Diageo Considers Spin-Off or Sale of Guinness

(Reuters) – Diageo (LON:DGE), the world’s top spirits maker, is exploring a potential spin-off or sale of its beer brand Guinness and is reviewing its stake in LVMH’s drinks unit, Moet Hennessy, Bloomberg News reported on Friday, citing individuals familiar with the matter.

News about a potential sale of the beer label, which has been a star performer in Diageo’s portfolio, helped to lift Diageo’s shares almost 4% higher, making it the top percentage gainer on the blue-chip index. However, some analysts and insiders noted that selling Guinness right now would not make sense.

Diageo declined to comment on market speculation; LVMH also declined to comment.

Guinness stands out in Diageo’s portfolio, which mainly includes spirits rather than beer. Nonetheless, its performance has recently outperformed key liquor brands such as Johnnie Walker whisky.

Spirits sales have faced challenges as the post-pandemic demand for high-end liquors has decreased. In contrast, Guinness sales have grown by double digits annually since 2021, with its zero-alcohol version also seeing significant growth.

This recent success may make Guinness an attractive asset, potentially valued at over $10 billion, according to Bloomberg.

Diageo’s liquor brands generally offer higher margins, and drinking trends indicate a shift in developed markets from beer to spirits-based drinks like cocktails.

However, Guinness’s success left analysts, like Laurence Whyatt at Barclays, questioning why Diageo would consider selling it. He stated, “I would be very surprised if Diageo wanted to sell Guinness,” emphasizing that it is unusual for companies to sell their top-performing assets.

An insider agreed, noting that a sale does not seem logical in the near term given Guinness’s performance. They also mentioned that Diageo does not need the money, and CEO Debra Crew has publicly praised the label.

Bloomberg also reported that Diageo might seek to increase its ownership in the Moet Hennessy venture or consider an exit.

In an earlier note, Bernstein analyst Trevor Stirling suggested that if Diageo sought full control of LVMH’s wine and spirits division, it might require a “very reluctant disposal of beer/Guinness.”

(This story has been refiled to correct the reporter’s name in the signoff, no change to text.)