The world's largest spirits company, Diageo, is reportedly exploring a sale of its assets in China. This strategic review forms part of new chief executive Dave Lewis's plan to streamline the portfolio of the London-based drinks giant, which owns iconic brands like Guinness, Johnnie Walker, and Smirnoff.
New Leadership, New Strategy
Dave Lewis, who took over as Diageo's CEO on 1 January, has inherited a business facing several challenges. The company is contending with the lingering impact of US tariffs, high debt levels, and a notable shift in consumer habits, particularly among younger adults who are drinking less alcohol. Lewis, nicknamed "Drastic Dave" during his long tenure at Unilever for his cost-cutting approach, is now applying his focus to Diageo's global operations.
According to a report from Bloomberg News, Diageo is working with investment banks Goldman Sachs and UBS to assess its Chinese business. This follows a double-digit decline in sales in China, which the company flagged to investors in November. The banks are said to be gauging initial interest from potential Chinese strategic buyers and private equity firms.
The Chinese Portfolio Under Review
The centrepiece of Diageo's holdings in China is its majority stake in Sichuan Swellfun, a Shanghai-listed distiller. Diageo owns just over 63% of the company, which is a key distributor of Baijiu, a traditional Chinese distilled spirit. Based in Chengdu, Sichuan Swellfun has seen its share price fall by 14% over the past year, giving it a current market valuation of approximately 19.2 billion yuan (£2 billion).
This potential divestment continues a pattern of portfolio simplification under Lewis's leadership. Last month, Diageo announced the $2.3 billion sale of its 65% stake in East African Breweries, marking its exit from direct beer operations in Africa.
Navigating a Challenging Landscape
Lewis succeeded Debra Crew, who had a brief tenure as CEO in 2023 following the sudden death of the widely respected Ivan Menezes. Crew's time at the helm was marked by a profits warning linked to supply chain issues and falling sales in Latin America and the Caribbean, where budget-conscious consumers traded down to cheaper brands.
Further operational headaches emerged in the UK last Christmas, when pubs reported shortages of Guinness due to supply problems. The reported move in China suggests Lewis is moving quickly to reshape the business he took over at the start of the year, focusing on core markets and brands to drive future growth. Diageo has declined to comment on the reports regarding its Chinese assets.
