MIDAS SHARING TIPS UPDATE: Diageo profits from luxury movement
MIDAS SHARING TIPS UPDATE: Diageo benefits from its rise to market in recent years, focusing on premium products
Diageo can trace its roots back to the 19th century, with a stock market presence going back a good 70 years.
Now one of the largest beverage companies in the world, its brands include Johnnie Walker, Smirnoff, Baileys, and Guinness (still one of my father’s favorite drinks).
The company has moved decidedly into luxury in recent years, focusing on premium products like Johnnie Walker Black Label, Don Julio tequila and Tanqueray gin.
Drinking to success: Market turmoil has hit stocks lately, but Diageo is a long-term business
The approach has yielded impressive results. In the six months to December 31 alone, its tequila sales were up 56 percent, Scotch whiskey was up 27 percent, and gin was ahead a solid 21 percent, with really expensive drinks proving to be the More popular.
This trend is likely to continue, even as inflation rises to 10 percent and the prices of everyday basics soar.
Sure, many drinkers are trying to cut down on their alcohol intake, but they’re trading quantity for quality, which fits perfectly with Diageo’s strategy.
And wealthy drinkers willing to pay top dollar for high-end liquor are less likely to be hit by increases in food and energy bills.
Chief Executive Ivan Menezes also has a number of levers he can pull to manage inflation and supply chain pressures.
Diageo is big so you can buy in bulk, efficiency projects are already underway and many spirits are aged so they were made years ago and are now maturing well in barrels.
Midas Verdict: Spirits, wine, and beer come in and out of style, but drinking with friends and family is surely as popular today as it was 70 years ago.
And Diageo has shown that it can stay ahead. Midas recommended the stock in 2017 at £23.26, since then the price has risen 55 per cent to £35.98.
Market turmoil has weighed on stocks of late, but Diageo is a long-term business, ideal for investors with long-term horizons. Keep faith.
Traded in: main market Heart: GED Contact: diageo.com or 020 7947 9100