For the past couple of years, it has been the group mantra from big booze bosses that the current downturn in sales is cyclical rather than structural. But the cracks in that corporate front are widening.
No longer can the combined effects of squeezed wallets, the rise of cannabis-infused offerings, the increasing uptake of weight loss drugs which reduce the desire for alcohol and the lifestyle choices being taken by Gen Z be dismissed out of hand as inconsequential in the longer term.
Diageo’s changing tone
Earlier this year, Diageo, the biggest of them all, held a briefing to claim that its research showed that although the younger groups of legal age drinkers were consuming more discerningly and at different times, the overall message was that they were still spending, just in different patterns.
Last week, however, the company’s quarterly results painted a less optimistic picture, with demand in the US and China, which together previously accounted for more than 50% of sales, being the two problem markets.
Slowing Tequila and premium fatigue
In the US, Tequila had been the big growth engine of recent years, but former interim chief executive Nik Jhangiani admits that growth rates are slowing rapidly, especially in the premium and super-premium categories where Don Julio and Casamigos sit, and that consumers were downtrading and buying smaller pack sizes.
American bank JP Morgan says of the overall sector: “Coming up on two-plus years of well below trend growth, it’s hard to ignore some structural underpinnings to the slowdown.”
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