Diageo share price could be well placed for a rebound
Diageo won’t be top of your list for investing in lockdown due to plummeting alcohol sales in bars, but here’s why Diageo shares are still a credible option.
Following the issues surrounding the lengthy closure of bars and restaurants worldwide, it would be easy to take a dim view of the Diageo share price. The world’s biggest owner of alcoholic drinks brands opted not to submit its full-year guidance for 2020, admitting it was uncertain about when normality will return to the food and drink industry.
However, consumers could yet be the answer to aiding the recovery of Diageo, which includes brands such as Guinness, Johnnie Walker, Captain Morgan, and Smirnoff within its beverage portfolio.
Cause for optimism over Diageo share price recovery
The last four weeks have certainly been a little more encouraging for the Diageo share price. After plummeting to depths of £22 on the eve of the UK’s nationwide lockdown in March, it has been a relatively steady resurgence ever since.
Since early July, when the price was experiencing considerable resistance at the £27.48 - £27.58 mark, Diageo shares have been in bullish mood, reaching highs of £28.45 last Wednesday as the UK continues to ease its Covid-19 lockdown restrictions.
When you consider that the Diageo share price was £32.52 in early January, there is plenty of scope for improvement providing the positive news on a coronavirus vaccine and as additional treatments continue to move in the right direction.
Consumers have been stocking up despite the shutdown of bars
Another reason that the Diageo share price remains fluid is that many of their brands are priced fairly for a broad spectrum of consumers. Given that most consumers have been asked to 'stay at home' in recent months, it is no surprise that off-trade spirit sales are up around a third year-on-year in the US alone.
Diageo-owned brands like Johnnie Walker are iconic and subsequently benefit from cult followings, with many still prepared to pay a premium for the company’s most sought-after spirits - which can only help its operating profit margin in troubled times.
Diageo ramps up its e-commerce capacity
South America has been one of the regions hardest hit by the coronavirus crisis. Gregorio Gutierrez, managing director for Diageo in Brazil, Paraguay, and Uruguay, confirmed that the company had expanded its e-commerce capabilities to try and improve direct-to-consumer sales. The focus was largely on Brazil where reopening restaurants and bars is not a likely proposition in the near future.
World’s first eco-friendly paper bottles likely to buoy Diageo share price
Diageo’s forward-thinking approach to sustainability should also curry favour with investors interested in the Diageo share price. Its latest plastic-free, paper-based spirits bottle is set to redefine how Diageo’s brands package low and high-end offerings.
Even its flagship Johnnie Walker Black Label brand will benefit from this sustainably-sourced wood pulp bottle, which is designed to maintain the integrity of even the most premium of blends.
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