Diageo, the drinks giant behind Johnnie Walker, saw its share price tumble over 10% on Tuesday morning following its first sales decline since the start of the pandemic.
The London-based company reported a 0.6% drop in organic net sales for the full year to June 30th, primarily attributed to weakness in the Latin America and Caribbean region. Overall net sales fell by 1.4%.
Despite the overall decline, Guinness, the Irish stout, saw strong growth, driven by its popularity among younger consumers, fuelled in part by celebrity endorsements. Net beer sales climbed by 18%, with Guinness experiencing double-digit volume growth, particularly in Ireland and Britain.
The rise of non-alcoholic beverages also played a significant role, with Guinness 0.0 seeing sales and volumes more than double in the fiscal year.
However, the company's spirits sales saw a 1% decline, despite popular brands like Baileys, Smirnoff, Captain Morgan, Don Julio, and Tanqueray.
Diageo's Chief Executive, Debra Crew, acknowledged a "challenging year" for the company and the drinks industry as a whole, citing macroeconomic and geopolitical volatility. The cautious consumer environment in North America, coupled with inventory restocking issues, also contributed to the decline.
Chris Beckett, head of equity research at Quilter Cheviot, described the results as "disappointing but not catastrophic," noting that revenue remained relatively stable with a slight decline of 1% both overall and in the second half of the year. He expressed concern about the situation in Latin America, which had exacerbated inventory issues, leading to a significant loss in margin.
