The Premiumisation-at-all-cost bill is due now.
Reading in between the lines of the Diageo H1 26 results.
The beverage alcohol industry is currently navigating a period of profound transition, marked by a cooling of the post-pandemic spirits boom and a fundamental recalibration of consumer spending priorities. This report synthesises the performance of Diageo PLC following its interim results for the first half of fiscal year 2026, which ended on 31 December 2025. The data indicate a company at a strategic crossroads, managed by a new leadership team tasked with reversing a multi-year decline in shareholder value and addressing structural challenges in its core markets.
Diageo’s performance during the six months ending 31 December 2025 demonstrates a complex divergence between mature and emerging markets. Reported net sales reached $10.5 billion, representing a 4.0% decline compared to the same period in the previous year. This reported figure was primarily dragged down by an organic net sales contraction of 2.8%, alongside the negative impact of brand divestments and unfavourable currency fluctuations. Organic volume declined by 0.9%, while a negative price/mix of 1.9% reflected an increasingly competitive promotional landscape, particularly in the United States.
Operating profit before exceptional items fell by 2.8 % on an organic basis to $3.3 billion, reflecting the top-line pressure. However, the organic operating profit margin remained broadly flat, as the company successfully utilised its cost-efficiency programmes to offset rising tariff costs and adverse market mix. A critical component of this performance narrative is the impact of Chinese white spirits. Excluding the significant decline in these sales, Diageo’s organic net sales would have been approximately 2% higher, with volumes down only 0.5%.
