Diageo says Red Sea violence is delaying some alcohol deliveries

London — Spirits giant Diageo is seeing delays in shipping some of its products due to attacks on vessels in the Red Sea, and is putting contingency plans in place, CFO Lavanya Chandrashekar said on Tuesday.

Attacks by Iran-backed Houthi rebels in the crucial Red Sea shipping lane have severely disrupted shipping in the Suez Canal in recent months, which is the shortest sea route between Asia and Europe.

Diageo, the world’s top spirits maker, ships products including Johnnie Walker whisky, which can only be made in Scotland, and tequila, made in Mexico, all over the world.

Chandrashekar said shipments of products such as Scotch to Asia were facing delays as vessels rerouted to avoid the Red Sea.

She did not say whether that would have any effect on the company’s outlook for 2024, but said Diageo already had additional inventory in different regions, with a hub in China, for instance, holding stock to act as a buffer in emergencies for Asian markets.

“We always have safety stocks ... we live in a volatile world and even if it’s not geopolitical incidents, things can go wrong,” she said, adding that Diageo had invested to ensure it could react in such a scenario.

The company was reassessing its levels of safety stock following disruptions in the Red Sea and was planning to hold a higher number of days of stock where required, she said.

Diageo has previously said that trading in some markets in the Middle East had effectively ceased following Hamas’ October attack on Israel and the subsequent conflict.

Chandrashekar and CEO Debra Crew said on Tuesday that distributors in some markets in the region had essentially stopped placing orders following the attack. The situation remains “far from normal”, Crew added.

The main effect was in Lebanon, another big Scotch market, Chandrashekar said, where people were going out socialising and celebrating less. More broadly, the conflict had affected sentiment across the region, she said.

Reuters