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Covid-19 gave a near-death experience to alcoholic brands as bars/restaurants were closed and social distancing was enforced. Then it rebounded with a great vengeance as people used part of their excess savings to indulge or even use it to counter the "loneliness pandemic" - Many branded spirits players had a great 3year run before coming to an abrupt last year (2024).
A reduction in demand for high end cognac in China, and the trade war in which American/Europe branded spirits are easy targets are coming in as headwinds, but potentially short term. In FundSmith AR24 letter to fundholders, Terry Smith revealed that Diageo, a company they held since 15years ago, had been divested. There seems to be more serious medium/longer term headwinds in the form of potential customer habit changes - (1) Generation Z have new addiction choices and are drinking less compared to earlier generations when they were the same age (2) Elon Musk-promoted weight loss drugs may be on its way to be eventually approved to treat addiction (alcoholism).
All in all, it doesn't look good for alcoholic brands. In the coming years, they may have to write down a bigger portion of intangible brand value on their BS.
Guinness-owner Diageo scraps medium-term goals as tariffs cloud outlook
The maker of Guinness stout, Johnnie Walker whisky and Don Julio tequila said it had withdrawn its guidance for medium-term organic net sales growth of between 5 per cent and 7 per cent because macroeconomic and geopolitical uncertainty were slowing recovery.
The threat of US tariffs on Mexico and Canada from March added “further complexity” around forward guidance and threatened US$200 million worth of operating profit in the second half, executives said.
Some investors also worry societal shifts, such as a trend towards avoiding alcohol because of health concerns and the possibility weight-loss drugs suppress the desire to drink, threaten growth long term.
https://www.businesstimes.com.sg/interna...ud-outlook
P.S. Although Diageo is listed on LSE, but it has a secondary listing on NYSE and so I will nest it in the US listed company thread
A reduction in demand for high end cognac in China, and the trade war in which American/Europe branded spirits are easy targets are coming in as headwinds, but potentially short term. In FundSmith AR24 letter to fundholders, Terry Smith revealed that Diageo, a company they held since 15years ago, had been divested. There seems to be more serious medium/longer term headwinds in the form of potential customer habit changes - (1) Generation Z have new addiction choices and are drinking less compared to earlier generations when they were the same age (2) Elon Musk-promoted weight loss drugs may be on its way to be eventually approved to treat addiction (alcoholism).
All in all, it doesn't look good for alcoholic brands. In the coming years, they may have to write down a bigger portion of intangible brand value on their BS.
Guinness-owner Diageo scraps medium-term goals as tariffs cloud outlook
The maker of Guinness stout, Johnnie Walker whisky and Don Julio tequila said it had withdrawn its guidance for medium-term organic net sales growth of between 5 per cent and 7 per cent because macroeconomic and geopolitical uncertainty were slowing recovery.
The threat of US tariffs on Mexico and Canada from March added “further complexity” around forward guidance and threatened US$200 million worth of operating profit in the second half, executives said.
Some investors also worry societal shifts, such as a trend towards avoiding alcohol because of health concerns and the possibility weight-loss drugs suppress the desire to drink, threaten growth long term.
https://www.businesstimes.com.sg/interna...ud-outlook
P.S. Although Diageo is listed on LSE, but it has a secondary listing on NYSE and so I will nest it in the US listed company thread