Diageo comfortable about stock levels for Brexit

01 February, 2019

Diageo’s president global supply and procurement is comfortable the company’s stock levels and supply chain, ahead of the UK leaving the European Union.

David Cutter was replying to questions from city analysts and business journalists at a lunchtime briefing on Thursday (January 31) at Diageo’s London headquarters, following the reporting of the company’s six month results to December 31.

Diageo chief executive, Ivan Menezes emphasised that he and the company wanted a deal done between the UK government and the EU. Cuttter, responding to several journalists’ questions, was adamant that the company was “comfortable with stock levels” and the company has not been stockpiling goods, in anticipation of a so-called ‘hard Brexit’.

He reiterated: “Nothing out of the ordinary, nothing over and above the normal.”

Menezes cited scotch whisky as an example of Diageo not having to worry about the supply chain as most of its needs lay in Scotland.  He added that the company uses Scottish ports for shipments, rather than Dover-Calais, the focus of Brexit concerns.

On Guinness, Cutter said Guinness was brewed in Dublin but packaged in Northern Ireland and the UK. “I am confident that stock levels will be fine,” he replied.

“We have the ability to adjust and take it in our stride,” concluded Menezes.

Asked about possible acquisitions, chief financial officer, Kathryn Mikells, said: “We look a lot but we are pretty picky on what we want to transact on”.

Earlier, Menezes had opened the post results briefing by saying: “I am pleased with our performance. They are high quality results. I am pleased with the consistency of improvement with the consumer at the heart of our business. We have reinvested back into the business and our cash flow is £300 million more than last year and we have returned £7 billion to our shareholders.”

Questions switched to products and White Walker, the Johnnie Walker variant launched to coincide with the next, final, season of HBO’s Game of Thrones TV series. Menezes stressed it was too early to say but the initial rate of purchase through Amazon was a “bottle a minute” and the interest generated on social media was “on a scale we have not seen before.”

Menezes corrected one analyst, saying that White Waker was not repackaged Red Label but a new, sweeter, blend with less Islay malt in the blend and the bottle was meant to be put in the freezer.

“What we are seeing is new, non-Walker drinkers coming into the space. Our data suggests we are bringing in new consumers, not natural Johnnie Walker drinkers.  It is too early but it is very encouraging and it does not appear to be cannibalising other Johnnie Walker variants,” said Menezes.

On Guinness, Menezes said he was very pleased with the beer, it being +4% up and the new Rockshore Irish lager was performing well in Ireland. 

Not everything is rosy in the Diageo stable.  Menezes acknowledged that the rum category was tough - Captain Morgan has declined, and “vodka had improved but was not where we want it to be”.  The other brand that is suffering is Cîroc and, to a lesser extent, Smirnoff. A bright spot is Ketel One Botanicals, 73 calories, no sugar, is performing well, he said.

He acknowledged that scotch was “sluggish” in the UK, but pointed out that 95% of scotch whisky is exported. The US, Diageo’s largest market, was in growth and, at +4.7%, the company’s performance was in line with the sector.

Menezes commented that there had been a switch by younger drinkers out of wine and beer into spirits, lead by their interest in cocktails.  He said with spotting and following trends, Diageo was well placed to capitalise on those current trends.

Keywords: diageo




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