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The London-based company - whose brands include Johnnie Walker Scotch whisky, Smirnoff vodka, Tanqueray gin and Guinness beer - did not admit or deny wrongdoing, but agreed to cease and desist from further violations, the SEC said on Wednesday. According to the SEC, Diageo failed to publicly disclose how employees at its most profitable unit, Diageo North America, pushed distributors in its 2014 and 2015 fiscal years to buy more wine and spirits than they needed. The SEC said this "overshipping" enabled Diageo to report higher growth in operating profit and net sales than analysts expected, but was unsustainable because distributors would likely eventually push back on orders, and some did.
Diageo (DEO) relocates its North America headquarters to Lower Manhattan. The move adds 350 new job opportunities for the city, in addition to the 150 jobs already on payroll.
Diageo's (DEO) first-half fiscal 2020 results reflect gains from strong price/mix and higher operating profits. It cut the top-line view for fiscal 2020 on uncertainty in global trade conditions.
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.Diageo Plc, the world’s largest distiller, lowered its outlook for sales growth amid weakness in key markets including India as the industry faces risks from trade battles and the spread of the coronavirus.Sales growth will probably be near the lower end of the 4% to 6% targeted range in the year through June, Diageo said Thursday. Previously Diageo guided to the midpoint. Sales rose 4.2% on an adjusted basis in the six months through December, matching analysts’ estimates.Chief Executive Officer Ivan Menezes said in a statement that the distiller was facing increased levels of volatility and uncertainty in the global trade environment “and we would not be immune from further policy changes.” Diageo warned investors in September that trade tensions could undermine a positive start to the financial year.Sales from the travel retail division declined 18%, hindered by rising tensions and challenging trading conditions in the Mideast region and lower passenger traffic in cities including Hong Kong, which has been impacted by social unrest. Growth slowed in India as the economy weakened there. Economic and political unrest in countries such as Mexico, Peru and Chile affected Diageo’s business in Latin America.Diageo finds it hard to predict when economic conditions might improve in markets such as India, Chief Financial Officer Kathryn Mikells said on a call with journalists.She said it’s too soon to see what impact the coronavirus will have on business in China, where Diageo owns the Shui Jing Fang baijiu brand and has opened retail outlets for its Johnnie Walker Scotch whisky. Sales grew 24% in the market last year.Diageo has suspended travel to China, and ensuring the safety of staff in that country is the main priority, she said, adding that the mainland accounts for about 4% of total revenue.The shares rose 1.1% as of 8:36 a.m. in London. They have dropped about 9% in the past six months.Diageo benefits from geographic and portfolio diversity, Mikells said. The U.K. division held up fairly well despite concerns Brexit would weigh on consumption. The North American business --which accounts for a third of sales -- delivered revenue growth of 6%, helped by growth of spirits.(Updates with comments from CFO starting in fifth paragraph)To contact the reporters on this story: Thomas Buckley in London at firstname.lastname@example.org;Deirdre Hipwell in London at email@example.comTo contact the editors responsible for this story: Eric Pfanner at firstname.lastname@example.org, Thomas Mulier, Anne PollakFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The maker of Johnnie Walker Scotch whisky, Smirnoff vodka and Guinness stout said it expected annual underlying net sales growth to come in towards the lower end of its 4 to 6% mid-term guidance range, amid rising global trade uncertainty. The company highlighted volatility in India, Latin America and the Caribbean and said it saw reduced inventory levels and lower passenger traffic including through Hong Kong in its travel retail arm. Diageo, which sells 200 brands in 180 countries, also said operating profit rose 0.5% to 2.44 billion pounds ($3.21 billion) in the six months ended Dec. 31.
Investing.com - Here is a summary from the most important regulatory news releases from the London Stock Exchange ahead of the U.K. market open on Thursday 30 January. Please refresh for updates for U.K. market news from the LSE’s RNS on individual U.K. shares from FTSE 100, FTSE 250 and FTSE All-Share.
Diageo's (DEO) acquisition and expansion efforts as well as operating margin growth are likely to aid results in the first half of fiscal 2020.
(Bloomberg Opinion) -- Growing up in the U.K. in the 1980s, the Christmas season was associated with particular foods and drinks. Pies made from fruit “mincemeat”; the same dried fruits cooked into Christmas pudding; grandparents passing round glasses of sherry.Believe it or not, that nostalgic memory hints at a long-term risk to the most bullish corner of the global liquor market: China’s sorghum-based firewater, baijiu.The past few years have seen extraordinary growth for baijiu makers. Kweichow Moutai Co., the maker of the most prestigious brand, overtook Diageo Plc to become the world’s biggest distiller by market capitalization in 2017. Now it’s in a whole other league, overtaking even Anheuser-Busch InBev SA and PepsiCo Inc. on that measure and within spitting distance of taking Coca-Cola Co.’s crown as the world’s largest beverage company.What’s more, this success has been built on the back not of a valuation bubble, but of relatively pedestrian assumptions about earnings. Kweichow Moutai is on a lower price-earnings multiple than Brown-Forman Corp., Davide Campari-Milano SpA and Remy Cointreau SA. Luzhou Laojiao Co. is cheaper on that measure than any major western distiller.What could possibly put a cloud on the horizon of this thriving market? The most serious looming risk is embodied in those nostalgic memories of a British Christmas: demographics.Throughout baijiu’s boom, it’s struggled to shake the perception that it’s primarily a drink for older men. Its former image as an unofficial currency of corrupt government officials has receded since a campaign against official graft in the early years of President Xi Jinping’s reign. Still, the connotations of rich older men exchanging drunken toasts remain, even if the drinkers in the stereotype are now more likely to be employed in the private than the public sector.“Many young people still think that baijiu isn't for them, that no matter the flavor, it's not a drink for the young,” according to a China Daily article this year. “Drinking baijiu is increasingly seen as a dated behavior by younger Chinese uninterested in banquets and bravado,” wrote Jing Daily, a site specializing in the Chinese luxury market.That association with oldsters is a problem Spain’s sherry industry has been enduring for several decades. In the 1970s and 1980s, exports to the U.K., the Netherlands and the U.S. boomed in an unprecedented manner, to the point that bodega conglomerate Rumasa was reported to account for as much as 2% of Spanish GDP.Since then it’s been in long-term decline. Sherry’s core consumers outside Spain have reached a more abstemious age or died out, while younger drinkers shun a product they associate with their grandparents. For all that many wine connoisseurs sing its praises and lament sherry’s fall from grace, it’s hard to see the glory days returning.This trajectory is a common one in the alcohol business, which lives and dies on the changing demographics of its consumers. One reason Japan’s brewers have been so desperate to acquire overseas businesses while Vietnamese ones have been M&A targets is that beer is drunk by thirsty workers, and Japan’s labor force is declining while Vietnam’s is rising. The same goes for clear spirits like baijiu. Its success is hard to separate from the fact that China’s population of men aged 40 to 60 increased by more than half over the past two decades, adding about 78 million people to the core baijiu-drinking market. That demographic is set to stagnate over the coming decade, though, before beginning an accelerating decline after 2030.To the extent that the industry is making any inroads with women and younger people, it’s in lower-cost, lighter-flavored “rice aroma” products where margins are tighter. The giant listed baijiu-makers specialize in the complex, higher-cost “sauce aroma” and “strong aroma” varieties such as Maotai and Luzhou Laojiao, which is quite a different product.This needn’t be the end of the world. The drinks market’s best defense against unfavorable demographics is “premiumization” — counting not on a larger number of consumers, but a small group paying more and more. Premiumization is already the strategy of the high-end listed baijiu companies, so there's no reason they can’t keep going with it.Still, chasing the luxury market is notoriously expensive in marketing terms, and baijiu makers for years have been able to rely on a product that sells itself.Major distillers typically dedicate a third or more of their revenue to selling, general and administrative costs — mostly marketing and distribution. Baijiu makers are far more thrifty, one reason their profit margins are so much fatter than those of peers. As their core demographic ages out of its drinking habit, though, they’re likely to have to spend more and more converting younger drinkers.Every cellar manager knows that liquors can get better with age, but the process of maturation has to be carefully monitored and cultivated if the precious drink isn’t to turn into drain-cleaner. Marketing departments of baijiu companies will have to be no less careful over the coming decades maintaining the shine on their storied brands. To contact the author of this story: David Fickling at email@example.comTo contact the editor responsible for this story: Matthew Brooker at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
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The FTSE 100 index ended 0.6% higher and the mid-cap FTSE 250 index rose 0.2%, with the financial sector boosting both the indexes. Central banks around the world have been loosening monetary policy to stem a slowdown in economic growth. CMC Markets analyst Michael Hewson said the Fed's signal to hold back on further cuts was probably not priced in.