Diageo is considering selling off the iconic Guinness brand

Bloomberg sources say the stout brand could be worth almost €10bn

Guinness is considered an outlier in Diageo's business, which consists mostly of spirits rather than beer, but its performance recently has outshone that of key liquor labels like Johnnie Walker whisky. Picture: Patrick Bolger/Bloomberg

A potential spin off or sale of iconic Irish stout Guinness is amongst the range of possibilities being considered by owner Diageo.

The company is examining options for the brand as it seeks to reignite growth under its new chief executive. Debra Crew has had a rocky year and a half since taking over as chief executive officer of the drinks giant.

The shares slumped, sales dropped on cooling demand in China and the US and the owner of Guinness and Johnnie Walker surprised investors with a profit warning just months into her tenure after getting caught out by piles of unsold inventory in Mexico and Brazil.

When Diageo reports earnings next month, Crew could well scrap or lower Diageo’s growth targets to reset expectations to a more realistic level, investors and analysts said. Others say bigger changes are needed as new Chief Financial Officer Nik Jhangiani runs the rule over a company whose portfolio ranges from Scottish single malts to a minority stake in luxury-goods conglomerate LVMH’s Champagne and Cognac business.

Diageo is already looking to sell Ciroc vodka, a brand once backed by music mogul Sean “Diddy” Combs, and could look to dispose of other subscale or underperforming labels. Among the range of possibilities being studied is a potential spinoff or sale of Guinness, its premier beer brand, which would likely be valued north of $10bn (€9.7bn), people familiar with the matter said. The company could run a dual-track process, weighing a listing while also gauging takeover interest, if it decides to proceed, they said.

Guinness is considered an outlier in Diageo's business, which consists mostly of spirits rather than beer, but its performance recently has outshone that of key liquor labels like Johnnie Walker whisky.

Diageo’s 34% stake in LVMH’s drinks division, Moet Hennessy, is also under review, the people said, asking not to be identified discussing private deliberations. Diageo could look to deepen its ownership in the venture or exit altogether. If it wanted to sell the stake, LVMH has an obligation to buy it, albeit at a 20% discount to its fair value, according to their agreement. The division has been suffering from poor demand for two years.

Diageo isn’t alone among distillers in getting hit by a slump in demand and by a corresponding blow to sales and profit. The shares of rivals such as Jameson owner Pernod Ricard and Cognac producer Remy Cointreau have fallen even further as the pandemic-era boom fizzled out.

And Diageo might be better placed to bounce back than peers. Nielsen figures in the US show that while spirits and beers trended weaker in December, Diageo outperformed the market thanks to the strong performance of Don Julio tequila and the blackberry-flavored version of Crown Royal Canadian whisky. Guinness has also delivered strong sales growth in recent months.

Bloomberg