latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/whiskey-rivals-diageo-and-pernod-ricard-face-long-hangover-from-coronavirus-hit-58653131 content
Log in to other products

Login to Market Intelligence Platform


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

Whiskey rivals Diageo and Pernod Ricard face long hangover from coronavirus hit

Gauging Supply Chain Risk In Volatile Times

S&P Global Market Intelligence

Cannabis: Hashing Out a Budding Industry


IFRS 9 Impairment How It Impacts Your Corporation And How We Can Help

The Market Intelligence Platform

Whiskey rivals Diageo and Pernod Ricard face long hangover from coronavirus hit

Companies that sell whiskey, vodka, gin and other spirits, including Diageo PLC of the U.K. and Pernod Ricard SA of France, may welcome the gradual reopening of some bars, restaurants and hotels in various parts of the world, but nonetheless are expected to face a slow and bumpy recovery as the COVID-19 pandemic continues to spread.

Sales of spirits have been hit hard by the effective closure of the global hospitality industry, as well as the massive blow that travel restrictions have had on tourism and airport-based retail. More shoppers are now buying lower-priced alcoholic drinks from grocery stores and online outlets and consuming them at home, but that increase has not been enough to offset price stagnation and falling on-premise sales.

For example, before the pandemic hit, the U.K.'s spirit industry was on a 5.1% growth trajectory, but 2020 sales there are now expected to fall 6.9%, according to GlobalData. The research firm says its global view for the industry is "equally as bleak," although it expects the spirits sector to rebound over the long-term with growth stabilizing again after 2021.

SNL Image

"Luxury spirits and beverage makers will find a challenging landscape over the second half of 2020," said Carmen Bryan, consumer analyst at GlobalData, in e-mailed comments to Market Intelligence. As a result of the plunge in on-premise sales, drinks makers "have been forced to channel the majority of their sales through retail, which tends to have a budgeting position and highly competitive shelf space. Consumers are able to easily compare brands in supermarkets, with quality, reputation and price all playing major roles in purchasing decisions that are less prevalent in typical, 'impulse-buy' bar and restaurant settings."

Unlike smaller spirit companies, which are heavily dependent on sales from tourism or duty-free, both Diageo and Pernod Ricard have deep pockets, wide distribution and a diverse portfolio of products, which can help them ride out even a prolonged downturn. But they are not immune. A survey by GlobalData found that 27% of U.K. customers claimed to have either bought fewer spirits or stopped buying such drinks altogether since the lockdown in the U.K. started.

On April 9, Diageo, maker of Johnnie Walker whiskey, Smirnoff vodka and Tanqueray gin, withdrew its 2020 guidance and froze its £4.5 billion share repurchase program for 2020. On April 28, the distiller launched and priced a $2.5 billion bond offering to help it weather the pandemic. "Diageo's bond offering reflects the long-term struggles manufacturers and operators in the spirits industry will experience over the coming years," said Bryan of GlobalData.

On April 23, Pernod Ricard reported a 14.5% organic drop in third-quarter sales, said it would suspend its plan to repurchase about €500 million worth of stock under its existing buyback program and confirmed its guidance of an organic decline of about 20% in profit from recurring operations for fiscal 2020. The company makes Jameson whiskey, Absolut vodka, Malibu rum and other spirits.

SNL Image
SNL Image

Diageo and Pernod Ricard did not respond to requests for comment, but in a call with analysts on April 23, Helene de Tissot, director for finance at Pernod Ricard, indicated how slow any recovery might be. De Tissot said the company, which originates about 75% of its sales from the off-trade business, such as liquor stores, expected a 10% sales drop from mid-March to the end of June, while the on-trade business, such as bars and restaurants, would see "no sales from mid-March to the end of June as outlets are closed or not re-ordering." The company said it also expected the travel retail business to fall 80% from February to the end of June.

IWSR, a research firm that tracks alcohol trends, expects the coronavirus pandemic to cause a deeper and more long-lasting impact to the global drinks industry than the 2008 financial crash as a result of the especially severe impact on on-premise and global travel retail sales. In the previous downturn, global alcohol consumption was essentially flat in 2009, but would have fallen 2% without contributions from higher-consuming Brazil, Russia, India and China, the so-called BRIC countries. This time, though, IWSR does not expect the BRIC countries to prop up global demand.

Similarly, wine and spirits volumes fell 8% in the travel retail sales segment in 2009 but recovered and grew 12% the following year. This time, the severe impact on the airline industry, plus the effect of social distancing at airports and on planes, could hamper any such bounce back. "It is very hard to see a recovery as quick as last time until a vaccine is widely available," said Mark Meek, CEO of IWSR, in a statement issued in May.

READ MORE: Sign up for our weekly coronavirus newsletter here, and read our latest coverage on the crisis here.