- The drinks giant said sales in the region will fall 20% in the six months to the end of December.
- A resounding setback for new boss Debra Crew
- Diageo expects profits during the period to rise less than previously forecast
Diageo shares suffered the biggest drop in almost 40 years after it warned that falling sales of Scotch whiskey in Latin America and the Caribbean would hit its profits.
In a blow to new boss Debra Crew, the drinks giant, behind brands such as Johnnie Walker and Guinness, said sales in the region will fall more than 20 per cent in the six months to the end of December.
As a result, it expects earnings during the period to rise less than previously forecast.
The unscheduled upgrade saw Diageo fall as much as 16 per cent – the biggest one-day drop since 1987 – before the shares closed down 12.2 per cent, or 395 pence, at 2,850 pence.
The defeat wiped almost £9bn off the group’s value, leaving it worth £64bn.
Fight: The drinks giant, behind brands such as Johnnie Walker and Guinness, said sales in the region will fall more than 20 percent.
Sophie Lund-Yates, an analyst at brokerage Hargreaves Lansdown, said: “Diageo has long been a favorite stable Eddie thanks to its seemingly impenetrable brand power and dividend-paying ability, and there will now be concerns that the change in the appetite can translate into other larger markets.”
Diageo, whose brands also include Smirnoff, Don Julio, Captain Morgan, Tanqueray and Baileys, sells drinks around the world, with Latin America and the Caribbean accounting for 11 per cent of its business. Brazil and Mexico are its largest markets in the region, followed by Central America and the Caribbean.
Business there was boosted last year by growing demand for Scotch whiskeys, 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 whiskey brand, Cacique, Venezuela’s leading rum, and Ypioca, a traditional Brazilian liquor called cachaca.
But business has been hit by economic problems in the region and drinkers have opted for cheaper brands. “Macroeconomic pressures have worsened and that has led to lower consumption and actually more sales declines than the team expected,” said Crew, a former US Army captain who succeeded Sir Ivan Menezes as Diageo chief executive when he died. in June.
While its four other 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 a little more on consumer confidence, but this has only been the last few weeks.
Russ Mould, investment director at AJ Bell, said: “It’s rare to see Diageo deliver bad news, but no company 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 is not building.