Diageo Considers Price Hikes to Offset Sharp Rise in Commodities Costs

From the Sunday Herald:

SCOTCH WHISKY drinkers could face another hike in the cost of their favourite tipple as Diageo reviews for the second time this year the domestic pricing structure of brands including Johnnie Walker, J&B, Bell’s and Buchanan’s.

News of a potential increase could come as early as Thursday when chief executive Paul Walsh is expected to disclose that the group has seen a £100 million rise in its costs for items such as grain, energy, glass and packaging over the past year, which analysts expect to have taken the edge off this year’s profit growth.

The article also notes that currency exchange in the export market, which accounts for 90 percent of Scotch sold, has more than offset the rise in production costs. In addition, ingredients such as barley make up only a small percentage of the total cost of goods sold.

Consumers have already seen one price hike in the U.K. so far this year, in addition to a tax increase.

The price review comes as Diageo is preparing to begin production at a giant new distillery in Roseisle, fuelled by rising global demand. But the industry is also getting some mixed signals, as it absorbs news from the summer of a production slowdown and layoffs from boutique distilleries Springbank and Glengyle.

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~ by whisky1 on August 24, 2008.

One Response to “Diageo Considers Price Hikes to Offset Sharp Rise in Commodities Costs”

  1. […] Market non-reaction, shares were up 0.4 percent to 983-1/2 by late afternoon. If history is a guide, Diageo will try to pass through some costs to customers with higher prices. […]

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