Earnings call transcript: Diageo’s Q1 2025 sees flat sales amid market shifts

Diageo’s Q1 2025 earnings call revealed a complex landscape for the global beverage giant, marked by flat organic net sales and a 2.2% decline in reported net sales to $4.9 billion year-over-year. Despite these challenges, the company maintained its stronghold in emerging markets and showcased notable growth in its Guinness and RTD segments. The stock currently trades at $1,173.02, near the middle of its 52-week range ($982.44-$1,236.84), reflecting cautious investor sentiment amidst market uncertainties. According to InvestingPro data, Diageo has posted a modest YTD price return of 1.45%.

Key Takeaways

• Diageo’s Q1 2025 reported net sales fell by 2.2% year-over-year.
• Organic net sales remained flat, with varied performance across regions.
• Guinness and RTD products showed strong growth, particularly in the US and Brazil.
• The US spirits market is softening, impacting overall sales.
• Diageo is targeting $3 billion in free cash flow by fiscal 2026.

Company Performance

Diageo’s performance in Q1 2025 highlighted the challenges of navigating a shifting market landscape. While the company achieved a 2.9% organic volume growth, the negative price mix of 2.8% weighed on overall sales. Regional performances varied, with Europe and Latin America showing positive growth, while North America and Asia-Pacific experienced declines. The company remains a leader in key brands like Johnnie Walker and Guinness, but faces increased competition in the tequila segment.

Financial Highlights

• Reported Net Sales: $4.9 billion, down 2.2% year-over-year
• Organic Net Sales: Flat
• Organic Volume Growth: 2.9%
• Price Mix: Negative 2.8%

Outlook & Guidance

Looking ahead, Diageo has revised its fiscal 2026 guidance, expecting organic net sales to be flat to slightly down, with organic operating profit growth in the low to mid-single digits. The company anticipates a stronger performance in the second half of the fiscal year and is committed to achieving $3 billion in free cash flow. Diageo aims to return to a leverage ratio of 2.5-3x by fiscal 2028. Despite recent market challenges, InvestingPro data shows Diageo has delivered a solid 6-month price return of 9.2%, outperforming its 1-year return of -0.58%, suggesting potential recovery momentum.

Executive Commentary

Interim CEO Nick Jhangiani emphasized the company’s strategic focus, stating, "We are acting with pace, sharpening our strategy to drive broader growth, better results, and ultimately improved shareholder returns." Interim CFO Deirdre Mahlan noted shifts in consumer behavior, saying, "We are seeing shifts in the way and where consumers are consuming our products."

Risks and Challenges

• The US spirits market is experiencing significant softening, impacting sales.
• The tequila category is declining, posing a challenge for Diageo’s portfolio.
• Policy changes in China are affecting the white spirits market.
• Consumers are trading down in price points and formats.
• Competitive pressures are increasing in key segments like tequila.

Q&A

During the earnings call, analysts focused on the challenges in the US market and the dynamics within the tequila category. Diageo’s leadership provided insights into their growth strategies for the Guinness brand and clarified interim leadership roles and strategic direction.

Full transcript - Diageo PLC (DGE) Q1 2026:

Operator/Moderator: Good morning and welcome to Diageo’s Q1 Trading Call. To ask a question today, please press star followed by one on your telephone keypad. To withdraw your question, hit star followed by two. We’re now ready to start the call. Sonya, please go ahead.

Sonya Ghobrial, Head of Investor Relations, Diageo: Thank you. Good morning, everyone, and thank you for joining us for Diageo’s Q1 2026 trading statement. I’m Sonya Ghobrial, Head of Investor Relations, and today I’m joined by Nick Jhangiani, Interim CEO, and Deirdre Mahlan, Interim CFO. Just to remind listeners on the call that in the discussions today, the company may make certain forward-looking statements, including those that refer to our estimates, plans, and expectations. Please refer to this morning’s announcement for more details, including factors that could lead actual results to differ materially from those expressed in or implied by any such forward-looking statements. Hopefully, you’ve all seen our press release released this morning. I’ll hand over to Nick and Deirdre for some brief comments on the quarter before opening the line to those who would like a question. For those who would like to ask something, the dial-in details are in today’s release.

As a reminder, if we can stick to one question each in the Q&A session, that would be appreciated, and hopefully we can get through more questions this way. With that, over to Nick.

Nick Jhangiani, Interim CEO, Diageo: Thanks, Sonya, and good morning, everyone. Thank you all for joining Deirdre and I today. Let me start with a quick overview of our results. In the quarter, net sales were flat on an organic basis. Strong organic net sales growth in Europe, LAC, and Africa was offset by weakness in Chinese white spirits, impacting Asia-Pacific results, and softer performance in North America as U.S. spirits showed a further decline, reflecting a weaker consumer, worse than we had planned for. While we made progress in Q1, we are clearly not satisfied with the current performance and are stepping up our actions with urgency to drive growth while staying focused on what we can manage and control.

We are well advanced in sharpening our strategy and are implementing a number of initiatives, not just to navigate the near-term challenging backdrop, but also to better position Diageo for the future by driving growth across the broader portfolio, ensuring that we meet consumer occasions of the future. I am pleased with how the work on advancing stronger commercial execution is progressing, with encouraging results from this already coming through, especially in Europe and in NAM in conjunction with our distributor partners. Importantly, our Accelerate program is progressing well at pace, and we will both share some examples of the work and early wins on this shortly. As you will have seen in today’s release, we have updated our fiscal guidance, and I will come back to that later. Let me now hand over to Deirdre for some more details on our performance.

Sonya Ghobrial, Head of Investor Relations, Diageo: Thanks, Nick. It’s a pleasure to be back at Diageo and speaking to all of you today. At a group level, organic net sales in Q1 were flat, reflecting weakness in Chinese white spirits, which adversely impacted group sales by about 2.5%. Positive organic volume growth of 2.9% was offset by negative 2.8% price mix, driven largely by negative market mix, given the impact of Chinese white spirits. Excluding this impact, price mix would have been relatively flat, demonstrating our continued focus to do the right things for our brands. Reported net sales of $4.9 billion were down 2.2% versus last year and were negatively impacted mainly by the Guinness Nigeria disposal and the Shiraz North America transaction. In the quarter, the impact of foreign exchange was negligible.

Looking at net sales across the regions, we saw solid organic net sales growth in Europe, LAC, and Africa, offset by North America and Asia-Pacific. In North America, organic net sales declined 2.7%, with U.S. spirits down 4.1% and Diageo Beer Company up 9.2%. As a reminder, we said with fiscal 2025 results that we had planned for a cautious U.S. environment. However, the quarter was weaker than we had planned as the economic environment continued to weigh on consumer sentiment. Additionally, we saw increased competitive pressure, particularly in tequila. The weaker overall results in tequila reflected a number of factors, lacking tough comparatives from restocking and size extensions, consumers trading down. General category weakness, as well as increased promotional intensity. Scotch, in our ready-to-drink and ready-to-serve portfolio, delivered strong growth.

In Europe, we saw good organic net sales growth of 3.5%, driven by sustained momentum in Guinness Draft and Guinness 00, as well as strong net sales growth in spirits led by Turkey and Middle East North Africa. Scotch saw solid growth overall, driven by Johnnie Walker. We restructured some markets in Europe as part of Accelerate to be closer to the consumer and customer and drive stronger in-market commercial focus. We are starting to see some encouraging early results from these changes. APAC organic net sales decline of 7.5% was driven by Chinese white spirits in Greater China, with reduced consumption occasions across the Baijiu category, primarily as a result of market policy. The weakness in Chinese white spirits adversely impacted regional net sales by approximately 13%. Around 2.5% at the group level.

Double-digit growth in India and good performance in other markets only partly offset this, with Scotch driven by Johnnie Walker performing well across the region. In LAC, organic net sales growth was 10.9%, led by double-digit growth in Brazil. The consumer environment continued to stabilize in Mexico. Scotch growth was strong, driven by Johnnie Walker in Brazil. There was also very strong growth in RTDs, led by Smirnoff Ice, also in Brazil. In Africa, where we reported organic sales growth of 8.9%, we saw continued broad growth across our two major markets of East Africa and Southwest and Central Africa. Price mix declined due to market mix. As we said in today’s release, we’re making good progress on Accelerate, our program to strengthen Diageo’s foundations for long-term sustainable growth, launched in May this year.

Momentum to date reinforces our confidence in delivering our $3 billion free cash flow guidance in fiscal 2026 and onwards. Specifically, work undertaken on cost efficiency, process simplification, and stronger analytics increases our confidence that we can deliver productivity and cash goals. Rigorous application and focus on established tools and capabilities are facilitating greater discipline in where we prioritize allocation of A&P to drive future growth. For example, in GB, one of our most profitable markets, we have halved our A&P development spend and reduced the number of agencies we use by 30%. We’re also making strides in optimizing trade spend with learnings from early markets, including GB, but also in Australia. Learnings from these efforts are being shared across the business. We will share more on progress on Accelerate on our half-year results in February. Now I’ll hand back to Nick.

Nick Jhangiani, Interim CEO, Diageo: Thanks, Deirdre, and I can honestly say that it’s great to have you back in the business, partnering with me and the rest of the exec. Let’s go back to updating on a slide we shared earlier this year. We’re advancing on our work to sharpen our strategy and drive growth. As you can see, we’re continuing to work on improving operating leverage, and the work focused on strengthening commercial excellence is well underway in a structured and sustainable manner. Our work evaluating and building capabilities is also well underway, with an extensive review of our operating model well advanced. We have established and implemented a clearer framework for decision-making across the center, market, and region, which will bring with it speed and agility.

We’re continuing to work on end-to-end process planning, including defining future processes and ultimate process owners to drive clear accountabilities across the business, as well as our global business operations team. Turning now to fiscal guidance, we have updated organic sales and profit guidance for the expected impact from Chinese white spirits, as well as to reflect the weakening in U.S. consumer confidence, which extended beyond what we had expected. As a result, we now see organic net sales growth flat to slightly down for the fiscal year, with the decline in organic net sales greater in the first half. We still expect to drive positive operating leverage, but now expect organic operating profit growth to be in the low to mid-single-digit range for fiscal 2026. Reflecting our fiscal net sales guidance, we expect a stronger second half, with the first half showing a decline.

Let me take you through some of the moving parts. Firstly, adverse market mix will be more pronounced in the first half as a result of the dynamics being seen in Chinese white spirits and NAM, as well as the stronger growth coming through from India, obviously at a lower margin. Secondly, Accelerate savings are skewed to the second half. However, given the current environment, we are moving at speed with our initiative, so that circa 40% of the $625 million commitment of savings that we made from the Accelerate program will now be delivered in fiscal 2026. The timing of delivery is ahead of our prior guidance and reflects the increased pace across the business. We have spoken to prioritize allocation of A&P spend. And being more focused around both short-term and long-term returns.

Given seasonality, due to the key trading period of O&D, these savings will be more pronounced in the second half, as will our changes in trade investment terms and conditions. Our focus on delivering stronger free cash flow remains unchanged. We continue to expect circa $3 billion in free cash flow for the fiscal year, supported by the Accelerate program, but also by actioning the work to date on managing maturing stock more dynamically, our A&P spend, as I just discussed, CapEx, and broader cost discipline. As you can see, we have updated fiscal 2026 expected CapEx to the lower end of the guidance range of $1.2-$1.3 billion. We remain committed to returning to well within our target leverage ratio range of 2.5-3 times, no later than fiscal 2028.

As I have said this before, this will be supported by appropriate and selective disposals over the coming years. You may have seen USL’s release yesterday regarding the strategic review of our investment in RCB, and we’re very pleased with the pace with which this will move. This is a differentiated and valuable asset for many investors, but clearly non-core to our Alcobel business in India. We’re also moving forward with other non-core disposal initiatives and will provide further updates as and when appropriate. We are still excited by the opportunities to accelerate growth in RTDs, Guinness, and Guinness 00, and of course, activation and showcasing our brands in both NAM and LAC during FIFA 2026. Taking everything together, while there was some good progress in the first quarter, there’s much more for us to do, and we need to go faster.

We are acting with pace, sharpening our strategy to drive broader growth, better results, and ultimately improved shareholder returns. We have a fantastic portfolio of iconic category-leading brands, and we can and should do better with a focus, rigor, and sense of urgency on the work well underway at Diageo to do this. With that, let me hand back to the operator open line for questions for both Deirdre and myself. Thank you.

Operator/Moderator: Thank you. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. The first question comes from Simon Hales of Citi. Your line is now open. Please go ahead.

Oh, hi, Nick. Hi, Sonya. Hi, Deirdre, and welcome back. My question is on the US, really. I want to understand a little bit more the moving parts in the quarter and how we should really think about the US as we move into Q2 and in the context of your revised guidance. Specifically, you highlighted that US spirits declined 4.1% in Q1. However, some of that was driven, or some of the underlying performance was driven by some benefits of pull forward on tariffs and some stocking ahead of O&D. How do we think about the unwind of some of those fading benefits in Q2 and beyond? Could you share an underlying depletion rate for Q1 and perhaps what the exit rate was as we’ve headed into October, please?

Nick Jhangiani, Interim CEO, Diageo: Yeah. So, I mean, clearly a lot of moving parts in the US, as you’ve just called out, particularly with some tariff prebuy, as well as obviously the seasonality with O&D. Let me hand over to Deirdre, who can give you some more details on some of the numbers and how you should think about the Q2 and half one in particular.

Deirdre Mahlan, Interim CFO, Diageo: Okay. Hi, Simon. In North America, we did have net sales a bit ahead of depletions, as is typical this time of the year. Our depletion NSV was down about 7%, and net sales, as we said, down about 4%. The difference, there’s some rounding in there. The difference is about two and a half points. That’s not atypical this time of year. As you know, every year there’s always some changes. Last year, we had some restocking of some Johnnie Walker SKUs in the quarter. This year, we did have some pull forward relating to tariffs. There’s also, as we mentioned in the release, some weakening depletions overall as we’re seeing the categories decline, in particular in tequila. The tequila category is declining, and we have a very big position in tequila, and you can see that.

We are getting some depletions, I think, declining ahead of our net sales. We do not really manage this on a quarter-to-quarter basis. When we get to the full year, of course, we are always making sure that, I mean, the full, the half year, okay, after at the end of O&D, we, of course, work to ensure that we have a balance between ships and depletes. Some of this depends on the activity during O&D, the execution during that period, and how big the holiday is. We will have a little bit of unwind of tariffs, although that will not be material in Q2 because some of it already unwound in the first quarter. It came in early in the fiscal year, and then some of that.

Pull forward for tariffs unwound in the quarter, although there’s still a little bit of an overhang. There’ll be a bit of that. I think we’re watching carefully what’s happening with consumer takeoff in the period, which will be the biggest factor.

Got it. Taking all that into account, Deirdre, is it fair to say if the depletion rate continued to be at minus 7% or there or thereabouts, and you had a little bit of unwind, we should be at the moment, depending on what happens with O&D takeoff, be thinking about Q2 US spirit sales being down perhaps high single digit?

Yeah. I mean, it’s really hard to say. I don’t want to forecast what the depletions will be. We are actively working, of course, to have the best execution we have in the quarter, and it is the holiday. The first quarter is frequently not the strongest quarter in spirits, as we all know. Going into the second quarter, I’m not trying to dodge your question. I really just think it’s unclear what it’s going to be. We don’t see anything that would cause a significant change in the current trends. They are weaker, but we’re not seeing a significant change in that. Of course, we’ll come and give you the update at the half.

Nick Jhangiani, Interim CEO, Diageo: Simon, I would just pick up on a point that Deirdre made, because I think it is important to talk about how well we are showing up from a commercial execution perspective. I talked a little bit about that. I think the work that the team continues to do as we look at our route to market evolution, right, and how we need to continue challenging that, because it is never always a fit for purpose in what might be a changing environment. I think we are looking at that as well. Clearly, where we have our business development folks, either on the ground ourselves and/or through our distributor partners, where we have really stepped that up in terms of feet on the street, we can see stronger performance in those states versus some of the control accounts. That in itself is what we are focused on.

How well can we show up and how well do we drive that execution? I think the team’s doing a great job there. To Deirdre’s point, it’s very difficult to predict what the consumer will continue to feel and confident about in terms of what they want to spend. We’re staying close to that.

Completely understand, Nick. Thank you.

Operator/Moderator: Thank you. The next question comes from Sanjeet Aujla of UBS. Your line is now open. Please go ahead.

Hi, good morning, everyone, and welcome back, Deirdre, as well. I want to dig a bit deeper into tequila in the US. You called out increased competitive pressure. Can you just dig a bit deeper into what you’re seeing there and what interventions are you putting in place to try and improve at least your competitive performance there between Don Julio and Casamigos, please? Thanks.

Nick Jhangiani, Interim CEO, Diageo: Great. I’ll kind of give you some overall perspectives, and then Deirdre will give you some numbers in terms of what we’re seeing. I mean, clearly, the tequila category as a whole, remember, we were outperforming the category quite significantly last year, right? Particularly with Don Julio. We knew going into this year, all else being equal, we’re still going to have an issue with the comps in terms of some of the restocking by distributors, as well as some of our size extensions, right? Clearly, consumers are trading down, all right? We’re seeing that in terms of the category. We’ve had some really strong anecdotal, but also some data points that you can see in terms of just shifting out of the category potentially and going into RTDs and/or then using tequila as kind of a chaser.

That really what that means is their rate of purchase is going to be that much lower, right? I think competitive pressure has increased. You’re seeing that much more in terms of both frequency and depth of discounting. Clearly, we’re focused on all of those elements, right? I think this is where. Continuing to work hard on our portfolio, Astral is a great example of what we want to be able to step up as we think about that shift from ultra premium into super premium or even into premium, right? How do we meet the consumer where they are, but still continue to drive affordability both from a cash outlay perspective with smaller sizes, which continue to do well, and again, show up great in terms of our execution?

I don’t know, Deirdre, if you want to add some stuff on some of the numbers that we were seeing.

Deirdre Mahlan, Interim CFO, Diageo: Yeah. I mean, I can give some specifics about that. If you look at what’s happened, I’ll talk about Don Julio specifically since that was the biggest change in the quarter from a consumer takeoff point of view. The share moderation in Don Julio in the quarter is about three quarters, about 75% of it is due to comps. This is what Nick pointed out. The comps show up in two different places. One is in May of 2025, which is when the small sizes were launched. Of course, distribution was building during that period. The peak of that was really around September. We started really lapping those comps in particular going into September, but you could see it actually in the numbers if you looked on it month over month starting in June.

The other thing was the big ramp-up and increase in share in Reposado last year, which we’re lapping. Those two things combined had a significant impact. The other points that I’ll just share is the category itself. If you look at what’s happening to tequila as a category, it was growing, I think, 10% in 2023, 6% in 2024, and now it’s down to about 3% or just under 3%. There is some category weakness. The tequila category, which had transcended most of the core spirits category for the last couple of years, can no longer defy gravity, I think, with respect to what’s happening overall. There is some reduction. Given how strong our position is, you’re seeing overall that come down. The final point that I’ll make is the trade down.

The consumers, of course, as I mentioned, are under some pressure. We are seeing a bit of a shift between the super premium, where our products sit, Don Julio and Casamigos, to premium, okay? We are sitting at a point where we were getting more growth from super premium previously. If you look at the 12 months versus the 3 month, that has moderated. The purchasing of premium has gone up for super premium, which is about $19-$35, which is where Astral is, to Nick’s point, but Don Julio and Casamigos are above that. I think we are seeing the effects of all three of those things. In terms of what is going to happen, I think the lapping part, of course, will start to moderate.

That impact on our performance will moderate, but I think we’re going to continue as long as the consumer is feeling some pressure. I think we’re going to continue to see a bit of consumers moving to small sizes instead of buying the larger sizes and also perhaps buying, I don’t know, the price points. We are now, again, as Nick pointed out, leaning into Astral. We do have offers for when the consumer makes those shifts. It is quite a dynamic category at the moment in terms of consumer behavior. That’s what you’re seeing show up in the numbers. One final point is on Casamigos because we really didn’t talk about that. I think we’ve mentioned in the past that we’ve been working to get our Casamigos pricing in the place that we think is appropriate. We have taken those actions.

It does take some time for the retailers to reflect that on the shelf. In some places, we’re seeing that happen more rapidly than others. Those adjustments are still coming through. Where we are getting those price adjustments on the shelf coming through, we are seeing improved performance. Of course, we’ve got a great launch for Casamigos RTD, which we feel really excited about. I think it is a sign of the strength of the brand overall.

Nick Jhangiani, Interim CEO, Diageo: Yeah.

Deirdre Mahlan, Interim CFO, Diageo: I know that was a lot of information, so I’ll probably sum it back up for you.

Nick Jhangiani, Interim CEO, Diageo: No, no, no. I think that was really helpful, Deirdre, because it really helps understand what’s happening in the category and how much of that is really the lapping, right, which is important. There is a softening of the category. I am excited about what we’re doing with the RTDs and Casamigos to Deirdre’s point, because that really will help continue building the brand halo and bring people back into the spirits. That’s exciting. One last piece, I just wanted to make sure that we’re all talking about in the most constructive way. You’ve probably seen the whole issue around the lawsuits and the credentials of tequila. I think the legal team’s doing a great job, and I won’t get into that in terms of the focus around dismissing those class action suits, which clearly are completely baseless. If you do think about.

The element of what we need to continue managing in a dynamic environment is also how do we make sure our customers, the trade, our consumers all feel really good about the quality of our products and the credentials of our products and the fact that it’s all made from 100% blue agave, right? I think the team in the US is doing a great job with a lot of action that you’ll start seeing around that to ensure that all of those three constituents, some are trade, not customers in particular, but our consumers feel really good about the credentials of our brand. More on that in days, weeks, months to come.

Thank you.

Operator/Moderator: Thank you. The next question comes from Andrea Bustacci of Bank of America. Your line is now open. Please go ahead.

Yes. Good morning, Nick, Deirdre, and Sonya. Also welcome back, also from me, Deirdre. My question is on the EBIT guidance, please. You’re adjusting this guidance, but only slightly. You should still be able to deliver low to mid-single-digit EBIT, despite the negative tariff impact, probably negative country mix, given the Baijiu situation, given the US being soft. You said that you’re accelerating efficiencies. My sort of quick calculation is that with 40% of your efficiencies delivered this year and a 50% drop through of that, that’s worth about 2% to EBIT. I was wondering, efficiencies aside, could you talk a bit about the other moving parts that could support margins? Is input cost a tailwind this year, particularly agave? Some of your peers like Cuervo are seeing material benefits from agave. Or maybe are there other factors also affecting margins?

What is your level of confidence on this new guidance for the full year? Thanks.

Nick Jhangiani, Interim CEO, Diageo: Thanks, Deirdre. I mean, I think, listen, firstly, to be very clear, we have a very good level of confidence because we would not have come out with that if we did not feel good about the actions that we are putting into place. You are right in terms of your calculations from an angle of Accelerate, but remember, we have kind of said circa 40% on that anyway. We will continue to look at that dynamically in terms of that element. Remember what I had talked about when we talked about Accelerate savings, we had been very clear from an angle that we do not expect to be reinvesting a lot of that in year one. You will see that all kind of really drop through as we continue to look at what we need to do in 2027 and beyond on digital, on more feet on the street, commercial execution, etc.

That is good. I would say to you, you are right in terms of the mix of markets, and I call that out in half one. I do think we are seeing some stronger growth across whiskey in particular. You have seen us talk about Johnnie Walker, for instance, and that is helping from a margin perspective. I think we are also looking at broader cost discipline outside of Accelerate in terms of OpEx spend. I think those elements all give us the confidence that we can deliver on that guidance for operating profit, as well as the fact that we continue to be very focused on cash. I will come back to just reiterate our commitment to deliver the $3 billion of free cash flow, right? With everything that we have looked at with EBIT, but also what we have done on maturing liquid.

We had talked about just being more dynamic in terms of how we think about planning and what we’re laying down. CapEx, etc. I think we feel good about both those levels, both on free cash flow and EBIT. I don’t know if you want to add anything, Deirdre.

Deirdre Mahlan, Interim CFO, Diageo: I’ll just add a couple of things. Look, as we’ve said throughout this, the kind of market conditions right now are quite variable and somewhat unpredictable. That has been the theme, I guess, since COVID, right? That has continued in different ways in different places. What we’re focused on is making sure that our brands show up in the best possible way in the markets and controlling what we can control, which is our cost base. We’re wanting to make sure we’re very efficient on driving costs. This is what the Accelerate program is all about. Also, to make sure that our investments, whether it be in trade spend or in marketing, are fit for purpose. That’s a big piece of the work that we’ve been doing. I referenced some of it in my remarks about looking at.

How we can ensure that our development costs in A&P are not too high and that the A&P that we are spending is getting us, and Nick mentioned this, the short and long-term returns. We will talk about that more as we get at the half, as some of those programs continue and we are sharing learnings from the early markets across the other markets so we can come out with some specific examples at the half. What I can say is we are being able to save some cost through our investments as well. That is what is giving us confidence that even with some of the weaker market mix, we are still going to be able to deliver in that range of EBIT.

Okay. Sorry, Agave is not a big factor, not one of the major factors in its efficiencies and all the things you’ve gone through now. Thank you.

Nick Jhangiani, Interim CEO, Diageo: There is a factor of that. I would not say that is a main factor, right? Remember, we just talked about some of the challenges we are seeing in tequila, right? Remember, just to be clear, what some of our competitors might be seeing could be different in terms of how we buy, right? We have talked about that before, right? If we were clearly on spot market only, absolutely, we would be seeing a lot better of that come through. Again, we are managing this category for the long term, right? The combination of what we have with our own plantations, what we have with our contracts, and what we will continue to benefit from in terms of spot pricing, not just for this year, but for the future as well, it will be that balance, right? I think that is the way we look at it.

It’s a factor, but I wouldn’t say it’s the big driving factor in our numbers.

Very clear. Thank you very much.

Operator/Moderator: Thank you. The next question comes from Mitch Collett of Deutsche Bank. Your line is now open. Please go ahead.

Thank you. And good morning, Nick. Hi, Deirdre. Welcome back. I think you said, Nick, that you have been able to reduce A&P in GB. I think you said 50%. So I’d be interested to know when did you manage to make that change? And any thoughts on the impact of that scale of reduction and what that tells you about the opportunity to reduce A&P and to be more efficient with your marketing spend in other geographies going forward? Thank you.

Nick Jhangiani, Interim CEO, Diageo: Yeah. Thanks for the question. I think just to be clear, I do not think we said we were able to reduce that by 50%. In fact, Deirdre made some opening comments where she talked about we have had our development cost, which is circa, let’s say, 15%-20% of the total spend that we would have in A&P in that market. We have reduced the number of agencies we use by 30%. Just to be clear on the numbers. Having said that, I think we are challenging, as both Deirdre and I have said, across all our markets, how are we truly looking at investing behind growth? How are we allocating with a one-Diageo mindset in terms of where that growth is and what are we going after? Very much also looking at those short-term and long-term returns in terms of through-the-line spend.

Because I think for a while, we’ve been focused on. One element of that spend, which is just the media spend, as opposed to through-the-line. And that’s where it shows up then when we also think about how well are we spending our money on commercial A&P and on trade investments, right? And that’s some work that we have done in Australia. And then we replicated that work in GB and will be taking it into the other European markets. And that’s what I talked about in terms of being more second-half weighted in terms of the opportunity that we see there. So hopefully that clarifies that confusion, Mitch.

Yeah. Understood. Thank you.

Yeah. I mean, again, I think it’s very important that we just come back to. The bigger point here. We are a branded consumer goods company. We see the level of spend that we need to have to continue building and protecting brand equity as critically important. So Deirdre and I are very focused with our region presidents and our markets around how are we spending that appropriately and are we getting the best bang for that? I actually truly believe from a dollar spend perspective, we continue to have an opportunity to get much more for less in terms of dollars that we spend. And that’s what we’re focused in on. And remember, we’re also not going to be shy if there is a reason to pause in a certain area. And come back when we see that growth coming back, for instance, right?

So that’s where we’re being very dynamic with that whole level of spend without in any way killing our brand equities. Thanks, Operator.

Operator/Moderator: Thank you. The next question comes from Olivia Nikolai of Goldman Sachs. Your line is now open. Please go ahead.

Hi, good morning, Nick, Deirdre, welcome back. And Sonia, I’ve just got one question, which is a bit of a follow-up, but it’s on the accelerate program. And if you could give us a bit more detail and some concrete example on how it’s going to help H2. And then on A&P specifically, which is related to accelerate. How confident are you that you can. Get some savings while also keeping your share of voice the same compared to your competitors? Thank you.

Nick Jhangiani, Interim CEO, Diageo: Olivia, I’ll give you a couple of comments on that. So I think back to your level, question around how confident are we? We’re extremely confident because that’s what we’ve actually been working on. Probably since the earlier part of this year and have been refining those plans. And hence, we feel with the analytics and the tools and what we’re going after, we feel very good about delivering that. I think to your question around some specific examples, right? We’ve now done some really good detailed work around our trade spend, okay, in some of the larger markets where that spend is there. So I’m going to talk about Australia and GB again, for example. And we know that some of that is not generating, forget about returns for us. It’s actually not even generating returns for our customer.

So is that the best and prioritized use of our cash? Or is there a better way to reallocate some of that spend and drop some of those savings to the bottom line, but still be able to support what we might need from a customer activation perspective? On the A&P, I think using our tools more effectively to look at through-the-line, effectiveness of that dollar spend is what I was just referring to as opposed to just share of voice from a media perspective is what we need to be thinking about. Because it is also how we show up and activate at the point of sale that creates a lot of excitement around our brands. And this is where the work that we’re doing around commercial execution, starting up with the off-trade, but being very focused in a structured way around understanding our outlet universe.

Segmenting out in the universe, making sure our portfolio is right, and then activating there is a great way to build habits and in some ways. Amplify our share of voice through point of sale, right? So those are the things that we’re doing that give us the confidence around that area. The other piece that I talked about was the work that we’ve been doing on operating model and framework. And those might sound very woolly, but it is critically important because those are elements that help us change how we work, right? And the culture and speed and agility with which we move. So clarity of decision-making, where does that sit, right? Brings speed and agility.

That allows us to move to make quick decisions in terms of how we need to allocate resources more ruthlessly back to that one-Diageo mindset and supporting where growth is, as opposed to where we might have been working in the past, where it was very siloed within a region and/or in a market, right? Those are some of the things that will start giving us tangible results, but those sometimes are a little softer because that’s how we change the culture of this organization as well. We feel very good. I would say it’s not just Deirdre and me. I would say the whole exec team is coming together in a very different way in terms of how we’re thinking about how and where we allocate resources jointly together for the best interest of Diageo. That’s kind of some of the color there.

I don’t know if you want to add anything, Deirdre.

Deirdre Mahlan, Interim CFO, Diageo: No. That’s great. Thank you.

Thank you.

Operator/Moderator: Thank you. The next question comes from Sarah Simon of Morgan Stanley. Your line is now open. Please go ahead.

Deirdre Mahlan, Interim CFO, Diageo: Yes, thanks for taking my question and morning, everybody. Just had a question on the margin and the operating leverage point. Can you just confirm in terms of, I think you said, Nick, that you’re going to deliver 40% of the savings in the quarter, sorry, in the year. And I think, if I’m right, the previous guide was basically equally spread. So you’re basically getting more savings earlier. That was part one. Secondly, if U.S. depletions and consumption has got a bit worse, does that not imply that you’re going to work through pre-tariff sold-in stock, i.e., you’re going to have less of a tariff impact across the year than you previously anticipated? Just wanted to understand that. Thanks.

Nick Jhangiani, Interim CEO, Diageo: So hey, Sarah, to your first question, you’re absolutely right. That’s what we’ve said. We’ve accelerated some of that work on the savings. So versus a circa a third. That we would have seen come through. And remember, again, just that point around we had said we would see that in the earlier part of the program drop to the bottom line. That’s now circa 40%. And again, that’s. A rounded number. So that’s where we are. I don’t know if you want to pick up, Deirdre, on the depletions point.

Deirdre Mahlan, Interim CFO, Diageo: Look, I think the North America depletions point, the pre-buy or where we saw the pull forward was in this year. So I think it’s just going to wash out in the year. I don’t think it changes what we have said originally about the tariff impact. I think that was already considered when we gave. The kind of pre-mitigation numbers, which was around 200 million pre-mitigation. But that is all being managed in the business. But the. Pre-buy, which I mentioned, was in the first quarter, some of which is already unwound. The rest will unwind in the second quarter. I don’t think it changes the total amount in this year. It’s just a question of where it lands in the quarters. Okay, thanks.

Operator/Moderator: Thank you. The next question comes from Trevor Sterling of Bernstein. Your line is now open. Please go ahead.

Good morning, Nick and Sonya and Deirdre. Let me re-echo the welcome back. Just return to something you said earlier, Deirdre. You talked about depletions down seven. Have you any estimate of what the sellout is doing underneath that? I presume depletions, you’ve got some element of retailer destocking because they had pre-bought ahead of tariffs as well. But have you any estimates around what the sellout is on that minus seven depletions?

Deirdre Mahlan, Interim CFO, Diageo: You mean the consumer takeoff? Because the depletion number is the sales from the wholesaler to the retailer. That is actually showing that it’s that sale. The consumer data, I mean, you can see what’s happening across Core Spirits. I mean, I think Core Spirits, if you take out ready to drink and ready to serve, is softening slightly. Within that, of course, we have some good performance. I called this out, I think, in the, or Nick did in the presentation. We have some good performance in. Johnnie Walker was good for us in the quarter. Kettle One is performing well. We have some improvement across Rum as well. Overall, I think you’re seeing the weight of our share impact in tequila, where tequila is softer. I spoke quite a bit about that earlier in the Q&A.

But what we are seeing is just some, and this is why we called it out in terms of our thinking about what’s happening in North America. We are seeing the consumer a bit weaker than we expected. Everyone was looking for stabilizing Core Spirits. And I think the Core Spirits continues to be soft to slightly softening with the better performance coming in ready to drink and ready to serve. And I think that, again, is an indication of what Nick talked about earlier about the consumer moving to formats and to types of. And to occasions where the formats are different. And that’s creating some weakness in Core Spirits. We’re not anticipating. An improvement or a degradation, really, from that place.

We’re just watching carefully and, of course, making sure that our brands show up in the right place at the right price with the right kind of presentation in terms of execution. So again, we’ll come back at the half and talk more as we see how the holiday is. We know that’s really important. We all do in this sector. So we’ll come back after that and then talk about how we see the rest of the year after that.

Nick Jhangiani, Interim CEO, Diageo: And I think just stepping back from the shorter-term piece there, I think what’s important is. Clearly we understand the importance of getting more balanced growth across our broader portfolio, right? So. We are really looking at the work through our sharpening of our strategy that says, how do we focus around broader recruitment? I think in some ways, we’ve forgotten that because we were so focused on premiumization. And I don’t think they need to be at odds with each other because you can recruit and be premiumizing at the same time, right? So I think bringing back focus around. Core Spirits growth, even within our premium core range, is critically important. And that’s some of the work that we’re doing as we speak. Clearly, whiskey and tequila will continue to be a big opportunity for us.

I’m thrilled with the early results of some of the work that we’ve been doing through our GBTs and CCTs, etc., on Johnnie Walker and the execution of that because you’re starting to see that in our results come through, right? Tequila clearly is a bit more of a challenge, as Deirdre highlighted, from a Latin perspective, the category weakness, but that’s North America. I think we have a big opportunity when we think about tequila globally and not just Don Julio, but also Astral, right? I think we have to continue thinking about RTDs and RTS in a positive way from an angle of what it can bring in terms of the consumers and the drinkers coming in through RTDs into spirits earlier, right? That’s a positive, right? We shouldn’t shy away from that, but it’s also a great way to think about.

Meeting the consumer from what they’re looking for, whether it be lower ABV. Calorie control and portion control, being clear around how much they’re consuming and what we can offer them, whether it’s around functionality, etc. And there’s an element of how we’re also thinking about what does the consumer want for the future, right? When they’re thinking about drinking occasions and how do we look at that. So clearly, there are some shorter-term pressures as we’re seeing that consumer, particularly in the US, in terms of continued downtrading, etc. But we’ve got to step back and look at how are we thinking about a broader range of growth opportunities as we look forward, not just for North America, but the rest of the world as well. Yeah.

Thank you very much, Deirdre and Nick.

Operator/Moderator: Thank you. The next question comes from Jeremy Fialco of HSBC. Your line is now open. Please go ahead.

Morning. I have a question on Europe. Can you talk a bit more about the implementation of these business model changes in Europe, some of the early benefits of that. And are there any elements of that. Which could be replicated or models for the US or not remotely given the. Massive distribution differences between the two geographies? Thanks.

Nick Jhangiani, Interim CEO, Diageo: Yeah, great question. Listen, I think a lot of what we did as we’ve had a new president, the Allen takeover in Europe, was to say, are we truly—if at the core of what we want to do is be closer to consumers and our customers, are we structured in the right way? I think for a number of years, we were managing the continent of Europe as one big market. Then we did some work, I believe, a couple of years ago before I joined, where we did go into some lower-level clusters. I think those clusters were still not necessarily getting us the impact of what we were looking for, right? A great example of that was Southern Europe and looking at that differently in terms of Italy, France, and Iberia, right?

And we can see that’s having great benefits already because the team is that much closer to the customer, understanding the outlet universe better, understanding the differences in terms of how we think about. Occasions and consumer needs and how are we making sure our portfolio offering is fit for purpose for that market, right? And I think that is an early sign of a positive that we’re seeing because I think we’re going to be executing very differently, being closer to the customer, right, and consumer. To your point around. Whether we can take that into the US, I think there’s always cross-learnings that we can have. And I think in the US, the team is doing a great job of. What I would say. Continuously being discontent with how we need to think about the market, right? And what can we do to differentiate ourselves?

Clearly, we have an advantage from our size and scale, right? Clearly, we have a dedicated distribution. Division that helps position us for success. Are we truly leveraging that to the whole extent that we have, right? Is there a difference between what we need to do when we think about. A geographic coverage versus a category coverage? And those are things that we will continue to challenge as we think about, again, getting ourselves closer to the consumer occasion. And are we set up for the right way to be able to do that? So I think there is that positive discontent that helps us continue to challenge ourselves even in that market to look at what can we do differently. And there’s always going to be good cross-learnings of what we can take from one market to the other.

Operator/Moderator: Thank you. The next question comes from Celine Panutti of JP Morgan. Your line is now open. Please go ahead.

Good morning. Thank you for taking my question. Nick, I wanted to come back to the outlook. Thank you for providing some building blocks on the H1. ABIT decline. I just wanted to think about when you thought about. The new guidance for top line and given the limited visibility. If I think about H2 as quite some. Punchy volume comparative. So first of all, you were saying before that H1 for like would be slightly negative. Is this still the case, or is it going to be a bit more than slightly negative given the commentary you made on Q2? And yeah, how do you think about the, I mean, is H2 going to be positive given what I said about the tougher comp. On volume? And maybe as well on H1, if I understood well, will margin be declining? Thank you.

Nick Jhangiani, Interim CEO, Diageo: Yeah. I’ll give you some higher-level comments. I’m sure Deirdre will support me on some of the planning that we’ve done as we look at the balance between the two. So to your first question around H1, while we had said that would be slightly down, that will be worse just given what we’re seeing with two big impacts. One is Chinese white spirits. And let me try and cover that first. Clearly, the policy changes that came in have led to the sharp decline that you’ve seen in the Baiju category in Q1 across. Not just our business, but all our competitors, etc. I think we’re in a slightly better position because we also managed down the stock levels at the same time to make sure that we were preparing for what might be. A tougher. Couple of months, if not quarters, to come, right?

Now, the positive there was there was a slight tonal change from the government pre-Mid Autumn Festival, which has resulted in. Us seeing some signs of better depletions, but it’s early days, right? So we’re continuing to plan for that to be more challenging in half two. But we do expect Chinese New Year. And depending on how government policy continues to play out. Excuse me, is how will that show through? So I think we’ll be able to give you a much better indication of that. With our half one results. I think Deirdre talked about some of the moving parts when we think about. The US, particularly with half one, with where we were at Q1 in terms of. Depletes versus sales and some of the category pressures that we’re seeing with tequila, right?

Remember, we had talked about the fact that half was going to be more weighted towards growth. Some of those are actually still very much intact elements of our plan, right? You’ve seen the acceleration in RTD, RTS. We’re expecting that to continue at an accelerator rate, not just in North America, but also for some of the other markets where we’ve seen really good success and the work that we’ve been doing. We talked about Guinness capacity coming on stream, and we’re going to be leveraging that fully, right? Some of the Europe changes that we’re doing, right? It’s early days, and we would expect that to step up in terms of the benefits that we can see. Lastly, it’s also linked to FIFA activation, right? We have a unique opportunity with.

A huge viewership of that event globally, but really being able to bring that to life in. NAM and LAC with several of our brands. So I think all of those still very much stay intact. And the teams are working at pace to ensure the execution of those continues to be at its best levels ever. And that’s what we’re doing through OND, so it takes us very well into how we’re thinking about second half as well. So those are some of the things that we feel good about in terms of the building blocks, both for the top line as well as even. Deirdre, I don’t know if I’ve missed anything.

Operator/Moderator: No, I couldn’t miss it. You’re good. Well done.

Thank you. The next question is from Jen Cross of BNP Paribas. Your line is now open. Please go ahead.

Good morning, everyone. Thank you for the question. My one’s on Brazil. So quite strong performance in the quarter, double-digit growth, and it’s quite in contrast to the numbers. In the quarter that we’ve seen from other beverage and staples companies. I just wonder if you could share a bit more color on what drove the strength and particularly whether double-digit sell-in was aligned with your estimate of sell-out in Brazil. Thank you.

We had strong performance in Brazil in Johnnie Walker and in RTD in the period. Those were the two strongest drivers of performance. In the period. So I think we’re feeling good about the overall performance. Of course, there has been some of the. Issues in the media about alcohol more broadly. That’s something that we’re watching carefully in terms of the total category dynamic, although we did get good performance in our brands in the period.

Nick Jhangiani, Interim CEO, Diageo: Absolutely. And I think the only other thing I would add to what Deirdre said is. If you do look at it from. A weather implication perspective and where some of maybe. Beer companies were impacted, we didn’t see as much of that, right? And clearly, we were helped with the progress, as Deirdre called out, on RTDs, where the team has been doing a phenomenal job. Under the leadership of Paulina. So. There is. A space that we’ll continue to watch in terms of that whole issue with. What we’ve seen in terms of. The spirits piece. But I think this is where, again, longer term, that’s a benefit from an angle of known and trusted brands and what people would want to consume, right? So we’ve got to stay focused again on what does that mean for the longer term and how does that help and benefit us.

In terms of. Our positioning. And then RTDs is a great way, again, to make sure people get trust because they’re opening up a can, they know what they’re drinking, and they know exactly what’s in it, right? And I think the team that the work that the team has been doing sets us up well from that angle as well.

Operator/Moderator: Thank you. The next question is from Edward Mundy of Jefferies. Your line is now open. Please go ahead.

Morning, everyone, and welcome back as well, Deirdre. And Deirdre, there’s a question for you, I think. I know you’ve only been back in Diageo for a couple of months, but I think you started the industry, if you don’t mind me saying, back in 1992, which was a really tough time both for beverage alcohol and spirits, having had a really bad sort of 1980s period. So I think you started in the industry just as spirits started to get its mojo back. And then we saw a 25-year super cycle. With a couple of very big years at the end of that through COVID. My question’s really, having been through a couple of cycles both for Diageo and the industry, what do you think is going to be the catalyst to get this industry back into sustainable levels of growth?

Nick Jhangiani, Interim CEO, Diageo: I’m going to let Deirdre answer that. Ed, I would say to you, that’s probably you don’t really need to call out when she came into the industry.

Operator/Moderator: But people are basically asking how old I am now. Wow, it was a long time ago, and you’re absolutely right. I have seen many cycles, including the broad premiumization cycle, the kind of situation that we had in 2009 with the economic crisis, a big move into emerging markets, and then, of course, a big growth for a long period in the U.S. I think we are seeing now, and Nick has spoken about this before, a bit of a shifting landscape across the industry, so we have two things happening. One is the same issue that we had before. We are on the back of a super cycle, which has been exacerbated by a weak economic environment, in particular in some of our biggest markets in the U.S. in particular.

So what’s happening from a consumer perspective in the US and its impact on this category is a bit unprecedented. We haven’t seen periods where I forget, it was a very long time ago where spirits volume wasn’t in growth, and that’s happening now for spirits. So we’re seeing shifts in the way and where consumers are consuming our products. And that is a period now where everyone in the industry is adjusting to that. We think we’re very well placed to win coming out of that. We participate. We can see we didn’t talk much about it today, but Guinness in the US is up 9%, right? So we have Guinness and Guinness Zero and RTDs.

I think what we’re seeing is a number of the players in the industry really thinking through where are their strengths, where are the categories and formats and geographies and occasions that they believe they’re best placed to win. Given the breadth of our portfolio and the strength of our brands, we think we’re in a really good position as these industry changes evolve and consumer behaviors evolve to win. I do think what’s happening now is just it’s largely economic. I know people have been saying that, and I believe that. If you just look at the changes that we’re seeing in terms of trade down both in formats and price points, and then there are some changes in the way people experience the products. We’ve lived through that before, though, of course.

I think we’re going to actually work through that and start to see the industry take a turn as the economies globally, and in particular in the U.S., start to improve.

Thank you. The next question comes from Lawrence Wyatt of Barclays. Your line is now open. Please go ahead.

Hi, good morning. Thanks very much for the question. Morning, Deirdre, Sonya. Deirdre, you just mentioned that Guinness is growing at around 9% in the U.S. I was wondering if you could just give us a bit more color on Guinness because it looks like it has accelerated in Europe as well. I think it was high single digit in Europe. I think it delivered about double digit in the full year last year, maybe around mid-single in Ireland. Just wondering if that is an acceleration at the moment. If it is, what do you think is driving that? Have you seen any impact from the House of Guinness series from Netflix? As we go into the end of the year, looking at the.

New house in London being completed, and just wondering if you think you’ve got enough capacity to not have any repeats of the stockout that we saw last year. Thank you very much.

I’ll make a few comments since I guess referenced it, and then I’m sure Nick will have more color on it. But we’re very excited about the performance of the Guinness brand. And this is on the back of a deliberate effort by us in terms of thinking about how we wanted that brand to show up in the market, how we wanted to invest behind it, and in some degree meeting the consumer where they are, which is evidence of that is the I mentioned shifts in consumer behavior, the significant growth in Guinness 00. And we’re finding that the combination of Guinness 00 and, of course, Guinness Draft in many places is creating a combination for consumers so that in terms of.

An evening out, they, of course, can have Guinness 00 and they can have a Draft Guinness and they can kind of manage their consumption if that’s what they’re wanting to moderate. It’s a multi-pronged effort over many years. If you look at the Cagr, this isn’t just happened overnight. The Cagr on Guinness over the last three years and over the last five years has been very high, double-digit or very high single digit. We have continued to grow in a number of markets, in Ireland and GB and in the U.S. specifically, but in other markets as well. We have been putting on new capacity. I think we will see that strength continue to grow. Of course, we’re working to ensure that we have sufficient product to meet the demands of the consumer as that happens.

With respect to the House of Guinness. I mean, it’s early days. I did hear just yesterday it was renewed for a second season, so I guess the consumers are liking the show. We were not associated with that program at all. So I don’t think that’s what’s driving the performance of our brand. Of course, it may drive some levels of awareness. We were seeing and continue to see very strong performance with the Guinness brand. I don’t know, Nick, if you want to share.

Nick Jhangiani, Interim CEO, Diageo: Yeah, just a few other things I would just add to the context. In fact, we actually spent some good time yesterday with our board as we looked about growth plans with one capacity that’s just coming on stream, as I referenced earlier, in Little Connell that will be able to leverage not just into half two, but beyond as well. We’re also looking at our plans 28, 29 onwards, which clearly are focused around what can we do in both Europe, GB in particular, and I’ll come back and talk about that, but also the U.S. Very focused around that because I think we continue to have a great brand that can still be very much scaled, but also premium, right, in terms of the offering. That’s where the consumer is going.

In particular, when you look at GB and 00 that Deirdre referenced to, there’s a lot of talkability around that given the fact that people are enjoying that. Whether it’s zebra striping, whether it’s semi-skimmed options of what they’re doing, it’s causing a lot of excitement around the brand. The team has done a phenomenal job steeping this in culture. We’re expanding the user base quite significantly from a twofold angle, right? One, it was really seen much more as a winter drink, and now it’s becoming an all-year-round drink, right? That’s been helped by what we’re calling a lovely day for our Guinness campaign, right? That’s been really strong. It’s also attracting younger demographic and more female into the category as well, which is all really positive when we think about the growth opportunities looking forward. To your question on the US in particular.

Clearly, it’s been outperforming there, right? We had share gains in 50 of the past 52 weeks, right? So that’s a real positive, and we see a big opportunity for further growth there with 00 as well, right? So I think overall, as Deirdre said, we continue to see the same trajectory of growth continuing for the next three to five years. We’re thinking about that in a balanced way in terms of how we want to think about capacity build, CapEx, and expansion plans. But continue to be very excited about that.

Operator/Moderator: Thank you. Our final question comes from Chris Pitchett of Rothschild and Co. Redburn. Your line is now open. Please go ahead.

Good morning, Nik, Deirdre, and Sonya. Deirdre, welcome back as well. Can I ask a slightly bigger strategic question? Two of your biggest profit pools, the US and China, have deteriorated quite materially. It hasn’t escaped investors’ attention that you both have the title interim in front of your job title. Can you give us reassurance that both yourselves and the board feel that the big strategic decisions don’t need to be made now on those markets? Certainly from the commentary, it sounds like you’re going to see how Christmas plays out in the US and how Chinese New Year plays out for Sui Jing Feng before you do anything dramatic. I just wanted to feel there isn’t this tension between urgent action required and executive decisions. Thanks.

Nick Jhangiani, Interim CEO, Diageo: Well, I can speak for both of us, but I also, it’s great to have Deirdre back. And you’re absolutely right. We both have the interim title, but I don’t think that in any way is slowing us down and/or the board’s kind of mandate to us to continue at pace, right? We’ve just finished up a couple of days of really good discussions with the board, which was. Focused around how we’re thinking about the future. So we wouldn’t be doing that if we both were sitting here with interim titles and they were just kind of waiting for something to change. So I don’t see that as an issue at all. And I think. Hopefully you’re getting a sense that while we’re talking about the things that are impacting us in the short term, we are still very much thinking about. The longer term of this business, right?

And I called out some of those things with the sharpening of the strategy work that we’re doing as an exec with our MDs is really around how we’re going to actually meet the consumer of the future and think about the occasions for which we have a more relevant portfolio that is leveraging all parts of where we have already a right to win but have not been playing it effectively. And what are the areas that we need to think about differently, as Deirdre highlighted, because the consumers are potentially drinking differently, where they’re drinking, what they’re drinking, how they’re drinking, and what they want from. A beverage company as opposed to just a spirits company is how we need to be thinking about our product.

So rest assured, I can say to you, neither one of us is sitting back, nor is the rest of the organization in any way. So please stay confident of that. And Deirdre, I don’t want to add anything to that.

Operator/Moderator: I’ll just add one thing. I just want to be clear. When I said we were, of course, waiting to see how the consumer would behave, I’m not waiting to see how they behave before we decide how to manage our brands. I said that in the context of, of course, the consumer takeoff in the quarter will impact our overall performance. So I mean, I’ve known you a long time, Chris. I certainly am not going to sit and wait for something to happen regardless of what my job title is. We are running this business for the long term, for the strength of the consumers and for the benefit of our shareholders into the medium and long term. And nothing about our job titles changes that at all.

Thank you. We have no further questions. So I’d like to hand the call back over to Nick for closing remarks.

Nick Jhangiani, Interim CEO, Diageo: Great. Well, thank you, everyone, for joining us today. It’s great that Deirdre is back with us, and you’ll all give her a warm welcome. So thank you. I’m looking forward to sharing more on our accelerate program when we report results in February. As highlighted today, I think we’ve really made some good progress in the first quarter, but there’s a lot more for us to do. And we’re not shying away from that. And we need to go faster. And we just talked about that, right? So we are acting with pace to sharpen our strategy to drive broader growth, better results, and, as Deirdre just said, ultimately improve shareholder returns. We’re very conscious of that. And as always, any further queries, please just follow up with Sonia and the IR team. And have a great day. Thank you all for joining.

Operator/Moderator: Thanks all.

This now concludes today’s call. Thank you for your attendance. You can disconnect the lines.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.