Diageo has slashed its dividend and cut its annual sales and profit forecast for the second time in four months, as the maker of Guinness warned of capacity constraints affecting drinkers of “the black stuff” in London pubs.
The world’s largest spirits maker – which owns brands including Smirnoff vodka, Johnnie Walker whisky and Don Julio tequila – reported weak demand in the US and China in the first results released under the new chief executive, Dave Lewis.
The former Tesco chief executive, who earned the nickname “Drastic Dave” as a result of his cost-cutting during almost three decades at the conglomerate Unilever, took the reins at Diageo in January and wasted no time in cutting the company’s shareholder dividend in his attempt to turn around the drinks maker.
Describing his first seven weeks in the role as “pretty intense”, Lewis said in a results webcast it had not been a simple choice to reduce the dividend, halving it to 20 cents a share, down from 40.5 cents a year ago.
“This is not an easy decision to make, but we believe it is the right one. The North American market is challenged. Our portfolio needs some time and investment to make it more competitive. At the same time, we need to invest in our business, specifically in its capacity and capability,” Lewis said.
Lewis has joined London-based Diageo at a time when it is struggling with the impact of Donald Trump’s tariffs, squeezed household finances and consumer shifts, amid the rise in use of GLP-1 weight loss jabs and lifestyle changes as many younger people choose to drink little or no alcohol.
His appointment, after a four-month recruitment drive by the company, followed the abrupt resignation last July of Debra Crew, during whose tenure Diageo struggled with lacklustre performance and investor disquiet.
Diageo’s shares were boosted after the announcement of Lewis’s appointment last November but slid by 6% during early trading on Wednesday, the biggest faller on the FTSE 100.
It came as the company said it expected organic sales to fall between 2% and 3% in 2026, while it forecast its organic operating profit to remain flat.
Lewis said consumption of Diageo’s spirits remained fairly stable despite the use of GLP-1 drugs such as Mounjaro and Wegovy but added that consumers were increasingly choosing to have fewer drinks each time they indulged.
“It’s the serves per occasion where we see the change,” Lewis said. “What you see is a very significant squeeze on disposable income.”
The company intends to respond to squeezed consumer finances by offering smaller packs, Lewis said.
Praising Guinness as a “phenomenal asset”, which Lewis said was the fastest-growing beer brand in North America, he admitted it continued to face challenges.
“If you’ve tried to buy a pint in London you also know that we have some capacity constraints, too. This capacity and geographical constraint is an issue that we need to address, and quickly.”
