The Week Ahead: Mixed messages from spirit world
Monday 26 October 1998
True, the regulatory authorities huffed and puffed. But their demands were modest and comfortably accommodated by the biggest spirits power in the word.
With the regulators barking but not biting, it would not be long, the market and drinks industry reasoned, before the other major players, such as Allied Domecq, Seagram and Pernod Ricard, retaliated.
Nearly 18 months after the mammoth merger was rolled out there has been precious little sign of any response from the rest of the industry.
Talk that Canadian group Seagram will merge with Allied's spirits side, or that Pernod will throw in its lot with a US group, has so far come to nothing.
Allied, due to produce its annual results today, is to outward appearances little different from pre-Diageo days. It is still a mix of spirits production and varied forms of retailing. The Victoria Wine off-licence chain has been merged with Whitbread's Threshers business, and there are plans, as yet unrealised, to sell or float its Cantrell & Cochrane Irish drinks enterprise.
However, there is no indication of any spirits deal, with Seagram or anybody else, or even of the retailing and distilling demerger so widely expected by the market.
The Allied chairman, Sir Christopher Hogg, is unlikely to offer further enlightenment when he trots out what will be a flat set of figures. Sir Christopher has already let it be known that the results will not be a cause for celebration; pounds 612m against pounds 602m is expected.
The market is also fretting about the accompanying trading statement. Since Allied provided a trading update there have been some sobering indications of slackening consumer demand, particularly for leisure.
Bass has had to contend with dismal pub sales, and cheer has been in short supply from other operators.
Indeed the entire retailing climate is looking decidedly suspect, and it will be surprising if Allied's sprawling and largely mundane pubs estate has bucked the trend. Its spirits operations may also be encountering the chill winds of the worldwide economic slowdown.
Allied's figures would, at one time, have heralded the start of the City's brewing season. But the group is no longer a member of the beerage, having sold its brewery interests.
Whitbread, however, is still brewing as well as pulling pints. It could, therefore, claim to kick off the beer season tomorrow with its interim figures. Nick Williamson at Credit Lyonnais is looking for pounds 208m against pounds 198m.
Still, brewing has represented a declining slice of Whitbread's earnings for some years. Although it still has some 15 per cent of the beer market, brewing represents only about 12 per cent of its profits.
The group, which started as a City of London brewery more than 250 years ago, has spread determinedly into eating out through the Beefeater pub/restaurants and stand-alone establishments such as Cafe Rouge. It has also ventured into the coffee bar extravaganza as well as health clubs and - belatedly - hotels.
Worries that Whitbread has ended, or at least seriously curtailed, its spending on pubs is one of the influences causing much anxiety about the well being of the good, old-fashioned boozer.
Whitbread could, however, be planning to take advantage of the depressed state of the brewing and pub market. A bid for Greenalls, in talks to sell its franchised and tenanted pubs, is regarded as a distinct possibility.
With brewing down to such a relatively small percentage of profits, there is a feeling that Whitbread could be prepared to abandon its heritage and use the resulting freedom dramatically to increase its retail spread with a Greenalls bid.
If it called time on brewing it could comfortably swallow a wide range of retail outlets without encountering the Westminster-imposed restrictions on pub ownership. It wants hotels - Greenalls' De Vere chain would be a splendid capture - and it is clearly thinking about more retail muscle. First Leisure and Vaux's Swallow Hotels chain are seen as other bid candidates.
In a week which sees the opening of the Channel Islands Stock Exchange, the first to appear since the regional operations (even Oldham once had its own exchange) were annihilated by London more than 30 years ago, there will be plenty of talk about consumer demand.
J Sainsbury, for long under pressure and seemingly running hard to stay within sight of arch-rivals Tesco, is expected to show signs of a rally with interim profits of pounds 464m against pounds 411m. Here again it will be more the trading statement than the figures which will intrigue the market.
The supermarket sector was under pressure last week as the market fretted about price wars - real as opposed to the phoney exercises which have occurred lately - and their effect on margins. There is little doubt that costs are increasing and the supermarketeers no longer have the benefit of enchanting inflation profits.
Debenhams, which demerged from Burton (now Arcadia) in February, will also give an indication of retail attitudes. Around pounds 136m is expected for the year to August, but once again the accompanying trading statement could be more important than the unadorned figures.
The busy reporting week also includes nine months' figures from British American Tobacco, now shorn of its financial interests. Profits in the region of pounds 950m are expected.
Pilkington, the glass maker, is likely to announce interim profits of pounds 60m (pounds 67m) and Colt Telecom will again be in the red with third-quarter losses of some pounds 15m against pounds 9m.
BSkyB, the satellite TV station, takes time off from its pursuit of Manchester United with first-quarter figures of pounds 50m or so, down from pounds 62m. The digital launch has hit profits, although Sky Digital did not start operating until after the quarter's end. The market will be looking for a trading update, with hopes that Sky's digital customer base is already above 200,000.
- 1 New Zealand 'the best country to work as a prostitute', says sex worker advocacy group
- 2 Purity balls: Girls in the US making virginity pledges as fathers vow to 'protect purity'
- 3 Mother 'will allow son's circumcision in return for release from prison'
- 5 Female Muay Thai champion hustles coaches to give them a beating
Purity balls: Girls in the US making virginity pledges as fathers vow to 'protect purity'
Puerto Rico, island of lost dreams: People are leaving the debt-hit territory in droves as near neighbour Cuba's star rises
Female Muay Thai champion hustles coaches to give them a beating
16-year-old girl beaten and burned alive by lynch mob in Rio Bravo, Guatemala
Warren Buffett thinks the poor should stop blaming inequality on the rich
As a white man, I'm surprised more women aren't tweeting the hashtag #KillAllWhiteMen
Scotland may have to leave the EU even if it votes to stay in, David Cameron confirms
Report finds that Britain's wages are the most unequal in Europe
The day that Britain resigned as a global power
Almost a third of school pupils believe 'Muslims are taking over our country', study claims
Gay marriage 'Bert and Ernie' cake bakery found guilty of discrimination in Northern Ireland
iJobs Money & Business
£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...
£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...
£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...
£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...