Diageo plc DEO continues to make strategic moves to enrich customer experiences and drive growth. In line with this strategy, the company has signed and completed the sale of its Cacique rum brand to Bardinet S.A., a leading player in the Spanish spirits market.

Cacique, an iconic rum brand with a rich 65-year heritage, holds a strong consumer base in Spain and Venezuela. This divestiture aligns with Diageo’s focus on optimizing its portfolio by prioritizing its premium brands and delivering sustainable growth. By transferring Cacique to Bardinet, which has extensive expertise in the spirits sector, the brand is well positioned for continued success under new stewardship.

Diageo’s management views the sale of Cacique as a reflection of its commitment to effective portfolio management. It believes that Bardinet will be the ideal owner to preserve the brand’s authenticity and prominent market positions in Spain and Venezuela while expanding its presence in Continental Europe.

Jean-Paul Bouyat, CEO of Bardinet S.A., highlighted Cacique’s unique positioning as rum with a deep heritage. He noted that the acquisition should bolster Bardinet's rum market share, particularly in Spain, and enhance its offerings while maintaining the brand’s exceptional taste and quality. Bardinet’s portfolio includes Bericho bitter, vermouths, Bonet liqueur and Dillon white rum.

Shares of Diageo reflected momentum following the news. Notably, the company’s shares opened the pre-market trading session today with an increase of 1.8%.

More About Diageo Stock

Diageo is keen on investing in strategic initiatives to drive long-term organic growth. DEO is confident about the long-term growth potential of the total beverage alcohol sector and expects to expand its value share by 50% in the sector, to 6% by 2030. Diageo is on track to deliver on its medium-term guidance for fiscal 2023-2025, targeting organic sales growth of 5-7% and organic operating profit growth broadly in line with net sales growth.

Diageo is progressing well with its new productivity commitment to deliver $2 billion of productivity savings in the three years from fiscal 2025 to fiscal 2027, as announced at the Capital Markets Event in November 2023. Per the plan, the company expects to deliver this accelerated productivity commitment across the cost of goods, marketing spends and operating overheads. The company plans to support this acceleration through investments, including its supply chain agility program announced in July 2022. The company expects benefits from the supply chain agility program to increase from fiscal 2025 and accelerate in the following years.

Roadblocks in DEO’s Path

Despite these positives, Diageo has faced significant challenges in the Latin America and Caribbean (LAC) and North America regions, which have negatively impacted the company’s financial results in fiscal 2024. The LAC region, which represents 10% of Diageo's net sales, has seen a marked decline in performance. This was primarily due to rapidly shifting consumer sentiment in fiscal 2023, which led to elevated inventory levels and required adjustments by wholesalers and customers throughout the year.

Diageo’s North America performance has been impacted by the U.S. spirits market due to a cautious consumer environment, adjustments in the retailer inventory and the comparison with inventory replenishment from the previous year. The U.S. spirits category saw a 3% decrease in net sales in fiscal 2024, largely due to a 5% drop in volume.

Shares of this Zacks Rank #4 (Sell) company have lost 9% in the past three months compared with the industry’s decline of 19.4%.

DEO Stock's Past Three Month Performance

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Key Picks

We highlighted some better-ranked stocks from the broader Consumer Staples space, namely Freshpet, Inc. FRPT, Vita Coco Company COCO and The Boston Beer Company SAM.

Freshpet, together with its subsidiaries, manufactures, distributes and markets natural fresh meals and treats for dogs and cats, currently sports a Zacks Rank #1 (Strong Buy). FRPT delivered an earnings surprise of 144.5% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Freshpet’s current fiscal year’s sales and earnings implies growth of 27.2% and 228.6%, respectively, from the year-ago reported number.

Vita Coco develops, markets and distributes coconut water products under the Vita Coco brand name in the United States, Canada, Europe, the Middle East, Africa and the Asia Pacific. The company currently has a Zacks Rank of 2 (Buy). COCO has a trailing four-quarter earnings surprise of 17.6%, on average.

The Zacks Consensus Estimate for COCO’s current financial-year sales and earnings suggests growth of 3.8% and 29.7%, respectively, from the year-ago reported figures.

Boston Beer is one of the largest craft brewers in the United States. The company produces beer, malt beverages and cider products at company-owned breweries and under contract. Boston Beer currently has a Zacks Rank #2.

The Zacks Consensus Estimate for the company’s 2025 earnings implies growth of 35.3% from the previous year’s reported number. SAM has a trailing four-quarter average earnings surprise of 154.6%.

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