The speculation surrounding a potential sale of Guinness, a standout brand in Diageo's lineup, resulted in a nearly 4% increase in Diageo's stock, making it the top gainer on the blue-chip index. However, some analysts and a source close to the matter indicated that selling Guinness at this time may not be a prudent decision.
Diageo opted not to comment on the market rumors, and LVMH also refrained from making any statements.
Guinness stands out within Diageo's portfolio, which is predominantly focused on spirits rather than beer, yet its recent performance has surpassed that of major liquor brands such as Johnnie Walker whisky.
Sales of spirits have faced challenges as the post-pandemic surge in demand for high-end liquor has waned. In contrast, Guinness has experienced double-digit sales growth annually since 2021, with its non-alcoholic variant also seeing significant increases.
This recent success could position Guinness as a highly desirable asset, potentially valued at over $10 billion, as reported by Bloomberg.
Diageo's spirits brands typically yield higher profit margins, and there is a noticeable trend among consumers in developed markets shifting from beer to spirits-based beverages like cocktails.
Nevertheless, the strong performance of Guinness has led analysts, including Laurence Whyatt from Barclays, to question the rationale behind Diageo's potential decision to sell the brand.
"I would be very surprised if Diageo wanted to sell Guinness," he said, adding it was unusual for companies to want to sell their best-performing assets.
An informed source indicated that it would be illogical for Diageo to divest Guinness in the short term, considering its strong performance. The source noted that Diageo is not in need of financial resources, and CEO Debra Crew has publicly expressed her fondness for the brand.
Additionally, Bloomberg reported that Diageo might consider increasing its stake in the Moet Hennessy partnership or potentially exiting it entirely.
In a note released earlier on Friday, Bernstein analyst Trevor Stirling suggested that if Diageo were to assume full control of the LVMH wine and spirits division, it would likely require a reluctant sale of its beer segment, including Guinness.