World Cup ‘critically important’ for Diageo
Diageo’s leaders addressed the company’s weak US spirits performance, while noting the upcoming Fifa World Cup tournament and RTDs could support future growth.
While Diageo posted a small 0.2% increase in organic sales for Q3 (three months ending 31 March 2026), North America remains its “biggest challenge”, CEO Dave Lewis said as the company revealed its results on Wednesday (6 May).
Lewis also said the company’s offering in North America “needs to be more competitive”.
The Don Julio and Casamigos owner saw organic sales fall by 9.4% in its biggest market, with a weak spirits showing in the US playing a large part in the North America troubles after the division suffered a 15.4% drop.
In a call with investors, chief financial officer Nik Jhangiani said US spirits were impacted by “lapping tough comps last year due to the pre-tariff pull forward of imports to distributors, as well as Tequila restocking”.
Lewis and Jhangiani addressed how the company is aiming to turn things around in the US, particularly with Tequila, which also dropped by double digits in Q3.
Jhangiani told investors that Diageo had tested pricing elasticity with Casamigos in Florida ahead of the Fifa World Cup with “positive results”, and that action is being initiated at other participating cities and states for the football tournament, which will take place in June.
“I think the other piece would continue to be around how do we also look at the entry-point Tequila of Astral, and how do we also ensure that we’ve got the right price tiering with Don Julio as we bring the Casamigos pricing more in line as well,” Jhangiani said.
World Cup: ‘Critically important’
Jhangiani earmarked the Fifa World Cup as a “critically important” moment for the company, in which it will play a prominent role.
Diageo is the official spirits supporter for the tournament, which will see it leverage its biggest spirits brands through on-the-ground activations and initiatives.
The company has already kicked off the partnership with campaigns for Casamigos, Don Julio and its blended Scotch whisky Buchanan’s.
Jhangiani highlighted that this is “the first time a spirits producer is really supporting this”.
“We want to make sure that we’ve got the right plans in place across North America and Latin America and the Caribbean (LAC), but also the rest of the world,” he said.
“Brazil [World Cup] in 2014 was the last time where you had the matches being aired during this period of time and with the time zone differences,” he added. “I think that would be another element that we would be tracking that could have an impact on the performance and the top line.”
While North America dragged on Diageo’s sales, there was strong growth across Europe, LAC and Africa. LAC grew by 16.2% and was said to have benefited from the World Cup with distributor buy-in. Brazil also claimed double-digit net sales growth.
Lewis, who said he had been “involved intimately in the plans in Latin America”, noted the strong link between football, its brands and all the occasions that unite them.
“There is no history in terms of how the brands will respond to activation,” he said. “We’ll use the usual metrics in terms of impact on the brand equity and also the impact on both short term and sort of medium [to] long term sales.
“North America is probably going to be a bit more of a voyage of discovery. We probably feel more confident in the reaction in Latin America, given what we know about the passion for football that exists in that part of the world.”
Jhangiani was also asked about Mexico, which suffered a high double-digit decline in Q3. He reasoned the outcome to a more cautious consumer in Mexico, both in their sentiment and disposal income.
“We need to have some price repositioning to ensure that we’ve got a more competitive offering,” he said, noting the company’s strategy in the market with Don Julio Blanco as an example.
“We need to be playing in what is a large top line and profit pool at the right price points, which will both enable recruitment but also help us then go up the ladder from a premiumisation perspective as we build that brand equity.”
North America leadership change
At the beginning of April, John O’Keeffe succeeded Sally Grimes as Diageo’s North America president and CEO. O’Keeffe was previously Diageo’s president of Asia Pacific and global travel retail.
When asked about O’Keeffe, Lewis said more details of his mandate would be shared at the company’s full-year results in August, but “his remit is to step back, advise and guide us in how we can improve the competitiveness in North America.”
Lewis also addressed Grimes’ immediate departure, explaining that “in conversations with Sally, we mutually agreed it was a good time for us to make a change”.
“I put on record our appreciation for everything that Sally has done for Diageo in her time with us. In nominating John, we take one of Diageo’s most experienced spirits executives into our largest region, and his brief is to step back and have a full evaluation of our competitiveness, our capabilities within that North American operation,” Lewis said.
“He’s been an intrinsic part of the strategy exercise that’s ongoing.”
After his first financial results as Diageo’s CEO, Lewis had highlighted an opportunity within the “increasingly relevant” ready-to-drink (RTD) space – also a category that he said Diageo had created when it launched Smirnoff Ice 26 years ago.
Earlier this week, Diageo introduced a mini canned RTD cocktail range in the US.
When asked about reports that an increased focus on RTDs would be an element of his strategy, Lewis reiterated that he “considered RTDs to be a growth opportunity”.
However, he played coy in revealing details of what Diageo’s strategy might be, noting that there will be more clarity in August.
“We would readily accept that we’ve been perhaps a little slow in addressing that opportunity,“ he said. “There’s plans in place now. There will be even more plans in place as we go forward. It’s not going to be my intention to respond to each and every rumour that gets out there.”
All eyes on August
As Lewis uses the early stages of his leadership to evaluate Diageo’s business and competitiveness, he said he will be ready to share the updated strategy for Diageo in August when the company’s full-year 2026 results will be published.
Regarding US president Donald Trump’s announcement that he would remove the tariff on Scotch whisky, Jhangiani said Diageo welcomed the news but “it will likely have minimal impact, if any, on fiscal 2026 and is more relevant to the next year.”
“We’ve been able to make interventions in parts of the group and see responses quite quickly,” Lewis added. “We knew that in North America that was going to take longer, and we consider that that will still be the case.
“I’m particularly encouraged by the way the whole of the Diageo team is engaging in the strategic refresh and the rethinking around how we can be more competitive and effective as an organisation.”
For Diageo’s fiscal 2026 results, the group reiterated that it expects a 2%-3% organic sales drop.
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