Diageo Cuts Forecasts and Dividend as Recent CEO Confronts Shifting Consumer Habits

Diageo, the world’s largest spirits maker, has lowered its annual sales forecast and slashed its dividend in new CEO Sir Dave Lewis’s first earnings presentation, signaling a significant reset for the company. The move sent Diageo shares down 6% on Wednesday, February 25, 2026, and also impacted the share prices of its competitors, including Pernod Ricard, Rémy Cointreau, and Campari, which fell by around 3% .

Challenges Facing Diageo

Lewis, who took the helm in January 2026, faces a complex landscape of challenges, including managing tariff-related uncertainty in the US, slowing demand in China, fragile global consumer sentiment, and evolving drinking preferences . A key factor impacting the industry, according to Lewis, is “pressurised consumer wallets” .

Impact of Emerging Trends

Beyond economic pressures, Diageo is also navigating shifts in consumer behavior. The increasing popularity of weight loss drugs, which can reduce the desire for alcohol, as well as changing lifestyles and the rise of legal cannabis, are all contributing factors, though Lewis noted their current impact is relatively little .

Revised Financial Outlook

Diageo now anticipates a 2%-3% decline in 2026 organic sales, with operating profit expected to be flat to up in the low-single digits. This is a downgrade from its previous forecast of flat to slightly lower sales and low-to-mid-single-digit profit growth . The company’s interim dividend has been reduced to 20 cents per share, down from 40.5 cents a year ago, even though a minimum annual dividend floor of 50 cents has been established .

Strategic Shift and Cost Cutting

Investors are closely watching how Lewis, known as “Drastic Dave” for his cost-cutting reforms at Tesco and Unilever, will implement his turnaround strategy . Diageo has already begun a plan to sell assets and cut costs, and Lewis intends to present an updated strategy to the board in the second quarter, with a public announcement to follow in the third quarter .

Regional Performance

The company’s US sales experienced a 9.3% decline in the first half of the year. Sales of key tequila brands, such as Don Julio, which have been significant growth drivers in the past, fell by more than 23% . Volumes declined in four out of Diageo’s five regions during the first half of the year .

Potential Price Adjustments

Sir Dave Lewis has also signaled a potential shift in pricing strategy, indicating he will consider lowering prices to attract consumers .