Diageo has reported subdued sales growth for the opening quarter of its financial year, as the drinks giant faced "competitive pressure" in its key markets, particularly North America.
The FTSE 100 company, whose portfolio includes Guinness, Johnnie Walker and Tanqueray, posted net sales up 1.2 per cent year-on-year at $4.9bn. Organic growth, which excludes currency fluctuations and the disposal of East African Breweries to Asahi, stood at 0.6 per cent higher.
Sales volumes were also marginally lower, declining 0.1 per cent for the July to September period.
North America Drags on Performance
This was driven by a decline in North America, which accounts for 36 per cent of the group's operations. US sales dropped 3.7 per cent and volume fell by the same amount.
"In north America, we continue to focus on making our offer more competitive, and whilst this remains our biggest challenge, clear actions are underway," Diageo boss Sir Dave Lewis said, as reported by City AM.
Sales of the group's premium brands Don Julio and Casamigos plunged double digits in North America, while tequila broadly was down double-digit in Mexico. This was partially offset by double-digit growth in beer in the region and ready-to-drink canned cocktails.
Market Reaction and EMEA Growth
Chris Beauchamp, chief market analyst at IG, said: "Turnarounds are tricky things to spot in real time, but Diageo appears to be in the midst of one. The share price seems to have effectively bottomed out, while the fundamentals are picking up too."
"Admittedly the north American business isn't helping, but with everywhere else now contributing to performance it seems that Diageo has recaptured market confidence."
In Europe, the Middle East and Africa (EMEA), which accounts for 26 per cent of the group's business, organic sales climbed 2.4 per cent, buoyed by a 4.4 per cent increase in volumes.
Diageo shifted 4.4 per cent more bottles across Europe, yet earned two per cent less per bottle owing to deliberate price reductions and promotional activity.
Turnaround Strategy Underway
Beer sales recorded low-single-digit growth in EMEA, despite Guinness surging double-digits across Africa and Central Europe. Diageo noted this was partly offset by a low-single-digit decline in Britain and Ireland "due to unusually hotter weather and competitive pressure".
Lewis assumed the helm at Diageo at the start of 2026 and swiftly introduced a turnaround strategy, warning shareholders there was "hard work ahead" to drive sales growth.
The drinks giant cut approximately 2,000 roles before the plan was formally launched, with total headcount dropping six per cent to 27,938, according to its annual report.
The group posted a three per cent decline in sales to $19.6bn for the year ending June, with profits plummeting by more than a fifth to just under $2bn. However, Lewis — who earned the moniker 'Drastic Dave' for his renowned turnaround at Tesco — pledged to deliver up to $850m in cost savings.
