Diageo shares suffered the biggest fall for nearly 40 years after it warned tumbling sales of Scotch whisky in Latin America and the Caribbean will hit profits.
In a bruising setback for new boss Debra Crew, the drinks giant, behind brands including Johnnie Walker and Guinness, said sales in the region are set to fall by more than 20 per cent in the six months to the end of December.
As a result, it expects profits over the period to rise by less than previously anticipated.
The unscheduled update sent Diageo down as much as 16 per cent – the biggest one-day drop since 1987 – before the stock closed down 12.2 per cent, or 395p, at 2850p.
The rout wiped nearly £9billion off the group’s value, leaving it worth £64bn.
Struggle: The drinks giant, behind brands including Johnnie Walker and Guinness, said sales in the region are set to fall by more than 20 per cent
Sophie Lund-Yates, an analyst at broker Hargreaves Lansdown, said: ‘Diageo has long been a favoured steady-Eddie thanks to its seemingly impenetrable brand power and dividend paying ability, and there will now be concerns that the change in appetites could translate to other, larger markets.’
Diageo, whose brands also include Smirnoff, Don Julio, Captain Morgan, Tanqueray and Baileys, sells drinks all over the world with Latin America and Caribbean accounting for 11 per cent of its business. Brazil and Mexico are its biggest markets in the region followed by Central America and the Caribbean.
Business there was boosted last year by booming demand for Scotch, including Johnnie Walker Black Label and Johnnie Walker Red Label, as well as Don Julio tequila and Smirnoff vodka.
Diageo also owns Grand Old Parr, Colombia’s number one whisky brand, Cacique, the leading rum in Venezuela, and Ypioca, a traditional Brazilian spirit called cachaca.
But business has been hit by economic woes in the region with drinkers trading down to cheaper brands. ‘Macroeconomic pressures have worsened and that caused lower consumption and really more consumer downtrading than what the team was expecting,’ said Crew, a former US army captain who succeeded Sir Ivan Menezes as chief executive of Diageo when he died in June.
While its other four trading regions – North America, Europe, Asia Pacific and Africa – continue to trade well, Crew said there has been a slowdown in the Middle East due to the war between Israel and Hamas.
Crew said: We have seen an impact since the tensions and it is weighing on consumer sentiment a little bit more broadly, but this has just been the last few weeks.’
Russ Mould, investment director at AJ Bell, said: ‘It’s a rarity to see Diageo issue bad news, yet no business is immune to setbacks and the drinks giant has confirmed that life is not going well.’
He added: ‘The idea that luxury goods companies are immune to an economic downturn isn’t stacking up.
