Diageo plc is reviewing strategic options for its operations in China, including the possibility of divesting certain assets, as the global spirits group looks to streamline its portfolio, sources familiar with the matter said.
The owner of brands such as Guinness and Johnnie Walker is working with advisers Goldman Sachs Group Inc and UBS Group AG to assess its China exposure, which includes a more than 63% stake in Shanghai-listed Sichuan Swellfun Co. The advisers have begun gauging interest from potential domestic buyers and private equity firms, the sources said, declining to be identified as the discussions are private.
If pursued, Diageo would join a growing list of multinational companies reassessing their footprint in China amid rising competition from increasingly sophisticated local players with strong ties to domestic consumers.
Shares of Sichuan Swellfun have fallen about 14% over the past year, valuing the Chengdu-based liquor producer at around US$2.7 billion. Diageo shares, which are down roughly 29% over the same period, rose as much as 2.4% in early London trading on Tuesday.
The review is still at an early stage and no final decision has been made, the sources stressed, adding there is no certainty any transaction will proceed.
Diageo, Goldman Sachs and UBS declined to comment. A spokesperson for Sichuan Swellfun said the company had not been informed of any plans involving a stake sale.
The potential move comes as several Western companies reconsider their China strategies. In recent months, Starbucks Corp agreed to sell a majority stake in its China business to Boyu Capital, while Restaurant Brands International Inc took a similar step with Burger King’s local operations. Other multinational groups, including GE Healthcare Technologies Inc, have also explored options for their China units, according to sources.
Diageo has been reshaping its global portfolio as weaker alcohol consumption weighs on demand for premium spirits. In December, the group agreed to sell a majority stake in East African Breweries to Japan’s Asahi Group Holdings Ltd for US$2.3 billion, though the deal is facing legal challenges from a local distributor.
The strategic review also coincides with a leadership change at Diageo. Dave Lewis, former chief executive of Tesco plc, took over as CEO this month, replacing Debra Crew, whose tenure was marked by a profit warning and a sharp share price decline amid softer demand and trade tensions.
In November, Diageo cut its full-year sales and profit outlook, citing weaker consumption in the US and China, where anti-extravagance measures have curbed spending. Sichuan Swellfun, best known for its baijiu products, reported a sharp drop in its latest quarterly results, with revenue falling nearly 59% and net profit down more than 75%.
