Diageo, the world’s premier spirits manufacturer, is reportedly considering divesting several of its beer brands, excluding its flagship Guinness, due to concerns about profit margins. This development was reported by Axios, citing sources acquainted with the company’s operations.
The brands under consideration for sale include Smithwick’s, Kilkenny, and Harp Lager from Ireland, along with Tusker from Kenya, among others. According to Axios, these beer brands have been impacting the overall business margins negatively.
However, Diageo has refrained from commenting on these reports. A subsequent report from BANCM on Wednesday suggested that Smithwick’s, Kilkenny, and Harp might not be on the sales list after all.
Potential acquirers for these brands could be Heineken and the C&C Group, the producer of Bulmers, as per a report in the Irish Independent.
Overview of Diageo’s Beer Portfolio
Diageo’s beer sales amounted to £3.36 billion (€3.9 billion), representing just over 14% of the company’s total sales for the year ending June 30. In contrast, spirit sales contributed a substantial 81%.
In November, the maker of Johnnie Walker whisky warned of a potential decline in operating profit growth for the first half of the year, citing regional weaknesses.
Debra Crew, Diageo’s chief executive, expressed the challenges in predicting the resolution of inventory issues in Latin America.
Diageo anticipates a sales decline of over 20% in Latin America and the Caribbean, regions that account for approximately 11% of the company’s sales.
This announcement caught investors off guard, especially since Diageo had not indicated any significant problems in its September trading update. This led to concerns about how the company overlooked such a substantial issue.
In other news, Diageo has launched a new global campaign titled “The Magic of Moderate Drinking” aimed at promoting responsible drinking during the festive season. The campaign is narrated through a film that includes Guinness, Johnnie Walker, Tanqueray 0.0, Seedlip, and a host guiding guests on moderate drinking practices.
