker and Guinness owner warned of a major slowdown in sales and warned over profits.
Shares in the spirits and drinks maker dropped around 14pc as markets opened – the steepest fall since 1997 – after the company said it expected sales in Latin America and the Caribbean to drop by as much as 20pc in the first half of its current financial year. Latin America accounts for roughly 11pc of the company’s sales.
Chief executive Debra Crew blamed the slowing global economy, which has dented consumer confidence around the world and prompted shoppers to cut back or buy cheaper drinks.
She said: “That caused lower consumption and really more consumer down trading than what the team was expecting.”
DIAGEO’S SHARE PRICE PLUNGES
Diageo has in recent years shifted its focus to premium spirits, such as tequila brand Casamigos and Johnnie Walker whisky, as demand for more expensive drinks grew.
Former chief executive Sir Ivan Menezes, who died earlier this year, said in 2022 that Diageo was benefiting from “continued global premiumisation trends”.
However, the company has been caught out as inflation prompts drinkers to opt for cheaper spirits and beers as budgets are squeezed.
Diageo is a bellwether for the global economy. It operates across 180 countries around the world and had revenues of £15.5bn last year. Spirits, which make up the bulk of its business, are highly sensitive to changing consumer confidence.
Ms Crew, who took up the role of chief executive in July, warned of a hit to business from rising tensions in the Middle East, which had caused it to stop trading in “key geographies”.
She said: “We have seen an impact since the tensions and it is weighing on consumer sentiment a little more broadly.”
Diageo’s chief financial officer, Lavanya Chandrashekar, said: “Where trading has been impacted has been Israel, has been Lebanon of course, but there has been broader impacts as well.
“This is an unfortunate outcome. I would also say that we are one of the leading players in that part of the world.”
She added: “We have a small number of people in Lebanon, we are focused on their safety and supporting them through this very difficult time period. And our first concern in these circumstances is always protecting our people, and then our assets.”
Diageo’s profit warning comes amid a broader slowdown in the global spirits market that has seen rivals including Pernod Ricard and Remy Martin also warn of declining demand.
