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Diageo sales plummet in Latin America and Caribbean
The latest trading update from Diageo, released on Friday, revealed that it expects sales to drop in its Latin American markets by as much as 20% in the first half of fiscal 2024.
Diageo has issued a trading statement revealing that while “momentum is continuing” in four of its five regions, it now anticipates a substantial drop in Latin America and the Caribbean, where the company has seen a “materially weaker performance”.
Despite making up almost 11% of Diageo’s net sales value (in the fiscal year 2023), the Latin America and Caribbean (LAC) market is now expected to decline in organic net sales by more than 20% year-on-year, in the first half of fiscal 2024.
“Macroeconomic pressures in the region are resulting in lower consumption and consumer downtrading,” the company statement said. “These impacts are slowing down progress in reducing channel inventory to appropriate levels for the current environment.”
As a result, Diageo has downgraded its overall projection for 2024. It previously forecast that it would see “a gradual improvement” in organic net sales growth during the first half of fiscal 24 compared with the same period in fiscal 2023.
However, the company now expects “organic operating profit growth for the first half of fiscal 24 to decline compared to the first half of fiscal 23, primarily due to LAC’s declining net sales, increased trade investment, lower operating leverage and adverse mix resulting from downtrading.”
The company, which includes Johnnie Walker, Crown Royal, Smirnoff, Captain Morgan, Baileys, Don Julio, Tanqueray and Guinness in its portfolio, added: “Despite slowing category growth, our business continues to win share in most markets, within the categories we participate in.”
The drinks giant expects to see improved sales in the North America and Africa markets during the first half of fiscal 2024.
In Europe, “growth continues to be strong despite geopolitical tensions escalating in the Middle East, where we are a leading spirits company”, the statement said.
As for Asia Pacific, Diageo continues to see “good growth, despite slower than expected recovery in China.”
db has previously reported how raising product prices has been a key weapon in the armouries of major drinks companies, with Diageo proving no exception.
In its trading update, the company conveyed that it expects there to be “continued, albeit moderating, cost inflation, which will be partially offset by pricing actions.”
“We continue to believe in the fundamental strength of our business and expect to deliver organic net sales growth between 5 and 7% over the medium term,” said Diageo’s chief executive Debra Crew.
“While we expect operating environment challenges to persist, with ongoing cost pressure and geopolitical and macroeconomic uncertainty, we will move with speed and agility and continue to invest in marketing and innovation.
“We firmly believe the strength of our portfolio, our diversified footprint and our deep consumer insights will drive sustainable long-term growth and generate value
for shareholders.”
On 1 August 2023, Diageo announced a move in functional and presentation currency from sterling to the US dollar.
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