- Debra Crew appointed interim CEO ‘with immediate effect’
- Menezes’ recovery suffers setback
- Former Reynolds American boss Crew becomes Diageo’s first female CEO
Shares in Diageo (DGE) softened 0.1% to £33.70 on news the spirits giant has appointed Debra Crew as interim CEO ‘with immediate effect’ as existing boss Sir Ivan Menezes receives treatment in hospital.
Crew was already due to step up from her role as chief operating officer on a permanent basis next month, with Menezes retiring after 10 successful years steering the Johnnie Walker whisky-to-Smirnoff vodka maker.
MENEZES’ RECOVERY SUFFERS SETBACK
However, in a short statement, the FTSE 100 drinks group said Menezes is receiving treatment in hospital for ‘medical conditions including a stomach ulcer’.
Over the weekend, Diageo learned that Menezes’ recovery had suffered ‘a significant setback due to complications, which followed emergency surgery on the ulcer’.
Diageo added: ‘Out of respect for Ivan and his family’s privacy, we will not be commenting further at this time.’
WHO IS DEBRA CREW?
Crew becomes one of the FTSE 100’s few female CEOs.
Before her appointment as chief operating officer in October of last year, Crew headed up Diageo’s business in its largest market, North America, and was formerly the CEO of cigarettes group Reynolds American.
There, she delivered ‘strong performance growth’ before British American Tobacco (BATS) acquired the Camel-to-Newport maker for $49 billion in 2017.
Diageo owns some of the world’s most iconic alcoholic beverage brands including Johnnie Walker, Smirnoff and Guinness, an unrivalled portfolio that confers pricing power on the business, crucial during inflationary periods, and underpin Diageo’s consistent profitability.
Nevertheless, the shares are down 6.8% year-to-date amid concerns over a growth slowdown in the important US market, where the company generates half of its earnings.
The drinks giant has also been accused of racial discrimination by rapper Sean Combs.
Known as Diddy, Combs claims Diageo broke the terms of their business partnership and neglected the tequila brand they bought together because he is black, allegations Diageo strenuously denies.
THE EXPERT’S VIEW
AJ Bell investment director Russ Mould said: ‘It’s not the succession Diageo was envisaging but Debra Crew starting a month early is unlikely to create the sort of drama seen at Waystar RoyCo for the world’s biggest spirits maker.
‘Stepping up to the plate in these circumstances to replace stricken long-time boss Ivan Menezes may even earn Crew some goodwill and allow her to get an early read on the business and how she plans to grow it.’
Mould continued: ‘In his near decade in charge, Menezes delivered an annualised total return of nearly 8%, a decent showing given this period encompasses the pandemic which massively disrupted Diageo’s on-trade sales.
‘Spirits is a decent business to be in as they are cheap to make and typically have strong brand loyalty.
‘However, Crew needs to demonstrate she can make a good return from some of the pricey acquisitions of premium spirits by Diageo in recent years.
‘The company has focused on profitability, cash flow and growth in emerging markets under Menezes, and tapping into the growing middle class in the developing world makes sense. However, recent times have shown this exposes Diageo to volatility too.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (James Crux) and the editor of the article (Steven Frazer) own shares in AJ Bell.
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