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The head of Diageo has warned consumers face an “extraordinary environment” as one of the world’s biggest drinks makers reported its first global drop in sales since 2020.
The maker of Smirnoff vodka and Casamigos tequila reported sales during the 2023-24 fiscal year fell by 1.4 per cent to $20.3bn, while the volume of alcohol sold fell 5 per cent as consumers around the world cut back on pricier spirits. Organic net sales declined by 0.6 per cent to $129mn.
Diageo has recently faced its own setbacks, including issues in Latin America, but its warning follows recent evidence of shaky consumer demand from groups such appliance makers and fast-food chain McDonald’s.
Diageo shares fell by more than 9 per cent in early trading on Tuesday.
“We are in a very extraordinary consumer environment,” said chief executive Debra Crew. “You do see persistent inflation that is really weighing on consumers and weighing on their wallets.”
In its trading update, Diageo said the “challenging consumer environment” would persist in the company’s current financial year, which runs until June 2025. It did not give details on when it expected organic net sales growth to return.
Operating profit for the full year grew 8.2 per cent but declined 4.8 per cent on a like-for-like basis, marginally lower than analyst consensus.
Weaker demand for spirits has weighed on Diageo and the wider sector. The so-called Covid supercycle, in which drinkers splashed out on high-end spirits during lockdowns and in the recovery year that followed, came crashing to an end last year.
In November, the company issued an unexpected profit warning, reporting that Latin American and Caribbean sales would plummet by 20 per cent in the first half due to lower consumer demand for spirits. The news sent the company’s shares down 15 per cent.
Since the profit warning, a number of senior executives at the company have stepped down, including chief financial officer Lavanya Chandrashekar, who will be replaced by Nik Jhangiani, CFO at Coca-Cola’s largest bottler Coca-Cola Europacific Partners, in September.