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The phrase Diageo (LSE:DGE) comes from the Latin for day (diēs) and the Greek for world (geo). Latest years have felt like one lengthy darkish evening for shareholders.
The FTSE 100 inventory is down 65% since January 2022!
Latest weeks have introduced no solace, with the share falling 14.5% prior to now month. This may have turned a five-grand funding made in early March into roughly £4,275.
The good debate
The good Diageo debate basically boils down as to whether the downturn within the world spirits market is structural or cyclical. In different phrases, whether or not it’s everlasting (like falling cigarette volumes) or simply short-term.
Maybe unsurprisingly, Diageo’s new CEO Dave Lewis leans in direction of the cyclical view. Would he have taken the job if he thought the trade was struggling irreversible long-term decline? I believe not.
There’s some proof to help this view. Classes like Guinness and ready-to-drink (RTD) cocktails are nonetheless rising. In the meantime, Diageo’s Scotch portfolio returned to quantity development within the final six months of 2025 (H1), led by Johnnie Walker, Buchanan’s, and Black & White.
Equally, its spirits RTD portfolio grew internet gross sales by 17%, with Smirnoff RTDs growing round 13% to realize share in 4 out of 5 areas, together with North America. The agency says RTDs deal with “shopper demand for each comfort at an accessible worth level, and moderation“.
Nevertheless, complete group natural quantity nonetheless fell by 0.9% in H1. And natural internet gross sales dropped 2.8%, as did natural working revenue earlier than distinctive objects.
Final 12 months, world beverage alcohol quantity was thought to have declined by 0.7%, in accordance with trade information supplier IWSR. For reference, world cigarette trade quantity is predicted to fall round 2% in 2026.
So the decline will not be as steep as with cigarettes, a minimum of not but.
What about GLP-1s?
Muddying the waters is the rise of GLP-1 weight-loss medicine like Mounjaro, which seem to cut back urge for food for alcohol in some customers.
Within the US, roughly one in eight adults will likely be taking these medicines by 2030, in accordance with JP Morgan. And patents are already beginning to expire world wide, which means GLP-1 prices will plummet in future.
Addressing this subject, the chief government says he’s studying every bit of analysis out there to raised perceive the chance. However he cited one massive latest survey of GLP-1 customers, which mentioned the affect on spirits particularly was “actually relatively small“.
Is Diageo price contemplating?
So, we don’t but know whether or not alcohol is in structural decline or how a lot affect GLP-1s may need. However weak shopper spending is undoubtedly a central drawback. And the inflationary Iran warfare isn’t serving to issues right here close to time period.
Regardless of this, I nonetheless suppose the inventory’s price contemplating at 1,385p. At this worth, the ahead price-to-earnings ratio is simply 11.4, alongside a 3.5% dividend yield.
With shopper items knowledgeable Lewis in cost, I count on Diageo to turn into a much more centered firm. Simply final week, it offloaded its Indian Premier League cricket franchise for roughly £1.3bn (a hefty valuation a number of).
Yesterday (31 March), Deutsche Financial institution modified its score to Purchase. It believes Diageo can “put money into worth, advertising and marketing, path to market, and innovation, leaving [it] higher in a position to ship the form of predictable worthwhile development that buyers worth extremely“.
The common dealer worth goal is now 44% greater at 1,995p.
