Marketing

Drinks companies assess fiscal impact of COVID-19

In an update on the expected range of adverse fiscal impacts of the evolving COVID-19 ‘Corona virus’, Diageo has stated that bars and restaurants in China have largely been closed with a substantial reduction in banqueting.

 

The outbreak has also caused a significant reduction in international passenger traffic, especially in Asia and Diageo assumes that the recovery of passenger traffic will be gradual, resulting in weaker performance for the remainder of fiscal 2020.

The Corona virus outbreak has also caused a significant reduction in international passenger traffic, especially in Asia and Diageo assumes that the recovery of passenger traffic will be gradual, resulting in weaker performance for the remainder of fiscal 2020.

 

“As the majority of consumption is in the on-trade, we’ve seen significant disruption since the end of January which we expect to last at least into March,” stated the company recently, adding, “Thereafter, we expect a gradual improvement with consumption returning to normal levels towards the end of fiscal 2020.”

As for its impact on other Asia Pacific countries, “The outbreak in several other Asian countries, especially South Korea, Japan and Thailand, has led to events being postponed, a reduction in conferences and banquets and a drop in tourism which have all impacted on-trade consumption.

“We expect gradual improvement throughout the fourth quarter of fiscal 2020.”

The outbreak has also caused a significant reduction in international passenger traffic, especially in Asia and Diageo assumes that the recovery of passenger traffic will be gradual, resulting in weaker performance for the remainder of fiscal 2020.

It is difficult to predict the duration and extent of any further spread of the COVID-19 outbreak both in and outside of Asia.

“On this basis, we estimate the negative impact in fiscal 2020 on the group’s organic net sales and organic operating profit to be in a range of £225m (€264m) to £325m (€382m) and £140m (€165m) to £200m (€235m), respectively, with the timing and pace of recovery determining the impact within these estimated ranges.

“The COVID-19 situation is dynamic and continues to evolve and these ranges exclude any impact of the COVID-19 situation on other markets beyond those mentioned above. We will continue to monitor the situation closely.”

Elsewhere AB InBev has warned of profit losses of $170 million (which will lead to the brewer’s worst first quarter results in nearly a decade) through a sales fall of $285 million in January and February attributed to the virus severely curtailing beer drinking in China due to the lockdown situation there compared to January and February last year.

The world’s largest brewer of brands such as Budweiser and Corona has said that demand during the Chinese New Year “was lower than in previous years as it coincided with the beginning of this outbreak.”

InBev’s Chief Executive Carlos Brito has admitted, “We are not satisfied with the results.”

 

Corona beer in US

In the US the Corona beer brand has been the subject of rumour, confusion and disinformation by the general public.

The brand’s US distributor Constellation Brands recently addressed these “unfounded concerns” about the impact of the COVID-19 virus on its business and consumer sentiment related to the brand there.

“Sales of Corona Extra remain strong” it stated, “with dollar sales up 5% in the US per the latest 4-week period ended Feb 16, nearly doubling the 52-week trend for the brand. Similarly, depletion trends for Corona Extra for the first two months of this calendar year through Feb 26, as well as the month of February, have also outpaced their 52-week trend.”

Sales trends for the entire Corona brand family are also outpacing their 52-week trend in the latest 4-week and 12-week periods, added the company pointing out that all business units supporting its beer business are seeing positive sales trends for the brand thus far this calendar year.

“It’s extremely unfortunate that recent misinformation about the impact of this virus on our business has been circulating in traditional and social media without further investigation or validation,” said Constellation Brands’ President and Chief Executive Bill Newlands, “These claims simply do not reflect our business performance and consumer sentiment, which includes feedback from our distributor and retailer partners across the country. We’ve seen no impact to our people, facilities or operations and our business continues to perform very well.”

 

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