Diageo’s Turnaround Under Sir Dave Lewis: A Year of Challenges and Emerging Momentum

It’s been a challenging year for drinks giant Diageo, and Sir Dave Lewis is focused on charting a course for recovery as he prepares to unveil his vision for the future next week. Diageo’s stock has experienced a decline of over 15% in the last 12 months, with a significant drop in November following forecasts of low to mid-single-digit operating profit growth for the year ending June 2026, a downward revision from previous mid-single-digit guidance.

Shares fell over 6% on the news, compounded by a projected $200 million (£153 million) impact from President Donald Trump’s US tariffs. However, the appointment of Lewis a week later signaled a potential turning point. Since then, Diageo’s shares have gained 15% year-to-date as momentum builds.

“Diageo’s shares are finally showing a little more spirit after a terrible run,” analysts at AJ Bell noted.

Diageo Adapts to Shifting Consumer Preferences

Lewis, known for his successful turnaround of Tesco as group chief executive between 2014 and 2020, earned the nickname ‘Drastic Dave’ during his time at Unilever, where he prioritized cost-cutting and streamlining. As Lewis enters his first month at Diageo, the conversation is shifting from immediate financial results to long-term strategy.

Analysts are predicting a 3% drop in sales and a 4% decrease in profit for Diageo, resulting in a pre-tax income of $2.7 billion. Richard Hunter, head of markets at interactive investor, commented, “It remains to be seen whether the concerns overhanging the sector as a whole are cyclical or societal.”

Diageo’s profit margins have been impacted by consumers increasingly opting for lower-alcohol alternatives and more affordable spirit brands. Hunter added, “There is some debate as to whether the younger consumer market is a growth area at all given changing attitudes, whereas the growing proliferation of the “moderation”, low to no-alcohol drinks could provide an opportunity.”

Leadership Transition and Past Challenges

Lewis succeeded Debra Crew, who unexpectedly resigned in July after a two-year tenure. Crew’s time was marked by significant headwinds, including a profit warning issued five months into her role due to misjudged sales trends in Latin America – a crucial market – leading to a substantial reduction in earnings forecasts.

Diageo’s annual report revealed that Crew’s remuneration increased from $3.8 million to $4.8 million during her final year.

Diageo owns spirit brands such as Smirnoff, Johnnie Walker and Captain Morgans.