Last orders called for Diageo's growth target
Last orders called for Diageo's growth target
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Drinks giant Diageo is under pressure to cut its growth targets as cash-strapped and health-conscious drinkers turn away from booze. It comes as the owner of Johnnie Walker whisky and Guinness stout unveils half-year results this week. Diageo's shares have been languishing at a five-year low after a profits warning. Veteran fund manager Terry Smith recently dumped his stake saying weight-loss drugs could hit demand for its products.
He also raised concerns about Diageo's new management team, led by chief executive Debra Crew, who took over in June 2023. Drug makers are exploring whether jabs such as Ozempic could be used to cut alcohol consumption and treat addiction. To add to the sector's woes, the top doctor in the US wants alcoholic drinks to carry warnings that consuming them could cause cancer. Under pressure: The Johnnie Walker whisky and Guinness stout owner is set to unveil half-year results.
Diageo's target of annual sales growth of between 5 and 7 per cent has been in place since 2021. But revenues actually fell last year, and analysts at JP Morgan Cazenove note that Diageo has delivered 5 per cent or more growth in only eight of the past 20 years. Diageo is also at risk from US President Donald Trump's decision to slap a 25 per cent tariff on all imports from Mexico and Canada starting this weekend.
Canadian whisky and Mexican tequila imported into the US account for a tenth of Diageo's sales and profits. JP Morgan Chase reckons Diageo would have to raise prices by a fifth to offset the hit to earnings if tariffs are imposed. Diageo has also been hit by supply problems, with some pubs running out of Guinness. The company has denied reports that the stout brand, or its 34 per cent stake in Moet-Hennessy, is up for sale.
