Diageo’s recovery will be a long process

Following today’s news that Diageo has withdrawn its annual forecast for sales and profit growth and halted its shareholder returns program;

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

“More than one-quarter (*28%) of UK consumers are purchasing lower quantities of spirits or have stopped purchasing them altogether since the COVID-19 outbreak.

“For obvious reasons, this does not bode well for mega spirits manufacturers such as Diageo, which are already suffering from the closure of bars and pubs. In this respect, caution is wise; annual forecasts need to change, but as the COVID-19 landscape is still developing, and consumer behavior is capricious at best, it would be unwise for manufacturers to instill false confidence in their investors with hastily put together profit forecasts.

“The result of this uncertainty will likely lead to price hikes in spirits. However, that poses its own dangers – the economy has been hit hard by the pandemic, and this, combined with uncertainty on how the year will play out, is driving value consciousness with a vengeance. GlobalData found that *31% of UK consumers have either stopped buying or are buying cheaper alcoholic beverages owing to a limited budget.

“Supply and manufacturing disruptions will likely continue throughout the year, as Diageo and others in the same boat attempt to get back on their feet. The question now is, what does this mean for 2021 and beyond? What is certain, is that recovery will take time.”

*GlobalData Coronavirus (Covid-19) Tracker Survey – April 6th (Week 2)

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