The word Diageo (LSE:DGE) comes from the Latin for day (diēs) and the Greek for world (geo). Recent years have felt like one long dark night for shareholders.
The FTSE 100 stock is down 65% since January 2022!
Recent weeks have brought no solace, with the share falling 14.5% in the past month. This would have turned a five-grand investment made in early March into roughly £4,275.
The great debate
The great Diageo debate essentially boils down to whether the downturn in the global spirits market is structural or cyclical. In other words, whether it’s permanent (like falling cigarette volumes) or just temporary.
Perhaps unsurprisingly, Diageo’s new CEO Dave Lewis leans towards the cyclical view. Would he have taken the job if he thought the industry was suffering irreversible long-term decline? I suspect not.
There’s some evidence to support this view. Categories like Guinness and ready-to-drink (RTD) cocktails are still growing. Meanwhile, Diageo’s Scotch portfolio returned to volume growth in the last six months of 2025 (H1), led by Johnnie Walker, Buchanan’s, and Black & White.
Similarly, its spirits RTD portfolio grew net sales by 17%, with Smirnoff RTDs increasing around 13% to gain share in four out of five regions, including North America. The firm says RTDs address “consumer demand for both convenience at an accessible price point, and moderation“.
However, total group organic volume still fell by 0.9% in H1. And organic net sales dropped 2.8%, as did organic operating profit before exceptional items.
Last year, global beverage alcohol volume was thought to have declined by 0.7%, according to industry data provider IWSR. For reference, global cigarette industry volume is expected to fall around 2% in 2026.
So the decline is not as steep as with cigarettes, at least not yet.
What about GLP-1s?
Muddying the waters is the rise of GLP-1 weight-loss drugs like Mounjaro, which appear to reduce appetite for alcohol in some users.
In the US, roughly one in eight adults will be taking these medications by 2030, according to JP Morgan. And patents are already starting to expire around the world, meaning GLP-1 costs will plummet in future.
Addressing this topic, the chief executive says he’s reading every piece of research available to better understand the risk. But he cited one large recent survey of GLP-1 users, which said the impact on spirits specifically was “really rather small“.
Is Diageo worth considering?
So, we don’t yet know whether alcohol is in structural decline or how much impact GLP-1s might have. But weak consumer spending is undoubtedly a central problem. And the inflationary Iran war isn’t helping things here near term.
Despite this, I still think the stock’s worth considering at 1,385p. At this price, the forward price-to-earnings ratio is just 11.4, alongside a 3.5% dividend yield.
With consumer goods expert Lewis in charge, I expect Diageo to become a far more focused company. Just last week, it offloaded its Indian Premier League cricket franchise for approximately £1.3bn (a hefty valuation multiple).
Yesterday (31 March), Deutsche Bank changed its rating to Buy. It believes Diageo can “invest in price, marketing, route to market, and innovation, leaving [it] better able to deliver the sort of predictable profitable growth that investors value highly“.
The average broker price target is now 44% higher at 1,995p.
