There are various concerns swirling around Diageo (LSE: DGE) shares nowadays. These range from cash-strapped consumers to US tariffs and even the impact of weight-loss drugs like Wegovy.
The share price is down another 14.4% in 2025, bringing the five-year decline to around 30%. However, there’s another mounting concern I have as a Diageo shareholder. That is the habits of those born between the late 1990s and early 2010s in the West — otherwise known as Gen Z.
The trends seem clear
Just about every study on alcohol consumption among young adults points to the same conclusion: they’re drinking far less than previous generations. But why? There seems to be a cocktail of factors.
One major reason is health consciousness. As public health campaigns highlight the risks of alcohol — addiction, heart disease, cancer, etc — many young people are rethinking their drinking habits.
It might just be a matter of time before we see cigarette-style warning labels on alcohol, complete with those grotesque images of diseased organs. That could certainly dampen the mood over dinner as someone reaches for another glass of red!
Next is cost. As we know, just about everything is expensive nowadays in the West, including nights out and drinks. For many Gen Z’ers, it just makes zero sense to spend the equivalent of a working hour’s wage on a fancy cocktail or couple of pints of Guinness.
Finally, there’s a more fundamental generational shift. Throughout history, alcohol has been used as a social lubricant. Yet Gen Z’s interests are largely solo-based, including video games, social media, YouTube, or doing non-drinking activities like gym and yoga. Fitness trackers are hot — another new phenomenon.
Going to nightclubs and pubs — what’s left of them — just isn’t as common for this cohort as it was for Boomers, Gen X or even Millennials. A World Finance report reveals that Gen Z’ers drink on average 20% less than Millennials, who also consume less alcohol than older generations.
Zebra striping
Of course, Diageo knows all this. Otherwise, it wouldn’t be scrambling to build out its zero-alcohol options, including Guinness 0.0.
In fact, it has been using artificial intelligence (AI) to analyse trends shaping consumer behaviour. This involved listening in to 60m online conversations from across the world.
According to its 2025 Distilled report, Diageo found that consumers are participating in a trend known as “zebra striping”. That is, alternating between alcoholic and non-alcoholic drinks during social events.
While that just sounds like a buzzy term for moderation, I think Diageo is implying it might still benefit by offering them both alcohol and non-alcohol options. Or at least that’s what it hopes.
Cheap-looking valuation
If all these things are true, it would suggest that global alcohol sales are facing long-term structural decline, similar to oil and cigarettes. In other words, the sales issues the FTSE 100 firm is facing might not be cyclical. That’s the possible giant red flag here.
Now, this doesn’t mean the stock is untouchable. At 2,171p, it’s trading at 15.6 times forecast earnings for FY26 (starting July). That’s historically cheap for Diageo, which may suggest many of these issues are already priced in. But they’re concerning nonetheless.
My plan is to digest all this before deciding what to do with my Diageo shares.
