View from City Road: In search of a shot of sheer genius
Friday 18 March 1994
Not only has sales growth slowed but price rises have been harder, indeed impossible, to achieve. The cost-cutting programme is under way, but did not start soon enough, and is clearly failing to keep up with the speed of disinflation at the sales end of the business.
The shares fell 18p to 484p. Guinness fulfilled a promise of pre- exceptional profits of at least pounds 875m, but only just - with a pounds 22m disposal windfall offsetting a pounds 20m European reorganisation provision.
It will be some time before Guinness enjoys double-digit profit growth, because of continuing recession in some of its main markets, low inflation and a lame Spanish nag called Cruzcampo.
If it had known what it knows now, it is unlikely that Guinness would have bought the Cruzcampo brewing company. At the time Spain was bathing in sunny economic weather, just before hosting the Olympics and Expo '92.
Guinness has no intention of selling Cruzcampo. Fine. But who would buy it now, anyway? Unemployment in Spain is a conservative 23 per cent, and in Cruzcampo's backyard in Andalucia nearly one in three are out of work.
In the mainstay spirits business, Johnnie Walker Red Label reinforced its position as the world's best-selling Scotch. Total spirits sales, however, grew by a pedestrian 1 per cent to 52 million cases; and intense competition pegged the average price rise to 1 per cent - in other words, real prices fell.
Guinness used to perform miracles by aggressively raising prices of premium brands. Those days have gone, because consumer resistance has led to trading down to cheaper products instead. A dose of selective inflation in premium drink prices is what Guinness now needs to pay for its heavy investment programme. Unless that happens, there is no strong reason to buy the shares.
Emergency landing at Heathrow sparks further controversy over London airport capacity
Unrest may spread across Europe, warns Red Cross chief
French government seeks to ban extreme right-wing group
BNP and EDL accused of attempt to fuel racial hatred after Woolwich terror attack
You want to get an Eton scholarship? All you need to do is answer four (not so simple) questions
- 1 What, let gays get married? We must be bonkers
- 2 Rocky Horror star Tim Curry 'suffers major stroke'
- 3 Exclusive: How MI5 blackmails British Muslims
- 4 Lord of the Sings: Sir Christopher Lee, 91, to release heavy metal album
BMF is the UK’s biggest and best loved outdoor fitness classes
Get the latest on The Evening Standard's campaign to get London's children reading.
Win anything from gadgets to five-star holidays on our competitions and offers page.