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Drinks

Unclear How Quickly Diageo Can Fix Problems In Latin America, CEO Says

By Reuters
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Unclear How Quickly Diageo Can Fix Problems In Latin America, CEO Says

Diageo chief executive Debra Crew said that it was difficult to predict when the company could clear the inventory issues in Latin America that led to a surprise profit warning last week and sent its shares 16% lower.

The world's top spirits maker said last week that sales were set to fall by more than 20% in Latin America and the Caribbean, which makes up around 11% of the company's sales.

The announcement spooked investors because Diageo did not flag any problems in a September trading update, leaving some wondering how the company was blind to such a big problem that would have been brewing for some time.

Limited Visibility

Diageo said it had limited visibility into inventory levels among retailers and wholesalers in the region.

"This also makes it difficult to predict precisely how quick we can move through this disruption," Crew said at an investor day on Wednesday.

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She said that the company has robust retail activity scheduled over the holiday period and was putting together other steps to tackle the problem, adding that Diageo would update investors at its first-half results in January.

In August, spirits giant Diageo beat full-year sales forecasts as people continued treating themselves to expensive scotch, whisky and tequila despite high prices.

The world's largest spirits maker, which makes Johnnie Walker whisky, Captain Morgan's rum and Ketel One vodka, said organic net sales rose 6.5% in the year to June 30, marginally beating analyst forecasts for a 6.4% increase, according to a company-provided consensus.

The company said its organic net sales increase reflected 7.3 percentage points of price/mix and a decline in organic sales volumes of 0.8%.

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