Diageo’s bond offering reflects forecasted 6.9% decline in UKs spirits value over 2020

Following today’s news (April 28 2020) that Diageo will raise a $2.5bn bond offering;

Carmen Bryan, Consumer Analyst at GlobalData, a leading data and analytics company, offers her view on what this means the UKs spirits market:

“Diego’s bond offering reflects the long-term struggles many manufactures and operators in the spirits industry will experience over the coming years. Having adjusted the value growth of the UK spirits market for COVID-19, GlobalData notes that the market will see a stark downturn from a robust baseline growth trajectory of 5.1% to decline at a forecasted growth of -6.9% over 2020*.

“There are a number of reasons for this decline, including whiskey neat being marked up much more than bottles on supermarket shelves. The loss from tourism and duty-free sales is also a notable cause that will likely pose an ongoing challenge to industry players over the next few years.

“Diageo’s move for a debt offering showcases the turbulent times ahead for industry players. While the spirits giant’s popularity and market dominance will support it to ride out the storm, it is a different story for smaller players. Those that rely on sales from tourism or duty free will have to adjust their strategies to cater to a ‘new normal’ where typical occasions for spirits drinking are changing. A survey by GlobalData found that 27% of UK consumers claimed to have either bought fewer spirits or stopped purchasing altogether since the lockdown started**.”

* – GlobalData’s COVID-19: COVID-19 Impact Market Model – Consumer Goods – LCU value

** – GlobalData Coronavirus (Covid-19) Tracker Survey – Week 5 – UK – stopped buying/significantly lower/slightly lower quantities combined

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