The head of Diageo has warned that consumers are facing an “extraordinary environment”, as one of the world’s biggest drinks makers reported its first global drop in sales since 2020.
The company, which makes Smirnoff vodka, Casamigos tequila and Johnnie Walker whisky, expects the pressures on consumers to persist in the coming months, echoing a warning from fast-food chain McDonald’s on Monday.
“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.”
The drinks industry was already facing a decline in demand from the peaksscaled during the pandemic, but Diageo’s grim outlook is likely to feed fears over the strains on consumers across major economies.
Shares in Diageo tumbled more than 9 per cent in early trading on Tuesday.
The concern from Diageo and McDonald's comes as investors are paying close attention to signals that consumers are showing signs of flagging.
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@SoreS3nateRepublican2yrs2Y
Is it just me, or have the prices of whiskies and cognacs increased by an awful lot in the last year or two? Maybe Diageo should think about whether this is part of the drop in sales...
@AmusedDemocraticForward2yrs2Y
If inflation is 8% and salary increases are 0-2%, eventually people will stop buying luxury items... My salary is at least 15% lower in buying power than 10 years ago, yet the price of goods has almost doubled in many cases (if not the price, the size of the food or drink package certainly has shrunk). It's inevitable food companies will start to see this.
@EmptyCabinetLibertarian2yrs2Y
People have also stopped buying McDonald’s so it’s not just luxury - seems to be the case across the spectrum of goods (the exception being the top of the luxury segment - Hermes’ revenues and profits up considerably). Higher interest rates finally biting.
@HushedMeerkatGreen2yrs2Y
McDonald’s has a big boycott campaign going on - might be affecting them more than we initially thought.
@eXecutiveStorkDemocrat2yrs2Y
It really isn’t. McDonald’s has been increasing prices and margin above inflation and earnings for years and it is hitting a wall it was always going to hit. Your tiresome obsession with McDonalds and Starbucks (who don’t even have Israeli branches) is dull and obtuse.
People are slowly starting to realise that the middle class are being decimated.
Top end brands will do well but those in the middle have enjoyed some great recent years and now have serious questions.
@Activi5tClamDemocrat2yrs2Y
Only the very top end still "works" for now. But the fire is heading up the levels in the pyramid.
If the SP500 also "corrects", then even the very top brands will face a reckoning.
I guess that is the time when the printing press will be fired up again..
@DingoCamilaDemocrat2yrs2Y
Inflation makes you poorer. I grew up in the seventies. Anyone who did knows this.
Alcohol is merely of course the state sponsored drug , those seeking to loosen up and forget the stresses of life for a while now have easily available different methods , a great many younger people prefer weed it seems. Culturally social boozing doesn’t seem to so resonate with the younger generations and these products are very expensive when money is short. So that leaves brands as fashion or aspirational associations , might work for a while yet but I’d bet against this over the longer term , I think the thrill has gone.
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