As a "Sin" stock , Diageo should prove pretty defensive through the economic downturn. Many of its products (e.g. Johnny Walker) may suffer from some trading down, as consumer continue to drink but drink less expensive products than the Diageo brands but underlying sales grew by 6 percent in its July-September first quarter after an 8 percent sales rise in its previous financial year to June 2008. Chief Executive Paul Walsh said despite the recent turmoil on financial markets the group had not seen any significant adverse changes in its markets. Diageo also has great margins and offers a good dividend. One to have in the portfolio, in my view.
http://www.reuters.com/article/marketsNews/idUSLE4879720081015
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Diageo plc (Diageo) is engaged in drinks business. The Company’s business is organized under the business areas of North America, Europe, Africa, Latin America and Caribbean, Asia Pacific and global Supply. Diageo sells products in more than 180 markets around the world. On July 5, 2011, Diageo completed the acquisition of a 50% equity controlling stake in Rum Creations Products Inc. On July 14, 2011, Diageo acquired an additional 4% equity stake in Sichuan Chengdu Quanxing Group Company Ltd. On November 25, 2011, Diageo completed the acquisition of SABMiller Africa BV's 20% interest. In December 2011, Diageo completed the acquisition of Carlos Palanca Group's 49% non-controlling equity stake in Diageo Philippines Inc. On 9, August 2012, Diageo completed the acquisition of 100% of the equity of Ypioca Bebidas S.A. In May 2013, Relay BV a wholly owned subsidiary of Diageo Plc acquired a 27.142% stake in United Spirits Ltd. more »
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The key pre-Christmas trading period is still to come, and economic conditions continue to deteriorate, but on a relative basis, Diageo should hope up well (as very few stocks will have a good earnings period between now and Xmas, I suspect).
Everyone's going to trade down - branded labels like this will suffer big-time once the cycle really kicks in.