On Friday, the global premium beverage giant Diageo reported that they now anticipate a decrease in organic operating profit growth in the second half of the current financial year.
Diageo points out that this weakness is primarily due to significantly weaker performance in Latin America and the Caribbean.
The company’s shares are down 13.5% at the time of writing.
The world’s biggest spirits company saw its shares drop to 2,804p, making it the leading decliner on London’s blue-chip index.
In a statement, Diageo said that they expect sales in Latin America to fall by 20% in the six months to December.
Up to 11% of Diageo’s sales come from Latin America.
According to the statement, “Macroeconomic pressures in the region are resulting in lower consumption and consumer downtrading. These impacts are slowing down progress in reducing channel inventory to appropriate levels for the current environment.”
Sophie Lund-Yates from Hargreaves Lansdown noted that “very tough economic conditions in Latin America mean consumers are cutting back and trading down to less premium options. The region only makes up a relatively small portion of Diageo’s whole, but the extent of declines means expectations have materially changed at the group level.”
Lund-Yates added, “Diageo has long been a favoured steady-eddie thanks to its seemingly impenetrable brand power and dividend-paying ability, and there will now be concerns that the change in appetites could translate to other, larger markets”.