Diageo, the world's top spirits maker, is exploring a potential spin-off or sale of beer brand Guinness, and is reviewing its stake in LVMH's drinks unit, Moët Hennessy, Bloomberg News reported on Friday, citing people familiar with the matter.
News about a potential sale of the beer label, a star performer in Diageo's portfolio, helped lift Diageo's shares almost 4% higher, becoming the top percentage gainer on the blue-chip index.
The company did not immediately respond to a request for comment, and LVMH declined to comment.
Guinness is an outlier in Diageo's business, which consists mostly of spirits rather than beer, but its performance recently has outshone that of key liquor labels such as Johnnie Walker whisky. Spirits sales have struggled as a post-pandemic boom in demand for pricey bottles of liquor went into reverse.
Guinness sales have, meanwhile, grown double digits every year since 2021, with its zero-alcohol version also surging. Its recent success could make Guinness an attractive asset. It would likely be valued at above $10bn, Bloomberg reported, citing the sources. Nevertheless, Diageo's liquor brands offer a higher margin and generally, drinkers in developed markets are shifting away from beer and towards spirits-based drinks like cocktails.
London-listed Diageo could also look to deepen its ownership in the Moët Hennessy venture, or exit altogether, Bloomberg's report said, adding that if Diageo wanted to sell the stake, LVMH has an obligation to buy it, although at a 20% discount to its fair value, as per their agreement.
In a note earlier on Friday, Bernstein analyst Trevor Stirling said Diageo taking full control of the LVMH wine and spirits division would likely necessitate "a very reluctant disposal of beer/Guinness".
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