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Yahoo
6 days ago
- Business
- Yahoo
Even the Guinness craze could not save the boss of Britain's booze empire
Stroll through London on a summer evening and it is almost impossible to avoid throngs of 20 and 30-somethings armed with pints of Guinness. Such is the popularity of the famous stout – even the Princess of Wales is a fan – that you could be forgiven for thinking its boss must have been laughing her way to the bank. Instead, she's out of a job. On Wednesday, Debra Crew, chief executive of Guinness owner Diageo, abruptly parted ways with the FTSE 100 giant after just two years in post. Sir John Manzoni, Diageo chairman, thanked her for her 'contributions', but his message could not hide some of the share price turmoil which has likely driven the move. While sales of Guinness have been flying in Britain, Diageo has been struggling on the world stage. Dismayed investors have seen its share price plunge by 45pc since Ms Crew's appointment – making Britain's Guinness craze a small consolation. Diageo is the world's biggest spirits firm – the owner of Smirnoff Vodka, Gordon's Gin and Johnnie Walker – and a global giant which should be reaping the riches for shareholders. Many are now asking: how have things gone so badly wrong? 'It's been brewing for a long time, and the unease among investors just has been going up and up,' says a City source familiar with the drinks industry. Before taking the reins, Ms Crew appeared groomed for greatness at the drinks giant, enjoying several years as Diageo's chief operating officer and its North American boss – a role which allowed her to build strong contacts across the company. She worked alongside the group's late leader Sir Ivan Menezes – a well-liked leader credited with shaping Diageo into one of the consumer goods industry's best-performing firms – giving her extra credibility when she eventually took the top job in June 2023. A former US army captain with experience at the biggest names in food and drink, such as Kraft Foods and Nestlé, Ms Crew seemed an ideal choice and a safe pair of hands – not to mention the company's first ever female chief executive. 'I'm not saying she didn't have to do anything, but the business was doing very well when she took over,' says a banking source familiar with the company. Share price struggles Diageo was riding high after sales soared during the pandemic thanks to customers making cocktails at home after pubs and bars were forced to close. Yet early enthusiasm around her appointment gave way to concern as Diageo announced a string of disappointing results that dented investors' faith in the company and its future prospects. Just months after she became chief executive, Diageo suffered its biggest share drop since 1997 when it warned that its sales in the crucial Latin American market would drop by as much as 20pc. The drop was blamed on the slowing global economy, which Ms Crew said was causing shoppers to trade down to cheaper spirits. In a sign of the poorer performance, she earned just over £3m in her first year leading the company – roughly £7m lower than the £10.6m total remuneration paid to Menezes the prior year. The group's performance in the US, its most crucial market, flatlined as high inflation hammered households' spending on both sides of the Atlantic. Sales at the company declined by 1.4pc in the year to July 2024, with Diageo blaming a 2.5pc decline in North American sales on the 'cautious consumer environment'. 'In the immediate aftermath of the pandemic Americans turned to making cocktails at home, and they drank vast quantities of home cocktails,' says the City source. 'The whole thing wasn't sustainable. Diageo wasn't unique in that they benefited from it and then. But for the last year or two, it's continued to be weak.' Last year Terry Smith, the star fund manager, dumped his stake in Diageo, citing worries over the impact of weight loss drugs on the global alcohol market, given they have been shown to reduce consumption. Fewer people drinking alcohol has taken the shine off Diageo's stock in trade, say analysts. 'The company seemed oblivious to shifting consumer trends, with younger people showing less interest in drinking alcohol. At the same time, wealthier individuals cut back on luxury goods and that hurt Diageo's spirits sales,' says Dan Coatsworth, of AJ Bell. Feeling the pain Diageo has blamed its woes on declining consumer confidence and economic uncertainty in the global economy. In May, Ms Crew insisted that bosses 'continue to believe in the attractive long-term fundamentals of our industry and in our ability to outperform the market'. Diageo is not alone in feeling the pain amid shifting consumer tastes. 'Clearly she's had a very difficult set of circumstances, and Diageo hasn't done significantly worse than say, [Beefeater gin owner] Pernod Ricard, in terms of financial results,' says the City source. '[Diageo's performance] has set up a debate around [whether] this is pressure on consumers, whether it's low-income consumers or 21-year-olds who just don't have enough money to buy booze, or if it's more structural in that everybody's decided either they don't want to drink booze, or they're taking skinny jabs and aren't able to drink booze.' Diageo has also had to contend with worries over how Donald Trump's presidency could hurt it. Diageo said earlier this year that Mr Trump's tariffs would cost it about £110m annually – despite Sir Keir Starmer signing a much-hyped trade deal with the US. This brought tariffs on British steel and aluminium down to zero, but a 10pc levy on other goods including Diageo's drinks remains. Looking ahead Some investors have also been worried by the direction of the company under Ms Crew and are understood to have questioned whether key hires have the right level of experience to navigate the turmoil. 'The disquiet has been building,' the city source says. 'We haven't seen an activist investor coming out, but I would be surprised if you met any investor who's saying this is the right track.' Not everyone is so downcast. 'We think there is a buying opportunity with shares currently undervalued,' says Verushka Shetty, analyst at Morningstar. 'Diageo's entire portfolio is the strongest in the industry, based on aggregate brand power.' Still, it all means there is little victory to be claimed in the success of Guinness for now. A search for a full-time replacement is under way. In the meantime, chief financial officer Nik Jhangiani – who joined Diageo from Coca-Cola last year – has been handed the reins as interim boss. He has unveiled plans to cut $500m (£372m) worth of costs from the company and sell off underperforming brands to help revitalise Diageo. Investment bank Jefferies called him a 'newish heavyweight CFO' in a note to investors this week, adding: 'We see him bringing fresh perspectives on cost discipline, cash and deleveraging, sharpening execution to drive greater consistency of delivery.' Shares rose by about 4pc on Wednesday as Ms Crew's departure was announced. But gains were quickly pared back – suggesting investors are wary of getting ahead of themselves. 'The cost cutting is great. It helps protect the profits. It helps protect the dividend. It helps reduce the leverage. It's the right thing to do,' says the city source. 'But at the end of the day, Diageo needs to return to growth. This is a business that used to be growing around 5pc per annum, and in the last 12 months, it's been flat, and it's probably going to be flat for at least the next six months.' Even with Guinness conquering the UK, it will be some time before the bosses in Diageo's plush London HQ have cause for a celebratory drink. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
News18
6 days ago
- Business
- News18
Who Is Indian-Origin Nik Jhangiani? Diageo's Interim CEO After Debra Crew's Exit
Last Updated: Debra Crew stepped down as Diageo CEO, with CFO Nik Jhangiani named interim CEO. Diageo announced on Thursday that Debra Crew has stepped down as Chief Executive Officer and as a Board Director with immediate effect, by mutual agreement. Until a permanent appointment is made, Nik Jhangiani, Chief Financial Officer, will assume the role of Chief Executive Officer on an interim basis. Meanwhile, The Board has begun a comprehensive formal search process, which will include consideration of internal and external candidates. Who Is Nik Jhangiani? The Indian-origin Nik Jhangiani is a veteran in global finance having a rich experience working with global companies spanning form beverages and telecom sectors. He was appointed CFO of Diageo plc, the world's largest spirits company known for brands like Johnnie Walker whisky and Guinness beer, in September 2024 Before Diageo, he served as Senior Vice President and CFO at Coca-Cola Europacific Partners for over eight years. His earlier stints include: He also served as Group CFO for Bharti Airtel between 2009-2012. Group CFO at Coca-Cola HBC (2000–2009) Multiple senior finance roles at Coca-Cola Enterprises and Coca-Cola European Partners As interim CEO, Jhangiani is tasked with steering Diageo through a challenging period marked by a 20% share price decline, cooling demand in key markets, and a $500 million cost-cutting initiative. Nik holds a degree in Economics and Accounting from Rutgers Business School (Class of 1988). His academic foundation, coupled with over 25 years of financial leadership, positions him as a capable interim leader during Diageo's transition phase. About Diageo Diageo is a global leader in beverage alcohol with an outstanding collection of brands across spirits and beer categories. These brands include Johnnie Walker, Crown Royal, J&B and Buchanan's whiskies, Smirnoff, Cîroc and Ketel One vodkas, Captain Morgan, Baileys, Don Julio, Tanqueray and is a global company, and our products are sold in nearly 180 countries around the world. The company is listed on both the London Stock Exchange (DGE) and the New York Stock Exchange (DEO). view comments First Published: Disclaimer: Comments reflect users' views, not News18's. Please keep discussions respectful and constructive. Abusive, defamatory, or illegal comments will be removed. News18 may disable any comment at its discretion. By posting, you agree to our Terms of Use and Privacy Policy.
Yahoo
6 days ago
- Business
- Yahoo
Analysis-Diageo's new CEO needs actions, not just words
By Emma Rumney LONDON (Reuters) -Diageo's new interim CEO Nik Jhangiani has charmed investors with his cool confidence and clear communication, in contrast to his predecessor who struggled to win over the company's shareholders during her short term. But whoever takes on the full-time leadership of the world's top spirits maker will inherit challenges that will take more than words to address. Diageo announced Debra Crew was stepping down with immediate effect on Wednesday after just two years leading the company - a period in which its shares fell 44% amid a sector-wide downturn. Four investors, including one top 20 shareholder, told Reuters that Jhangiani, who joined Diageo as chief financial officer in September, would make a solid permanent CEO of the Johnnie Walker whisky and Don Julio tequila maker. Still, some of those shareholders cautioned, whoever takes the job permanently must cut Diageo's debt and revive growth at a time when consumers' wallets are stretched and the sector faces tariff hikes in the United States, its biggest market. At the same time, competition from alcohol alternatives like cannabis drinks is rising, some consumers are cutting back altogether and public health authorities are increasingly raising the alarm about alcohol's health risks. "We can't just hope for the best here," said Kai Lehmann, senior analyst at Flossbach von Storch, the top 20 shareholder, adding investors had criticised Crew for passivity and that belief in her plans to generate growth had waned. "The new CEO must immediately set about sharpening the portfolio and divesting categories and brands with no growth potential." Diageo's fortunes have turned dramatically since Crew's appointment in June 2023 after the sudden death of predecessor Ivan Menezes. Menezes presided over a period of extraordinary growth for the industry as drinkers splurged on spirits after the COVID-19 pandemic, a trend that would later reverse amid high interest rates and inflation, sending industry sales spiralling. Decisions made during those high times, including to significantly increase Diageo's debt and set ambitious targets for future growth, complicated life for Crew and for the company. The new CEO inherits these challenges. Diageo declined to comment. SALES CHALLENGES Crew did make some changes during her short tenure, including investing in Diageo's U.S. distribution, and despite the slide, the company's stock has performed relatively well versus peers. Not all investors were unhappy. But a November 2023 profit warning dented confidence in Crew from the outset, and it never fully recovered, Lehmann and five other investors said. Jhangiani, in contrast, joined in 2024 as a familiar and trusted figure thanks to his work at Coca-Cola bottlers. He quickly became the face of Diageo's turnaround, scrapping Menezes' ambitious sales targets and launching a plan to cut costs and sell assets to reduce the company's debt ratio. "They both said the right things," Chris Beckett, analyst at Diageo investor Quilter Cheviot said of Crew and Jhangiani. " was always at the back of the mind, who was really running the company?" Whoever takes over, Diageo must communicate a convincing plan for growth, Beckett, Lehmann and two other investors said. DEBT INCREASE Diageo, at least, is a company "with a problem, not a crisis", said Steve Clayton, portfolio manager at Hargreaves Lansdown, adding that it remained financially strong. Leverage has, however, crept above Diageo's target range to stand at 3.1 times operating profit at the end of 2024. Diageo's debts have doubled since 2017, driven in large part by $13 billion worth of share buybacks over the period, according to Fintan Ryan, analyst at Goodbody. That included extensive buybacks during the industry's boom in 2022 and in 2023, when shares were on average 40% more expensive than they are currently, Lehmann said. The strategy left Diageo looking to sell assets in a tough environment when it might get a worse price, said Michael Laskin, a senior fixed income analyst at Diageo shareholder Columbia Threadneedle. Laskin said Diageo failed to see the sharp drop in consumption coming and instead built up debts that now exacerbate its problems. These decisions were, in hindsight, a "lesson in poor capital allocation" that cost investors and makes the CEO's life harder today, Lehmann said. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Reuters
6 days ago
- Business
- Reuters
Diageo's new CEO needs actions, not just words
LONDON, July 17 (Reuters) - Diageo's new interim CEO Nik Jhangiani has charmed investors with his cool confidence and clear communication, in contrast to his predecessor who struggled to win over the company's shareholders during her short term. But whoever takes on the full-time leadership of the world's top spirits maker will inherit challenges that will take more than words to address. Diageo announced Debra Crew was stepping down with immediate effect on Wednesday after just two years leading the company - a period in which its shares fell 44% amid a sector-wide downturn. Four investors, including one top 20 shareholder, told Reuters that Jhangiani, who joined Diageo as chief financial officer in September, would make a solid permanent CEO of the Johnnie Walker whisky and Don Julio tequila maker. Still, some of those shareholders cautioned, whoever takes the job permanently must cut Diageo's debt and revive growth at a time when consumers' wallets are stretched and the sector faces tariff hikes in the United States, its biggest market. At the same time, competition from alcohol alternatives like cannabis drinks is rising, some consumers are cutting back altogether and public health authorities are increasingly raising the alarm about alcohol's health risks. "We can't just hope for the best here," said Kai Lehmann, senior analyst at Flossbach von Storch, the top 20 shareholder, adding investors had criticised Crew for passivity and that belief in her plans to generate growth had waned. "The new CEO must immediately set about sharpening the portfolio and divesting categories and brands with no growth potential." Diageo's fortunes have turned dramatically since Crew's appointment in June 2023 after the sudden death of predecessor Ivan Menezes. Menezes presided over a period of extraordinary growth for the industry as drinkers splurged on spirits after the COVID-19 pandemic, a trend that would later reverse amid high interest rates and inflation, sending industry sales spiralling. Decisions made during those high times, including to significantly increase Diageo's debt and set ambitious targets for future growth, complicated life for Crew and for the company. The new CEO inherits these challenges. Diageo declined to comment. Crew did make some changes during her short tenure, including investing in Diageo's U.S. distribution, and despite the slide, the company's stock has performed relatively well versus peers. Not all investors were unhappy. But a November 2023 profit warning dented confidence in Crew from the outset, and it never fully recovered, Lehmann and five other investors said. Jhangiani, in contrast, joined in 2024 as a familiar and trusted figure thanks to his work at Coca-Cola bottlers. He quickly became the face of Diageo's turnaround, scrapping Menezes' ambitious sales targets and launching a plan to cut costs and sell assets to reduce the company's debt ratio. "They both said the right things," Chris Beckett, analyst at Diageo investor Quilter Cheviot said of Crew and Jhangiani. " was always at the back of the mind, who was really running the company?" Whoever takes over, Diageo must communicate a convincing plan for growth, Beckett, Lehmann and two other investors said. Diageo, at least, is a company "with a problem, not a crisis", said Steve Clayton, portfolio manager at Hargreaves Lansdown, adding that it remained financially strong. Leverage has, however, crept above Diageo's target range to stand at 3.1 times operating profit at the end of 2024. Diageo's debts have doubled since 2017, driven in large part by $13 billion worth of share buybacks over the period, according to Fintan Ryan, analyst at Goodbody. That included extensive buybacks during the industry's boom in 2022 and in 2023, when shares were on average 40% more expensive than they are currently, Lehmann said. The strategy left Diageo looking to sell assets in a tough environment when it might get a worse price, said Michael Laskin, a senior fixed income analyst at Diageo shareholder Columbia Threadneedle. Laskin said Diageo failed to see the sharp drop in consumption coming and instead built up debts that now exacerbate its problems. These decisions were, in hindsight, a "lesson in poor capital allocation" that cost investors and makes the CEO's life harder today, Lehmann said.
Yahoo
6 days ago
- Business
- Yahoo
Analysis-Diageo's new CEO needs actions, not just words
By Emma Rumney LONDON (Reuters) -Diageo's new interim CEO Nik Jhangiani has charmed investors with his cool confidence and clear communication, in contrast to his predecessor who struggled to win over the company's shareholders during her short term. But whoever takes on the full-time leadership of the world's top spirits maker will inherit challenges that will take more than words to address. Diageo announced Debra Crew was stepping down with immediate effect on Wednesday after just two years leading the company - a period in which its shares fell 44% amid a sector-wide downturn. Four investors, including one top 20 shareholder, told Reuters that Jhangiani, who joined Diageo as chief financial officer in September, would make a solid permanent CEO of the Johnnie Walker whisky and Don Julio tequila maker. Still, some of those shareholders cautioned, whoever takes the job permanently must cut Diageo's debt and revive growth at a time when consumers' wallets are stretched and the sector faces tariff hikes in the United States, its biggest market. At the same time, competition from alcohol alternatives like cannabis drinks is rising, some consumers are cutting back altogether and public health authorities are increasingly raising the alarm about alcohol's health risks. "We can't just hope for the best here," said Kai Lehmann, senior analyst at Flossbach von Storch, the top 20 shareholder, adding investors had criticised Crew for passivity and that belief in her plans to generate growth had waned. "The new CEO must immediately set about sharpening the portfolio and divesting categories and brands with no growth potential." Diageo's fortunes have turned dramatically since Crew's appointment in June 2023 after the sudden death of predecessor Ivan Menezes. Menezes presided over a period of extraordinary growth for the industry as drinkers splurged on spirits after the COVID-19 pandemic, a trend that would later reverse amid high interest rates and inflation, sending industry sales spiralling. Decisions made during those high times, including to significantly increase Diageo's debt and set ambitious targets for future growth, complicated life for Crew and for the company. The new CEO inherits these challenges. Diageo declined to comment. SALES CHALLENGES Crew did make some changes during her short tenure, including investing in Diageo's U.S. distribution, and despite the slide, the company's stock has performed relatively well versus peers. Not all investors were unhappy. But a November 2023 profit warning dented confidence in Crew from the outset, and it never fully recovered, Lehmann and five other investors said. Jhangiani, in contrast, joined in 2024 as a familiar and trusted figure thanks to his work at Coca-Cola bottlers. He quickly became the face of Diageo's turnaround, scrapping Menezes' ambitious sales targets and launching a plan to cut costs and sell assets to reduce the company's debt ratio. "They both said the right things," Chris Beckett, analyst at Diageo investor Quilter Cheviot said of Crew and Jhangiani. " was always at the back of the mind, who was really running the company?" Whoever takes over, Diageo must communicate a convincing plan for growth, Beckett, Lehmann and two other investors said. DEBT INCREASE Diageo, at least, is a company "with a problem, not a crisis", said Steve Clayton, portfolio manager at Hargreaves Lansdown, adding that it remained financially strong. Leverage has, however, crept above Diageo's target range to stand at 3.1 times operating profit at the end of 2024. Diageo's debts have doubled since 2017, driven in large part by $13 billion worth of share buybacks over the period, according to Fintan Ryan, analyst at Goodbody. That included extensive buybacks during the industry's boom in 2022 and in 2023, when shares were on average 40% more expensive than they are currently, Lehmann said. The strategy left Diageo looking to sell assets in a tough environment when it might get a worse price, said Michael Laskin, a senior fixed income analyst at Diageo shareholder Columbia Threadneedle. Laskin said Diageo failed to see the sharp drop in consumption coming and instead built up debts that now exacerbate its problems. These decisions were, in hindsight, a "lesson in poor capital allocation" that cost investors and makes the CEO's life harder today, Lehmann said.
