This summer could be make or break for Diageo (LSE: DGE) shares. On 11 June, the FIFA World Cup kicks off when Mexico host South Africa in Mexico City. And eyes will be peeled to see whether the event can turn things around for the FTSE 100 drinks giant. Why? Because Diageo is the “Official Spirits Supporter in the Americas” in an effort to turn around the fortunes of the company in the region.
Let’s not forget we have a share price that is still 53% off a previous high. Could the next few days be a cheap buying opportunity? Should I buy Diageo shares before the World Cup begins?
Crucial times
The reason the next few months could be crucial for Diageo begins with the recent decline. The shares have been falling for a variety of reasons, including changes in consumption habits (like Gen Z drinking less) and a switch to lower-priced alcohols (because of the cost-of-living crisis).
Nowhere were these problems more pronounced than in the US. America is the company’s largest market but has seen sales volume of many of its products falling at an alarming rate. Tequila is the spirit most affected, with Casamigos and Don Julio both taking a large share of the worst of it.
That the World Cup is being held in the US (as well as Canada and Mexico) could prove to be very timely indeed. The new CEO Dave Lewis was only installed a few months ago and will be hoping the world’s second-largest sporting event could put the afterburners on the share price.
What is going to happen?
So what’s the plan? Lots of advertising, basically. With so many eyes on the premier footballing event, Diageo aims to showcase its brands like Don Julio, Buchanan’s, Casamigos, Johnnie Walker, and Smirnoff. One of the more interesting sounding ploys is a Don Julio 1942 bottle of tequila that is golden and shaped like the World Cup trophy!
Adjustments to the pricing of various products is being tried out, too. The ‘premiumisation’ model of going for the upper end of the market has backfired to a degree in the States. Therefore the company aims to find price points more suitable to current economic conditions.
One World Cup is hardly likely to turn around a £35bn company all by itself. And I don’t think the news is compelling enough to get me to add to my position. But it could be a welcome fillip for a stock that has already begun the turnaround.
Diageo shares are up 17% since April. Only time will tell if the company has truly turned the corner. Either way, I think the stock is worth considering.
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John Fieldsend owns shares in Diageo.
