6. Diageo plc (NYSE:DEO)
Number of Hedge Fund Holders: 26
Diageo plc (NYSE:DEO) is a British multinational alcoholic beverage company with its headquarters in London, England. With a vast array of brands in over 180 countries, Diageo’s portfolio has remarkable breadth across the spirits and beer categories in a range of markets around the world. This provides the industry giant with a buffer against market volatility associated with luxury goods and also enables it to find opportunities to roll out more accessible product lines or bring innovation to the ‘everyday luxury’ segment. Moreover, the London-based company’s evolving strategy revolves around pivoting away from its ‘affordable luxury’ narrative towards a more conventional staples business model, demonstrating that Diageo has been adapting to broader industry trends, favoring stability and consistent performance over the potential volatility of luxury markets.
Also, despite the challenges, the company generated a strong free cash flow of $2.6 billion in FY 2024 (ending June 30th), up $0.4 billion from the previous year. Diageo plc (NYSE:DEO) is also one of the Best Alcohol Stocks for Dividends, as the company stood up to its reputation as a very reliable dividend payer for decades and increased its full-year dividend by 5%, maintaining its track record of dividend increases since fiscal year 2000.
Diageo plc (NYSE:DEO) has vehemently kept up with the rising non-alcoholic beer trend. Its Guinness 0.0 brand has achieved massive success in only four years since its launch and is already counted among the Best-Selling Non-Alcoholic Beers in the US. In fact, the NA offering has witnessed an almost 50% increase in sales between the end of February 2023 and the end of February 2024, according to Food Manufacture.
Aristotle Capital Management, LLC, an investment management company, said the following about DEO in its Q3 2024 investment letter:
“Headquartered in London, England, Diageo plc (NYSE:DEO) is a global leader in the alcoholic beverages industry. The company has a vast portfolio of over 200 well-recognized premium spirits (~80% of FY 2024 sales), beers (~15% and mostly Guinness) and other beverages (~5%) that are sold in nearly 180 countries. Led by its Johnnie Walker brand, Diageo is the world’s largest exporter of Scotch whiskey—its largest category at ~25% of sales—followed by other spirits such as tequila and vodka (~10% each). Diageo also owns a ~34% stake in the premium champagne and cognac maker Moët Hennessy (a subsidiary of LVMH Moët Hennessy Louis Vuitton).
The company is the product of the 1997 merger between Grand Metropolitan and Guinness and the subsequent divestiture of its food-related businesses. M&A continues to be a part of Diageo’s strategy, as regional brands often dominate local markets (which provides further opportunities for mergers and industry consolidation). Over the last decade, Diageo has also meaningfully increased its presence in the rapidly growing tequila market with the acquisitions of Don Julio and Casamigos…” (Click here to read the full text).
