Diageo is seeking to divest its beer portfolio on margin concerns, except flagship brand Guinness, Axios reported on Tuesday, citing sources familiar with the world's largest spirits maker.
The company is looking to sell beer brands including Smithwick's, Kilkenny and Harp Lager, based in Ireland, and Tusker in Kenya, among others, Axios reported, adding that its beer brands were a margin drag on the rest of the business.
Diageo declined to comment on the report.
Beer Sales
Beer sales of £3.36 billion (€3.92 billion) accounted for just over 14% of total sales at Diageo for the year ended June 30, whereas spirits sales contributed a mammoth 81%.
The Johnnie Walker whisky maker in November warned of a drop in first-half operating profit growth on weakness in some regions.
Macroeconomic pressures
The same month Diageo said it expected organic operating profit growth to decline in the first half of its current financial year due to 'materially weaker' performance in Latin America and the Caribbean.
'Macroeconomic pressures in the region are resulting in lower consumption and consumer downtrading,' the world's biggest spirits company said in a statement.
'These impacts are slowing down progress in reducing channel inventory to appropriate levels for the current environment.'
Geopolitical Tensions
Sales in the Latin America and Caribbean (LAC) market, which generates nearly 11% of total sales, are now expected to decline by more than 20% in the six months ended December, the company added in November.
Meanwhile in Europe, growth continues to be strong despite geopolitical tensions in the Middle East, albeit the pace is slower than the second half of the previous financial year, Diageo said.
For the year ended June 30, the maker of Tanqueray gin and Don Julio tequila narrowly beat earnings estimates as sales of its more expensive liquor brands offset lower volumes.
Article by Reuters, additional reporting by Hospitality Ireland.
