Diageo slashes dividend and vows to address Guinness capacity constraints in London | Diageo
Diageo cut its dividend and slashed its annual sales and profit forecast for the second time in four months after the Guinness maker warned of capacity restrictions affecting drinkers of the “black stuff” in London pubs.
The world’s largest alcoholic beverages producer, which owns brands such as Smirnoff vodka, Johnnie Walker whiskey and Don Julio tequila, reported weak demand in the US and China in the first results announced under new chief executive Dave Lewis.
The former Tesco chief executive, who earned the nickname “Drastic Dave” after almost three decades of cost-cutting at the Unilever conglomerate, took the reins of Diageo in January and wasted no time in cutting the company’s shareholder dividend in a bid to turn the drinks maker around.
Describing his first seven weeks in office as “pretty busy,” Lewis said in a results webcast that halving the dividend to 20 cents per share from 40.5 cents a year ago was not a simple choice.
“This is not an easy decision to make, but we believe it is the right one. The North American market is facing challenges. Our portfolio needs some time and investment to become more competitive. We also need to invest in our business, especially its capacity and capability,” Lewis said.
Lewis joins London-based Diageo at a time when it is struggling with the impact of Donald Trump’s tariffs, tight household finances and consumer changes amid rising use of GLP-1 weight loss vaccines and lifestyle changes as many young people choose to drink little or no alcohol.
The company’s appointment, following a four-month recruitment campaign, follows the sudden resignation last July of Debra Crew, whose tenure Diageo struggled with poor performance and investor unrest.
Diageo’s shares rose after Lewis’ appointment was announced last November, but fell 6% in early trading on Wednesday, the biggest fall on the FTSE 100.
This comes as the company expects organic sales to fall between 2% and 3% in 2026, while organic operating profits remain flat.
Lewis added that Diageo spirits consumption has remained fairly stable despite the use of GLP-1 drugs such as Mounjaro and Wegovy, but consumers are choosing to drink less and less each time they drink.
“What we see changing is the number of services per incident,” Lewis said. “What you’re seeing is a very significant contraction in disposable income.”
Lewis said the company plans to respond to tight consumer finances by offering smaller packages.
Praising Guinness, which Lewis said is the fastest-growing beer brand in North America, as “an extraordinary asset,” Lewis admitted that the company continues to face challenges.
“If you’ve ever tried to buy a beer in London, you know we have some capacity constraints. This capacity and geographic constraint is something we need to address quickly.”
