FWIW I think it important to look at the difficulty of entry into Diageo's market to judge the possibility of competition and to see where growth might come. The easiest spirits for aspiring craft distillers to make are gin and vodka. Set up a still, buy some botanicals and ethanol, run them through the still a couple of times, put them in bottles and you can be selling your craft gin within a month or so. Vodka is even easier to make as you don't need botanicals. As Seeking Money said, it is hard to tell most craft gins apart. Gin and vodka represent about 15% of Diageo's portfolio. Other spirits are much harder to make -whisk(e)y requires a long maturation and a supply of wooden casks. So our new distiller will have to wait for a minimum of two years before he gets his cash back, much longer in the case of some Scotch and Bourbon. The various types of whisk(e)y represent about 41% of Diageo's sales. Other spirits are also harder to get into - liquers such as Bailey's have a strong brand; tequila requires access to a supply of raw materials. Liquers, rum and tequila account for about 16% of Diageo's sales. So they have what Warren Buffett calls 'a moat'. Also they are very innovative - they grew US Rye whiskey from nothing and now have a significant presence, they are now re-opening previously closed Scottish distilleries and engaging with whiskey heritage tourism. They recently introduced a dairy free Bailey's and although I am not a vegan, this pleased my vegan relatives. So, as you can see, I'm hanging in there.
Sorry for the delay in replying, but being honest I've had other items on my to do list ahead of this post. Also I'm not sure my view will add any worth.
Diageo share price growth, I feel will come slowly, without purchase or creation of brands.
I will use Gin as my example. There are a lot of gins in the UK market. To the majority of the public, taste difference, can not be discerned. So the only way a Diageo owned brand can rise above, in sales of others is through advertising. It must have fair quality to start with, but without large advertising campaigns making it the go to brand, sales will not rise. However if multiple Gin brands are owned sales can be by market dominance. But with so many gins out there this is going to be difficult in the gin market, as in other spirit types.
Another approach is to purchase into a different drink type, eg wine. This can be done by outright ownership or via a % stake in another company. Wine production again is a full market, so my view is distribution. An approach Diageo has all ready visited in the past.
However it does not need to be an alcoholic brand. Costa I believe is to be split from its parent company Witbread. So purchase another `product` type in beverages, in this manner. I do add that the Costa image is a bit Asda, in my view. Whilst we need more a Sainsbury image. Creation of another high street brand with Diageo might May work.
Overall, I bought into Diageo as a swing trade and did not set a limit order to exit at Christmas and have been holding due to the exchange rate impact on the recent price movement. I will hopefully be exitting soon dependent on price action in the next few weeks. Hopefully that Sterling coming off the recent highs and FTSE gains will provide my sale opportunity.
Agreed - this remains a quality company with an array of brands that is unmatched. The high-profile Casamigos acquisition aside, it seems a well-run business; small beer, in the grand scheme of things, but I like their use of the Guinness branding for slightly more exotic (and expensive) forays into variants of stout and lager, as well as the penetration of same into supermarkets and the on-trade (anecdotal, but pubs selling HH13 lager seem to be shifting it at a rate of knots, something the landlord of my local confirms).
I personally see the drift downwards as a buying opportunity - never sold this share and never regretted holding, in c15yrs.
I grant that Casamigos spoke of Ivan losing his mind temporarily but, as a one-off, it matters little in the long run and may (faint hope, I grant) even be made to work if enough expensive tequila can be pushed through Diageo's excellent distribution network.
I have just seen the note on the company's site that the last shares have been purchased under this scheme.
I agree that debt reduction is good, but with companies of this size the debt is not allways a cash capital loan, that is repaid easily. My limited knowledge on debt, leads me to think it will be in the form of bonds and other debt types. So the reduction takes time to reduce, combined with building a war chest of cash to replace future borrowing.
If you want to see a good example of company debt reduction look no further than Booker plc. The company now a target for Tesco, so some debt can help keep the wolves away. However if the cyclical nature of makets is to be believed, we are heading for a downturn, and new brands will be purchasable from companies in distress.
I feel the debt reduction should be done, but it might not be an easy fix if we have to buy more brands to keep growing. Reducing dividends is one fix but an unpopular choice, so all in, why I get excited about watching the company "chess game".
Thats the trouble with short term directors views looking to hit targets for their bonuses etc by buy-backs ...... instead of debt reduction, which in the current climate is much more common sense, ie, as extra interest will be reducing profits and making targets harder to achieve.
......as having been completed. ´Fag packet ´ calculation or is it more appropriate to say these days ´phone calculator ´, I don´t know.....anyway DGE´s site shows as at 16 Feb 51,766,359 shares purchased for cancellation. Use a very low price of £25 and you have £1.294bn spent of the £1.5bn pot. Averages of the prices paid are North of the £25 used above so I'm expecting a note out soon.
Can't say I perceived any worth in the share price, would prefer to see the BS strengthened with debt reduction.
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Gave my reaction in my previous post, unimpressed despite Ivan's upbeat text, and the Markets Live quoted broker comments were unusually not very iluminating. Per the HL website three brokers now say hold/neutral, one sell and one buy (but no price target). The PTS were 2550p, 2500p, 2320p and 2100p.
So the insider selling yesterday was right with the shares closing at 2535p. Might continue to drift down, hope so as I would like to buy back at some point.
Just glanced at the interims, Ivan trying to hype up fairly unexciting but OK numbers is my impression. Dividend up 5% and that seems to me about the growth rate in the biz netting out the exceptionals. There is likely to be some analyst coverage reported in Markets Live in the Alphaville section today on the FT website 1100-1200, my guess is those who think DGE overvalued unlikely to change their stance particularly given the stronger £ going forward. What's your take?
Shares came back yesterday then bounced initially 50p this morning but pretty much back now to yesterday's close. I like to be invested in DGE but not rushing to buy back having sold a quid higher.
a beet -- It is to a degree, but I suspect the press euphoria on DGE's expected better performance is doing most of the holding up. DGE's last 5 years performance has been pretty meagre from a business perspective.
DGE, BATS, both got over a 2% drop today.
£ has returned to the pre-Brexit vote level -- so much for the scaremongering.
What is does show is 4 different businesses :-
Spirax Sarco -- the steam machine
Diploma -- Niche engineering
Intercontinental Hotels -- clue in the name
Diageo -- booze
Some comparatives - ROCE is consistently 25-30% for all three companies except Diageo which is around 15% -- it had been declining over the years to 12% and blipped back up to 15% in 2017.
Turnover growth is by far the greatest at Diploma, and it's pretty tepid in all the other three, especially Diageo. EBIT growth has been pretty stagnant at DGE and reasonable at the other three -- yet the growth which is no surprise is the rerating of the share prices and share buybacks, some funded by debt perhaps?
IHG's growth in EBIT has been down to flogging off the hotels I assume.
With the exception of Diploma, I suspect all three of the others could be due a rerating - downwards.
Yes indeedy, a bit of misery helps too:
'This obsession about returning the colour of the British passport to imperial blue undermines the arguments of those who claim that the Brexit vote wasn't driven by an urge to turn back the clock.'
Looks like it's worked, lads. Yes it's the, well, navy blue passport for us, back in time we go to real austerity - ration books, bleached white bread ....yum,yum.
Just realised from all your comments that this wondrous new concoction existed.From my favourite inf source Tesco I gleaned:
' Gordon's Premium Pink Distilled Gin was inspired by Gordon's original 1880 pink gin recipe. Crafted to balance the refreshing taste of Gordon's with the sweetness of raspberries and strawberries with the tang of redcurrant. Made using only the highest quality ingredients and only natural flavourings to provide an authentic real berry flavour.
Gordon's Premium Pink Distilled Gin has been created to offer a sweeter and more accessible way to enjoy a gin and tonic. To set the occasion serve in a large wine glass, filled with ice and garnished with fresh strawberries.
For something a little different, try our Gordon's Pink Spritz - mix 2 parts Gordon's Pink with 2 parts lemonade and 1 part prosecco. Serve in a large wine glass filled with ice, garnish with fresh strawberries and raspberries.'
Yo, sounds a blast - that should spice up a cheap drop of prosecco and lemonade at the ladies lunch no end - and all those natural ingredients too (not so sure about the lemonade).
Great stuff, m8. For the lazybones out there, you don't need to slash each sloe you can just put 'em in the freezer in a bag overnight. That'll break the skin, which is what you need to get the colour and flavour out, no worries.
I have a vague memory of making sloe "gin" with some kinda neat basic ethanol rather than gin tel quel. Make sure not to use methanol which will blind you and ruin the Boxing Day meet.
Damsons are a fine alternative to sloes.
LKH on the flybridge or you could buy Gordon's sloe gin
Pick a pound of so of sloes, round about now, or anyway after the first frost. Slash each sloe with a sharp knife and place in an empty clear bottle. Add a pound of sugar, two cloves and a drop of almond essence, and fill the bottle with gin (any old cheap muck will do, don't waste a good one). Leave undisturbed for a couple of days, and then shake vigoursly. The liquid will turn a glorious rich pink colour. Shake every day for 30 days - the liquid will gradually get darker - and then leave for 30 days. It will be delicious by Christmas and perfect for the hipflask at the Boxing Day meet.
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