Guinness and Smirnoff owner Diageo warns pub shutdown badly hitting sales
The company said advertising and promotional spending has ended for now, and shutdowns in North America, Europe and India are all impacting sales.
Johnnie Walker and Guinness owner Diageo has warned that the speed of the shutdown across the world is hitting the business even harder than before.
Bosses highlighted several areas which have worsened in the past month following widespread lockdowns across the globe.
They also put on hold a share buyback scheme and scrapped advertising and promotional spending on brands the company said “will not be effective in the current environment”, although it did not say which ones remain effective.
“Social distancing measures, including the closure of the on-trade channels, have been introduced in most of our markets. We are tracking changes in consumer behaviour during this time and adjusting our plans and resources in response.”
In Europe, Diageo also revealed that around half of all sales on the continent are from pubs, bars and restaurants, with the rest sold in retail stores.
There has been a boost in sales through supermarkets, but the firm cautioned over whether it can be sustained in the longer term.
“The significant impact on global travel retail, referred to in our February 26 update, has extended beyond Asia Pacific into other markets in March due to a steep drop in passenger numbers, as well as new travel restrictions imposed by many countries.”
Two production sites in Nigeria have also been shut, and significant impact to the business was highlighted in North America, India, Latin America and the Caribbean.
Despite the difficulties, Diageo said it was donating alcohol to make more than eight million bottles of sanitiser for frontline healthcare workers around the world, along with support packages for bar staff hit by closures.
To cut costs, the business said: “We are stopping A&P (advertising and promotional) spend that will not be effective in the current environment.
“We are also tightly managing working capital and deferring discretionary capital expenditure projects. We are providing an appropriate level of support to our key suppliers and customers to ensure we are strongly positioned for a recovery in consumer demand.”
