For the major global drinks companies it really was Black Friday last week following a shock, unscheduled trading update, reports Ron Emler. At the end of last week, the share prices of several cornerstone drinks companies tumbled as Diageo gave investors final confirmation that inflation and consumer resistance to price rises are hitting them. That put the previously relentless drive for premiumisation under close scrutiny. Diageo’s shares fell by 13% after it issued an unscheduled trading update which warned that growth in operating profits will slow in the first half of this financial year to Christmas because of a sales slump in Latin America and the Caribbean, a region where it derives 11% of its net sales. Shares of Diageo’s rivals were hit in the backwash of the announcement as investors feared a global deceleration in growth, and consumers trading down to cheaper bottles. Pernod Ricard’s shares were 5.7% lower, Rémy Cointreau shed 4.2%, while Campari and Brown-Forman both saw their shares fall by more than 3%. They have all pointed to more difficult trading conditions since the summer. Those falls further underlined that investors fear that premiumisation and higher margins will be harder to achieve in the coming months, especially as consumers balk at the inflation-busting price rises of the past 12 months. Diageo’s share price is now 27% below it 12-month high, Rémy Cointreau’s is 40% lower, Pernod Ricard and Brown-Forman have both shed about 25% since their year’s peak and Campari is 18% down. Diageo said the
This Article was originally published on The Drink Business - Wine
