Guinness in focus as Diageo reveals latest trading
Diageo is set to reveal how Guinness and its major spirit brands performed over the key Christmas period, after ruling out speculation it could sell the Irish stout brand.
The London-based, drinks giant is expected to reveal another bumper performance by Guinness, which has been a key strong performer in recent years, becoming the UK’s best-selling beer in pubs in the process.
However, investors will be keen to hear more about the strategy for Guinness moving forward, when the company updates the market on Tuesday February 4.
It will come around a week after Diageo shut down reports that it could sell or spin off Guinness, as well as its 34% stake in champagne maker Moet Hennessy.
Diageo stressed that it had “no intention” to sell either after reports it could seek to secure £8 billion from a deal for Guinness.
Guinness has proven to be a golden goose for Diageo in recent years.
Last July, the company said strong sales of Guinness, particularly in the UK, helped to drive an 18% rise in beer sales across the company.
Soaring demand has put pressure on production, with the company reporting “unprecedented levels” of demand from UK pubs in the run-up to Christmas.
It led to reports that some pubs suffered shortages and that the brewer was raising its reserves in Ireland to help keep up with demand.
Shareholders will be keen to find out whether the company was able to benefit financially from the strong demand or if its supplies failed to keep up with its sales potential over the period.
A consensus of analysts have predicted that the Diageo group will report a slight increase in organic sales, of about 0.5%, for the six months to September as growth in beer is offset by a slowdown in scotch and rum.
The Gordons gin and Baileys owner is also expected to reveal that organic operating profits were 2% lower for the period.
The spotlight will be on chief executive Debra Crew to show she can get the business back on track, after its shares hit their lowest level since 2017 late last year.
Russ Mould, AJ Bell investment director, said: “Disappointing results for the fiscal year to June 2024 and a profit warning for fiscal 2025, thanks in part to problems at the Latin American operation, have weighed heavily upon the share price, along with concerns over a wider slowdown in alcohol consumption.
“Further complications include Chinese tariffs on European brandy, rhetoric over additional levies on European scotch sales into the USA, calls from the US surgeon general for warnings about the health impact of alcohol consumption and a cooling in the once-red-hot tequila market.”
The company has reportedly considered the sale of brands including Pimms liqueur and Ciroc vodka to streamline its portfolio and help revive its fortunes.
By Henry Saker-Clark, PA Deputy Business Editor