Pressure is mounting on Diageo’s chief govt after the drinks big posted sliding gross sales and income.
Drinkers downgrading to cheaper booze within the US, and a ‘perfect storm’ in Latin America and the Caribbean, noticed the Guinness maker situation a subdued set of half-year outcomes.
A powerful efficiency within the UK was not sufficient to offset declining gross sales elsewhere and ease the stress on Debra Crew, who took over in June. As such, the FTSE 100 group noticed gross sales fall 1.4 per cent to £8.6 billion within the six months to the top of December. Profits had been down 11 per cent to £2.6billion.
Shares stay down round 15 per cent since Crew, 53, succeeded Sir Ivan Menezes.
She conceded that the previous six months have been ‘challenging for Diageo and our sector’ however stated she anticipated an enchancment within the second half.
Sales droop: Drinkers downgrading to cheaper booze within the US, and a ‘perfect storm’ in Latin America and the Caribbean, has put the stress on Diageo boss Debra Crew (pictured)
‘Let me be clear, we are not satisfied with these results,’ she stated. ‘And I am restless to get this business to perform to its full potential.
Consumers are still facing multiple headwinds. Our consumers are resilient, but they’re additionally nonetheless cautious and choiceful. Premiumisation continues, however there are nonetheless some pockets of downgrading.’
Sales in North America, its largest market, fell 2 per cent within the six months to the top of December with single malts down 27 per cent.
Johnnie Walker fell 13 per cent and George Clooney-founded Casamigos tequila dropped 14 per cent. More inexpensive spirits akin to Buchanan’s and Bulleit jumped 36 per cent and 19 per cent respectively.
Crew additionally bemoaned a ‘perfect storm’ of issues in Latin America and the Caribbean the place gross sales fell 18 per cent amid weak demand for spirits akin to Scotch whisky in addition to a build-up of unsold inventory.
The poor efficiency within the area triggered a revenue warning in November that resulted within the greatest fall in Diageo shares on report.
Nonetheless, yesterday’s replace confirmed the UK remained a vivid spot, with gross sales up 9 per cent within the half-year.
This was largely due to the bumper efficiency of Guinness, which noticed a 24 per cent rise in gross sales in Britain.
The acquire within the UK helped raise gross sales throughout Europe 10 per cent.
And Nuno Teles, Diageo’s UK boss, performed down fears drinkers within the UK had been buying and selling down. He stated: ‘The cost-of-living crisis is something we are aware of, and consumers will be looking at how to address it.
‘But the reality is that Guinness – which is a premium product – is growing well ahead of the beer sector.’
He stated bumper occasions, akin to Six Nations Rugby, underscored Briton’s eagerness to splash out on booze.
Diageo stated that as many as 300,000 pints of Guinness are bought at Twickenham on England match days.
But Aarin Chiekrie, an fairness analyst at funding platform Hargreaves Lansdown, stated the outlook for income for the remainder of this yr ‘remains murky’.
He added: ‘The medium-term looks slightly brighter, but improvements in the Latin American and Caribbean market will be key and to a large extent that’s exterior of Diageo’s management.’
Richard Hunter, head of markets at Interactive Investor, added: ‘All is certainly not lost at Diageo, but the performance in Latin America and the Caribbean has left a bitter taste in the mouth, from which it may take some time to recover.’
Crew began her profession as a army intelligence officer within the US military, earlier than working at shopper titans akin to Pepsico, Kraft Foods, Nestle and Mars.