By Richa Naidu
LONDON (Reuters) - Diageo (LON:DGE)'s cost inflation is starting to moderate after a "double-digits" surge in its last fiscal year, the maker of Guinness stout and Johnnie Walker whisky told Reuters on Tuesday, the latest consumer goods group to flag an easing in cost pressures.
Manufacturers of everything from soap to spirits have struggled since the COVID-19 pandemic to keep expenses down, with their problems exacerbated by Russia's invasion of Ukraine.
This time last year, Diageo said cost inflation had risen 7-8% since the start of the war. But that went up to "squarely in the double-digits" in the fiscal year ended June 2023, finance chief Lavanya Chandrashekar said in an interview.
"For us, the biggest exposure from a cost perspective comes from energy," she said, noting the impact energy prices have had on fertilisers, cereals, glass and transportation costs.
A pint of Guinness, sometimes served in a glass bottle, is created using five key ingredients – roasted barley, malted barley, hops, yeast and water. Diageo also makes Johnnie Walker whiskey, which "all starts with the cereal: barely or grain", according to the brand's website.
The company's Baileys Irish Cream uses dairy, sugar and cocoa extracts.
"Sugar prices have gone up quite a bit. I mean, cereals have been much higher than historic levels. So we're really seeing inflation pretty much across the board," Chandrashekar said.
Turning to prospects for broader inflation, she said: "We are seeing that moderate as we're getting into the coming fiscal (year). So at least it's not going up."
That echoes recent comments from rivals.
Unilever (LON:ULVR)'s chief financial officer Graeme Pitkethly said in July: "We're past peak inflation now, but there will continue to be a high level of pricing growth within our reported numbers."
While energy and some commodities prices have been falling for some time, there can be a delay for that to be felt by companies, depending on the terms of their purchase contracts and their hedging strategies.