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Diageo, Treasury Wine Warn On Coronavirus Effects

February 26, 2020

The spread of the coronavirus is taking a toll on leading drinks companies, particularly in Asian markets, with Diageo and Treasury Wine Estates issuing trading updates today warning of its effects on their respective businesses.

Both companies noted the abrupt decline this month of the on-trade business in China, the epicenter of the coronavirus outbreak. “Bars and restaurants have largely been closed and there has been a substantial reduction in banqueting,” Diageo stated. “As the majority of consumption is in the on-trade, we have seen significant disruption since the end of January which we expect to last at least into March. Thereafter, we expect a gradual improvement with consumption returning to normal levels towards the end of fiscal 2020.”

The company added that its broader Asian business and travel retail channel in the region have also been affected. At the moment, Diageo said it expects negative impacts on net sales and operating profit in its fiscal year ending in June to be in the range of £225 million-£325 million ($291m-$420m) and £140 million-£200 million ($181m-$259m) respectively, but noted that the situation continues to unfold and its “primary concern remains the welfare of our colleagues, their families and their local communities.”

Treasury Wine also issued an update, saying “consumption across discretionary categories in China has been significantly impacted through February, and this impact on consumption is expected to be sustained at least through March. As a result, TWE no longer believes that it will achieve the previously provided guidance for fiscal 2020 of reported EBITS growth of between 5% and 10%.”

TWE’s staff is working from home in China due to “infection containment controls from the central government and provincial authorities,” and says its wholesalers, retailers, and other partners are operating under the same conditions. Treasury said that it’s not currently expecting the outbreak to materially affect markets outside of China, but added that it remains a possibility as the coronavirus continues to spread.—Daniel Marsteller

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