Coronavirus

Coronavirus could hit Diageo net sales ‘by up to £325m’

By Alice Leader contact

- Last updated on GMT

Virus concerns: Diageo is set to see a huge fall in profits as a result of the coronavirus outbreak restricting its trade
Virus concerns: Diageo is set to see a huge fall in profits as a result of the coronavirus outbreak restricting its trade

Related tags: Diageo

Giant drinks company Diageo has forecast a decline for its 2020 fiscal year as the coronavirus outbreak shuts off a prime source of trade.

In its trading update report, published today (26 February), the company outlined how its operating profits could be between £140m and £200m lower than expected as a result of many hospitality and retail outlets closing and restrictions on public gatherings across the Asia Pacific region, principally in China. 

With these public health measures in place to prevent the spread of the virus, the company has also warned its net sales could drop between £225m and £325m as a result of these procedures. 

The outbreak in several other Asian countries, especially South Korea, Japan and Thailand, has led to events being postponed, a reduction in conferences and banquets, and a drop in tourism – which have all impacted on-trade consumption.

Decisive action

Despite this, the company – whose brands include Smirnoff, Johnnie Walker, Tanqueray and Gordon’s gin – has stated its primary concern remains safety.

The trading report read: “As the situation continues to unfold, our primary concern remains the welfare of our colleagues, their families and their local communities, and we will continue to provide all support possible.

“Authorities in China and in other impacted countries have taken strong and decisive action, and continue to work tirelessly to contain the spread of the virus.”

Reduction in banqueting

While the company has seen a major disruption in trade since the end of January as a result of bars and restaurants being closed and there being “a substantial reduction in banqueting”, the company expects it to potentially turn around from March onwards.

The report read: “As the majority of consumption is in the on-trade, we have seen significant disruption since the end of January, which we expect to last at least into March.

“Thereafter, we expect a gradual improvement with consumption returning to normal levels towards the end of fiscal 2020.”

The company remains positive in the growth opportunities in greater China and Asia Pacific business and will continue to invest behind its brands with the aim of remaining in a strong position for the expected recovery in consumer demand.

Related topics: Marketing

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