Diageo sales fall 2.2% on weak China and U.S. demand

Diageo, one of the world's leading alcoholic beverage companies, reported on Thursday that its net sales for the first quarter of its fiscal year fell 2.2%, reaching $4.9 billion. The company attributed the decline mainly to the negative impact of recent divestments, while currency effects were minimal.

Organic net sales remained stable during the period. Organic volume grew 2.9%, but this was offset by a 2.8% negative change in price/mix. Diageo explained that the result was largely due to an unfavorable mix in Asia Pacific, driven by weak performance in China's Chinese white spirits (CWS) segment. The company noted that excluding this factor, the price/mix variation would have shown almost no change.

The report highlighted solid organic sales growth in Europe, Latin America and the Caribbean, and Africa. However, these gains were not enough to offset weaker performance in Asia Pacific and North America. In Asia Pacific, lower seasonal alcohol sales, particularly in China, weighed heavily on results, reducing the group's net sales by about 2.5% during the quarter. In North America, performance weakened as U.S. spirits sales declined, reflecting softer consumer confidence.

Interim Chief Executive Officer Nik Jhangiani said that net sales held steady thanks to growth in Europe, Latin America and the Caribbean, and Africa, but acknowledged that weakness in China's white spirits market and a less favorable U.S. consumption environment hurt overall performance. He noted that the company is not satisfied with its current results and is focusing on managing and controlling areas where it can act quickly to improve efficiency and prioritize investments.

Jhangiani also reported progress on the company's strategic initiatives, emphasizing that Diageo is developing and implementing clear plans to drive growth across its portfolio and adapt to changing consumer needs. He cited positive early results following efforts to strengthen commercial capabilities in Europe and foster a more results-driven culture within the organization.

Looking ahead to fiscal year 2026, Jhangiani said Diageo has updated its forecasts and continues to target free cash flow of around $3 billion, with plans to increase that figure in the coming years. The projection is based on tighter management of inventory, advertising and promotional spending, capital investments, and cost discipline.

The evolution of consumer trends in key markets such as China and the United States will be critical in the coming quarters. Diageo will continue to adjust its strategy to address these shifts and pursue new growth opportunities in both established and emerging markets.