Global Spirits Giants Hold $22 Billion in Unsold Inventory, Production Halts
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1h ago
0mins
Source: seekingalpha
- Inventory Crisis: Major global spirits producers, including Diageo and Pernod Ricard, are currently holding about $22 billion in unsold inventory, marking the highest levels in over a decade, leading to production halts and increased pressure to discount prices.
- Demand Plummet: The sharp decline in demand for premium spirits, exacerbated by inflation impacting household budgets, has resulted in a significant drop in cognac exports over the past year, further intensifying the inventory issue.
- Production Adjustments: In response to the inventory buildup, Diageo and other companies have temporarily shut down or slowed distillery operations in the U.S., a move that may help reduce stock but risks creating supply shortages if demand rebounds in the future.
- Uncertain Industry Outlook: Analysts warn that current production cuts could lead to supply shortages in the coming years, highlighting the long-term uncertainty facing the industry, particularly if demand recovers, which may further strain companies' financial health.
Analyst Views on DEO
Wall Street analysts forecast DEO stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for DEO is 111.00 USD with a low forecast of 93.00 USD and a high forecast of 131.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
3 Analyst Rating
2 Buy
1 Hold
0 Sell
Moderate Buy
Current: 89.350
Low
93.00
Averages
111.00
High
131.00
Current: 89.350
Low
93.00
Averages
111.00
High
131.00
About DEO
Diageo plc is a United Kingdom-based international manufacturer and distributor of premium drinks. The Company offers beverage alcohol with a collection of brands across spirits and beer categories. Its segments include North America, Europe, Asia Pacific, Latin America and Caribbean, Africa, and Corporate and other. The SC&P segment manufactures products and includes production sites in the United Kingdom, Ireland, Italy, Guatemala and Mexico, as well as comprises the global procurement function. Its principal products include scotch whisky, whisk(e)y, vodka, tequila, gin, rum, liqueurs, beer, wine, and non-alcoholic spirits. Its collection of brands includes Johnnie Walker, J&B and Buchanan's whiskies, Smirnoff, Ciroc and Ketel One vodkas, Captain Morgan, Don Julio, Guinness, and Tanqueray, among others. It offers Ritual Zero Proof Non-Alcoholic Spirits (Ritual). It owns manufacturing production facilities across the globe, including distilleries, breweries, and packaging plants.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
