Diageo, the maker of Guinness, has long been considered a constant performer through both prosperity and adversity, frequently outpacing the FTSE 100 giant. However, this is no longer the case.
Diageo’s recent lacklustre earnings have pushed down the shares to their lowest level in four years, experiencing a 29 per cent drop over the previous year and more than 40 per cent off 2021’s record high.
Despite poor overall results, the Guinness brand continues to show resilience, boasting its seventh straight semester of double-digit expansion. Diageo’s CEO, Debra Crew, referred to Guinness as “a fantastic success story” during the post-earning meeting with analysts.
While the brand remains a favourite among traditional rugby enthusiasts, it is also gaining popularity amongst female consumers. The innovative Turbo Surge cap, designed to achieve “the perfect pour of Guinness”, has shown a marked impact on sales. Moreover, Crew conveyed her enthusiasm about the alcohol-free stout, Guinness 0.0, claiming they were struggling to meet demand with a second Irish factory being necessary to keep up.
Despite the successful Guinness brand, Diageo’s overall results have been less than inspiring. A first-time decrease in yearly sales since 2020, driven by a 21 per cent dip in Latin America and hesitant buyers in the US, Diageo’s largest market, brings a dim light upon their prospects.
Nonetheless, these difficulties are not exclusive to Diageo, as several firms express concerns regarding feeble consumer sentiment. Crew views these challenges as fleeting and anticipates recovery in consumer behaviour over time.
Furthermore, Diageo has maintained or increased market share in 75 per cent of its markets due to a successful implementation of a “premiumisation” approach encouraging consumers to opt for quality over quantity.
The looming difficulty for the world’s leading spirit company emerges from shifting drinking habits with younger generations drinking less and the rising trend of weight loss medications potentially affecting overall alcohol intake.
Whether the current decline is merely a repercussion of post-pandemic fluctuations or a signifier of a deeper behavioural change in consumers is a question that divides optimists and sceptics alike.