Pressure is mounting on Diageo’s chief executive after the drinks giant posted sliding sales and profits.
Drinkers downgrading to cheaper booze in the US, and a ‘perfect storm’ in Latin America and the Caribbean, saw the Guinness maker issue a subdued set of half-year results.
A strong performance in the UK was not enough to offset declining sales elsewhere and ease the pressure on Debra Crew, who took over in June. As such, the FTSE 100 group saw sales fall 1.4 per cent to £8.6 billion in the six months to the end of December. Profits were down 11 per cent to £2.6billion.
Shares remain down around 15 per cent since Crew, 53, succeeded Sir Ivan Menezes.
She conceded that the past six months have been ‘challenging for Diageo and our sector’ but said she expected an improvement in the second half.
Sales slump: Drinkers downgrading to cheaper booze in the US, and a ‘perfect storm’ in Latin America and the Caribbean, has put the pressure on Diageo boss Debra Crew (pictured)
‘Let me be clear, we are not satisfied with these results,’ she said. ‘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 also still cautious and choiceful. Premiumisation continues, but there are still some pockets of downgrading.’
Sales in North America, its largest market, fell 2 per cent in the six months to the end 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 affordable spirits such as Buchanan’s and Bulleit jumped 36 per cent and 19 per cent respectively.
Crew also bemoaned a ‘perfect storm’ of problems in Latin America and the Caribbean where sales fell 18 per cent amid weak demand for spirits such as Scotch whisky as well as a build-up of unsold stock.
The poor performance in the region triggered a profit warning in November that resulted in the biggest fall in Diageo shares on record.
Nonetheless, yesterday’s update showed the UK remained a bright spot, with sales up 9 per cent in the half-year.
This was largely thanks to the bumper performance of Guinness, which saw a 24 per cent rise in sales in Britain.
The gain in the UK helped lift sales across Europe 10 per cent.
And Nuno Teles, Diageo’s UK boss, played down fears drinkers in the UK were trading down. He said: ‘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 said bumper events, such as Six Nations Rugby, underscored Briton’s eagerness to splash out on booze.
Diageo said that as many as 300,000 pints of Guinness are sold at Twickenham on England match days.
But Aarin Chiekrie, an equity analyst at investment platform Hargreaves Lansdown, said the outlook for profits for the rest of this year ‘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 outside of Diageo’s control.’
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 started her career as a military intelligence officer in the US army, before working at consumer titans such as Pepsico, Kraft Foods, Nestle and Mars.
This post first appeared on Dailymail.co.uk
