UPDATE(1/27/25): Apparently the “people familiar” with the situation were less familiar than they thought. Diageo denied any plan to sell Guinness.
The UK distiller said it was responding to reports over Guinness and its 34% stake in Moet Hennessy, luxury-goods conglomerate LVMH’s drinks division. “We can confirm that we have no intention to sell either,” it said in a statement Sunday.
Original Article on Reports of Potential Guinness Spinoff
Nearly 30 years ago in 1997, Diageo (DEO) was formed from the merger of Guinness plc and Grand Metropolitan. At the time, the company was engaged in many different industries – besides alcoholic beverages, the company owned Burger King and Pillsbury. In the ensuing decades it has shed many assets and acquired others (it sold its wine business to Treasury Wine Estates(TSRYY) in 2017, Treasury being a spinoff of Fosters). Now, Diageo is considering a sale or spinoff of Guinness, one of the original partners in its creation so many years ago, reports Bloomberg.
In general, sales of alcohol are in decline, and Diageo, which owns 40% of all scotch whiskey production, is certainly not immune. The Wall Street Journal recently discussed the problem.
A fifth of adults account for an estimated 90% of alcohol sales volumes in the U.S., according to an analysis published in 2023 by equity research firm Bernstein.
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That dependence has become a greater risk to companies as the U.S. government considers putting cancer warnings on alcohol packaging and lowering the recommended limit of drinks a day that people can safely consume.
The industry’s sales are declining because of consumer health concerns, expanding legalization of cannabis, the use of GLP-1 drugs such as Ozempic and a generational shift toward less alcohol consumption.
Diageo CEO Debra Crew is 18 months into the job and is looking to reposition the company for renewed growth. Bloomberg quotes “people familiar with the matter” as suggesting a value exceeding $10 billion for Guinness. These “people familiar” said that the company might run a two track process, simultaneously preparing for a spinoff and searching for a buyer.
Bloomberg’s report led to the stock’s best performance in 4 years as investors cheered the possible divestment.
Disclosure: The author holds no position in any stock mentioned, but enjoys Diageo’s products on occasion