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Diageo’s new chief executive Sir Dave Lewis has cut the group’s dividend and signaled he would lower prices to win back consumers, a shift from the spirits maker’s longtime focus on its high-end brands.
On Wednesday, the FTSE 100 company cut its dividend from 103.5 cents a share to a minimum of 50 cents a year for the 2025 financial year.
In a presentation following the release of the drinks company’s interim results, Lewis said the board had taken the “difficult decision” to reduce the dividend to a level that would give it the financial flexibility to invest and become more competitive.
In his first public comments since taking over eight weeks ago, the former Tesco boss criticized Diageo’s “very poor” customer service and hinted he would increase investment behind Diageo’s mass-market brands such as Smirnoff vodka and Captain Morgan rum.
Diageo has pursued a strategy of “premiumization” for more than a decade – built on the premise that consumers will drink less but its Casamigos will opt for increasingly expensive spirits like tequila.
Lewis said that although it was a “brilliant strategy”, he was considering some “value repositioning”.
The group chief highlighted that its portfolio was dominated by high-end brands and was “significantly under-represented” in the mass market, resulting in Diageo losing market share when consumers’ disposable incomes were under pressure.
Diageo reported a 2.8 percent decline in organic sales in the last six months of 2025, less than analysts expected, amid weakness in the US and China.
The company now expects full-year organic sales to decline between 2 and 3 percent, whereas its previous forecast was “flat to slightly below.” Its shares fell 5.7 percent in early trade on Wednesday.
Diageo’s weak performance was caused by a 42.3 percent decline in sales in China, where local sentiment has been hit by baijiu government restrictions. In the US, Diageo’s biggest market, organic sales declined 6.8 percent due to weak consumer spending.
Lewis, whose reputation for cost-cutting earned him the nickname “Drastic Dave”, took over at Diageo after a tumultuous period.
Lewis’s predecessor, Debra Crews, left last summer after the board failed to quash speculation that Chief Financial Officer Nick Jhangiani was seeking her job.
Investors are keenly awaiting Lewis’s assessment of the reasons behind Diageo’s malaise.
Lewis said that while weight-loss drugs and changing attitudes toward spirits are impacting sales, the biggest challenge is the squeeze on disposable income, particularly in the US.
The Yorkshire-born executive said Diageo’s customer service to its distributors and retail customers meant the group had failed to capitalize on demand for popular brands such as Guinness.
“The idea that we can’t meet that demand is a source of significant regret, but it’s also an opportunity,” he said.
Lewis aims to address the shortage of Guinness, the company’s fastest-growing brand. “If you’ve tried to buy a pint in London, you also know that we have some capacity constraints too,” he said.
Guinness sales on an organic basis increased 10.9 percent in the last six months of 2025.
Lewis said he would sell the brand “if appropriate” but would not do so cheaply.
Diageo’s interim operating profit fell 1.2 percent to $3.1 billion, which the company partly attributed to US tariffs.
