Spirited Away

Image source: Johnnie Walker

What's going on?

Diageo, the worlds biggest spirits maker, raised a toast on Thursday to celebrate its sparkling sales.

What does this mean?

Plenty of folk spent the pandemic mixing their own cocktails at home, but that doesnt mean they went teetotal when restrictions lifted. Quite the opposite: the current cost-of-living crisis seems to be another excuse for a regular liquid pick-me-up. And while the economic slowdown has some trading down for cheaper foods, drinkers actually seem to be quaffing swankier stuff: after all, it was Diageos most expensive booze that customers really thirsted for, and sales of the firms priciest offerings grew by double-digit percentages in each region. In fact, premium brands made up 65% of the companys organic sales growth. All in all then, those sophisticated sippers helped the maker of Johnnie Walker whisky and Captain Morgan rum top up net sales by a hardy 9% in the second half of 2022, outstripping analysts expectations.

Why should I care?

For markets: Investors stayed sober.
Investors didnt feel like joining Diageos celebrations, and not just because of Dry January. For one, sales slowed down in North America a worrying sign given that the region brings in about half the firms overall profit. And for another, most of the firms growth was simply down to price rises, meaning the amount of drink Diageo sold was actually pretty underwhelming. That meant stone-cold-sober investors looked past share buybacks and a dividend bump, and sent shares down 6%.

Zooming out: On the rocks.
British tonic maker Fevertree was also shaken in the US last year, adding insult to injury after its sales dropped in the UK, its biggest market. The maker of high-end spirit mixers warned that the cost of glass bottles is bubbling over, and that could keep its profit underwhelmingly flat this year. Unsurprisingly, that news wasnt the tonic investors needed: shares dropped a whole 15%.

Originally posted as part of the Finimize daily email.

The top 2 financial news stories in 3 minutes. Join over one million Finimizers

Read next

Easy Does It

Sign up to Finimize

Get the two most important global financial news stories each day. Sent at midnight UK time.

Get started with one email a day

The top financial news stories in 3 minutes.