A \u201cvery significant\u201d squeeze on disposable income is forcing Britons to cut back on drinking, the maker of Guinness has warned.<\/p>\n
Diageo, which is one of Britain\u2019s biggest pub suppliers, said the country\u2019s economic malaise was the biggest factor in falling alcohol consumption.<\/p>\n
Consumers are drinking \u201cfewer servings per occasion\u201d, the company said, although the number of times per month that people drank spirits in Britain rose by 16pc last year compared to 2024. Diageo also makes Smirnoff and Johnnie Walker.<\/p>\n
A decline in drinking will add to pressure on Britain\u2019s pubs, as they also grapple with tax raids and changing attitudes towards alcohol among young people.<\/p>\n
Sir Dave Lewis, the new boss of Diageo, said: \u201cThese fewer serves per occasion point to a pressure in the economics that our consumer groups are facing.\u201d<\/p>\n
He added: \u201cWhat you see is a very significant squeeze on disposable income.\u201d<\/p>\n
Sir Dave, the former boss of Tesco who was hired at the start of this year, said reinvigorating Diageo\u2019s relationships with pubs and bars was one of his key priorities to turn around the struggling drinks maker.<\/p>\n
He said the \u201con-trade\u201d segment of its business \u2013 meaning sales into bars, restaurants, hotels and pubs \u2013 had been \u201cdismantled understandably during Covid\u201d but warned its \u201cbuildback has been slow and patchy\u201d.<\/p>\n
He was speaking as Diageo slashed its dividend in half, with Sir Dave adding there remained \u201csignificant work ahead\u201d after he was forced to cut the company\u2019s sales forecast.<\/p>\n Diageo reported a 2.8pc drop in underlying operating profits to $3.3bn (\u00a32.4bn) in its half-year results as underlying sales also fell 2.8pc.<\/p>\n Sir Dave made the \u201cdifficult decision\u201d to cut the dividend from 40.5 cents per share last year to 20 cents and ramped up cost savings to boost its flagging performance.<\/p>\n The prompt action helped the seasoned executive live up to his nickname \u201cDrastic Dave\u201d, earned during his three decades at consumer goods giant Unilever where he oversaw a programme of brutal but effective cost cuts.<\/p>\n However, the cost-saving plan and the weak sales wiped more than \u00a35bn off Diageo\u2019s market valuation on the London Stock Exchange, as shares fell by 13pc on their worst day ever.<\/p>\n The drinks giant also downgraded its full-year guidance for the second time in three months, with sales now expected to fall by between 2pc and 3pc because of ongoing troubles in the US. Profits are predicted to be flat or to rise by low single digits.<\/p>\n Sir Dave, who led a turnaround at Tesco from 2014 to 2020, said he was working on an updated strategy for Diageo, which he said he will unveil in the summer.<\/p>\n<\/p><\/div>\n He was appointed at Diageo after a lengthy search for a successor to Debra Crew, who left in July following a rocky period of slipping sales and struggles to communicate a vision to both the board and market.<\/p>\n After performing strongly amid the rise of home drinking during the pandemic, Diageo has faced a cocktail of pressures in recent years. The company pivoted towards higher-end spirits and has battled shifting attitudes towards drinking.<\/p>\n More than a third of young people aged between 16 and 24 are shunning alcohol, the Health Survey for England revealed this year.<\/p>\n However, Guinness has attracted many new drinkers from Gen Z \u2013 driven by social media trends and growing popularity among young women.<\/p>\n On TikTok, trends such as \u201csplitting the G\u201d, where Guinness drinkers seek to down enough of their pint so the head of the beer bisects the company\u2019s logo, have helped the brand go viral.<\/p>\n The Princess of Wales and Kim Kardashian are fans, and the company was forced to deny reports last year that it could capitalise on its popularity with a sale.<\/p>\n Sir Dave said: \u201cOnly several weeks in I can already see significant opportunities for Diageo to act more decisively to enhance its competitiveness and broaden the portfolio offering leading to higher growth.<\/p>\n \u201cTo deliver on these opportunities, we need to create more financial flexibility.<\/p>\n \u201cAccordingly, the board has taken the difficult decision to reduce the dividend to a more appropriate level which will accelerate the strengthening of our balance sheet.<\/p>\n \u201cWe are confident that this is the right action which will ensure that Diageo can reinforce its position as the leading international spirits business and drive stronger shareholder value over the coming years.\u201d<\/p>\n John Moore, of wealth manager RBC Brewin Dolphin, said Diageo\u2019s results \u201creflect a company navigating near-term headwinds while positioning for longer-term recovery\u201d.<\/p>\n \u201cThe headline might feel cautious this morning, but the real story will be in how Sir David Lewis articulates the path forward.\u201d<\/p>\n Simon Hales, a Citi analyst, said the decision to more than half the dividend had \u201ctaken the shine off\u201d the results, which could have \u201cbeen seen as the clearing event for the stock to rally\u201d.<\/p>\n Try full access to The Telegraph free today. Unlock their award-winning website and essential news app, plus useful tools and expert guides for your money, health and holidays.<\/b><\/p>\n<\/p><\/div>\n<\/div>\n<\/div>
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