Q2 2026 Diageo PLC Earnings Call

Us spirits and Chinese white Spirits. Both organic Nest sales and organic operating profit declined 2.8%.

Notably, excluding the impact from Chinese white Spirits. We would have reported organic. Net sales down approximately, half a percent, and approximately 1 and a half percent growth in organic operating profit.

Europe, lack in Africa, delivered strong growth. But this was more than offset by Nam and Apex.

Dave: As you know, it's my first results session for Diageo. In fact, this is my seventh week, and I'll share a few initial impressions and immediate priorities with you later. First, I'd like to hand over to Nick to share with you the results of the first half of 2026. Nick?

Dave Lewis: As you know, it's my first results session for Diageo. In fact, this is my seventh week, and I'll share a few initial impressions and immediate priorities with you later. First, I'd like to hand over to Nick to share with you the results of the first half of 2026. Nick?

Speaker #1: Patient. As you know, it's my first results session for Diageo. In fact, this is my seventh week, and I'll share a few initial impressions and immediate priorities with you later. But first, I'd like to hand over to Nick to share with you the results of the first half of 2026.

Our focus on cost savings benefited, organic operating profit but did not offset lower gross profit given the mix of market growth.

Speaker #1: Nick?

Speaker #2: Thank you, Dave, and welcome to Diageo. In the context of a continued challenging macroenvironment and industry backdrop in many of our markets—particularly in US spirits and Chinese white spirits—both organic net sales and organic operating profit declined 2.8%.

[Company Representative] (Diageo): Thank you, Dave. Welcome to Diageo. In the context of a continued challenging macro environment and industry backdrop in many of our markets, but in particular, US spirits and Chinese white spirits, both organic net sales and organic operating profit declined 2.8%. Notably, excluding the impact from Chinese white spirits, we would have reported organic net sales down approximately 0.5% and approximately 1.5% growth in organic operating profit. Europe, LAC, and Africa delivered strong growth, but this was more than offset by NAM and APAC. Our focus on cost savings benefited organic operating profit, but did not offset lower gross profit, given the mix of market growth. This profit decline, as well as lapping the impact of the disposal of our businesses in Ghana and Nigeria, impacted our EPS pre-exceptionals, which declined 2.5%.

Nik Jhangiani: Thank you, Dave. Welcome to Diageo. In the context of a continued challenging macro environment and industry backdrop in many of our markets, but in particular, US spirits and Chinese white spirits, both organic net sales and organic operating profit declined 2.8%. Notably, excluding the impact from Chinese white spirits, we would have reported organic net sales down approximately 0.5% and approximately 1.5% growth in organic operating profit. Europe, LAC, and Africa delivered strong growth, but this was more than offset by NAM and APAC. Our focus on cost savings benefited organic operating profit, but did not offset lower gross profit, given the mix of market growth. This profit decline, as well as lapping the impact of the disposal of our businesses in Ghana and Nigeria, impacted our EPS pre-exceptionals, which declined 2.5%.

This profit decline is well as lapping. The impact of the disposal of our businesses in Ghana and Nigeria. Impacted our EPS pre exceptionals, which declined, 2 and a half percent.

our focus on cash, delivery continues delivering, just over 1 and a half billion dollars in free cash flow for the half year, but 164 million lower than last year, due to adverse movement in working capital,

Speaker #2: Notably, excluding the impact from Chinese white spirits, we would have reported organic net sales down approximately half a percent and approximately one and a half percent growth in organic operating profit.

We have also declared a dividend today of 20 cents per share and at the same time announced that we are moving to a dividend payout policy of 30 to 50%.

Speaker #2: Europe, LAC, and Africa delivered strong growth, but this was more than offset by NAM and APAC. Our focus on cost savings benefited organic operating profit, but did not offset lower gross profit given the mix of market growth.

This decision is not something that we have taken lightly. The 1 that we view is important in ensuring that we make the right decisions for the business, for the long term.

They will come back on this later.

Speaker #2: This profit decline, as well as lapping the impact of the disposal of our businesses in Ghana and Nigeria, impacted our EPS pre-exceptionals, which declined two and a half percent.

Now, moving to reach is, the biggest challenge, has been a circus 7%, organic sales decline in Nan, which was driven by softness, in US Spirits, especially into Kayla, which declined, approximately 23% driven by both custom Migos and Dong bolillo for a number of reasons, including category down Trading.

Speaker #2: Our focus on cash delivery continues, delivering just over one and a half billion dollars in free cash flow for the half year, but 164 million dollars lower than last year due to adverse movement in working capital.

[Company Representative] (Diageo): Our focus on cash delivery continues, delivering just over one and a half billion dollars in free cash flow for the half year, $164 million lower than last year due to adverse movement in working capital. We have also declared a dividend today of $0.20 per share, and at the same time announced that we are moving to a dividend payout policy of 30% to 50%. This decision is not something that we have taken lightly, but one that we view as important in ensuring that we make the right decisions for the business for the long term. Dave will come back on this later.

Nik Jhangiani: Our focus on cash delivery continues, delivering just over one and a half billion dollars in free cash flow for the half year, $164 million lower than last year due to adverse movement in working capital. We have also declared a dividend today of $0.20 per share, and at the same time announced that we are moving to a dividend payout policy of 30% to 50%. This decision is not something that we have taken lightly, but one that we view as important in ensuring that we make the right decisions for the business for the long term. Dave will come back on this later.

Organic growth in the Azure beer company or approximately 7% and in Canada of just over 2% only partly of septus. I will provide more detail on this shortly.

Speaker #2: We have also declared a dividend today of $0.20 per share, and at the same time announced that we're moving to a dividend payout policy of 30 to 50 percent.

In Europe, both volume and value growth in turkey with double digit. Growth in Johnny Walker, as we increase distribution and disability,

Speaker #2: This decision is not something that we have taken lightly, but one that we view as important in ensuring that we make the right decisions for the business for the long term.

This was alongside Rocky, which benefited from increased focus and new pack designs.

Speaker #2: Dave will come back on this later. Now, moving to regions, the biggest challenge has been a circa 7% organic sales decline in NAM, which was driven by softness in US spirits, especially in tequila, which declined approximately 23%, driven by both Casamigos and Don Julio for a number of reasons, including category downtrading.

[Company Representative] (Diageo): Now, moving to regions, the biggest challenge has been a circa 7% organic sales decline in NAM, which was driven by softness in US spirits, especially in tequila, which declined approximately 23%, driven by both Casamigos and Don Julio, for a number of reasons, including category downtrading. Organic growth in the Asia Beer Company of approximately 7% and in Canada of just over 2% only partly offset this. I will provide more detail on this shortly. In Europe, both volume and value growth in Turkey, with double-digit growth in Johnnie Walker as we increase distribution and visibility. This was alongside Rocky, which benefited from increased focus and new pack designs. Momentum in MENA continued, as did growth of Guinness across almost all markets, particularly GB and Ireland.

Nik Jhangiani: Now, moving to regions, the biggest challenge has been a circa 7% organic sales decline in NAM, which was driven by softness in US spirits, especially in tequila, which declined approximately 23%, driven by both Casamigos and Don Julio, for a number of reasons, including category downtrading. Organic growth in the Asia Beer Company of approximately 7% and in Canada of just over 2% only partly offset this. I will provide more detail on this shortly. In Europe, both volume and value growth in Turkey, with double-digit growth in Johnnie Walker as we increase distribution and visibility. This was alongside Rocky, which benefited from increased focus and new pack designs. Momentum in MENA continued, as did growth of Guinness across almost all markets, particularly GB and Ireland.

momentum and Mina continued, as its growth of Guinness across, almost all markets, particularly GB in Ireland, across Europe by bringing decision-making, closer to customers and consumers, we are improving commercial, execution and delivering some positive early results, the continued impact of decline in Chinese white Spirits adversely impacted sales and impact with Organic sales down approximately 11%

Excluding this organic sales would have been up slightly.

Speaker #2: Organic growth in Diageo Beer Company of approximately 7%, and in Canada of just over 2%, only partly offset this. I will provide more detail on this shortly.

In India continued momentum in Prestige and above segment, Brands and locally inspired flavor Innovation on smart off, as well as format Innovation on Royal challenge all contributed to strong results.

Speaker #2: In Europe, both volume and value growth in Turkey were double-digit growth in Johnnie Walker, as we increased distribution and visibility. This was alongside Raki, which benefited from increased focus and new pack designs.

In lack, we saw net sales growth in most markets, including both Brazil and Mexico. This was, despite the impact in Q2, in Brazil of counterfeit alcohol incidents, which was particularly pronounced in the entree,

Speaker #2: Momentum in MENA continued, as did growth of Guinness across almost all markets, particularly GB and Ireland. Across Europe, by bringing decision-making closer to customers and consumers, we are improving commercial execution and delivering some positive early results.

more recently, we have seen a gradual recovery of consumer confidence in this market,

[Company Representative] (Diageo): Across Europe, by bringing decision-making closer to customers and consumers, we are improving commercial execution and delivering some positive early results. The continued impact of decline in Chinese white spirits adversely impacted sales in APAC, with organic sales down approximately 11%. Excluding this, organic sales would have been up slightly. In India, continued momentum in prestige and above segment brands and locally inspired flavor innovation on Smirnoff, as well as format innovation on Royal Challenge, all contributed to strong results. In LAC, we saw net sales growth in most markets, including both Brazil and Mexico. This was despite the impact in Q2 in Brazil of counterfeit alcohol incidents, which was particularly pronounced in the on-trade. More recently, we have seen a gradual recovery of consumer confidence in this market.

Nik Jhangiani: Across Europe, by bringing decision-making closer to customers and consumers, we are improving commercial execution and delivering some positive early results. The continued impact of decline in Chinese white spirits adversely impacted sales in APAC, with organic sales down approximately 11%. Excluding this, organic sales would have been up slightly. In India, continued momentum in prestige and above segment brands and locally inspired flavor innovation on Smirnoff, as well as format innovation on Royal Challenge, all contributed to strong results. In LAC, we saw net sales growth in most markets, including both Brazil and Mexico. This was despite the impact in Q2 in Brazil of counterfeit alcohol incidents, which was particularly pronounced in the on-trade. More recently, we have seen a gradual recovery of consumer confidence in this market.

Across Africa, we saw broad-based net sales, growth across the region with strong double digit growth, in South Africa, driven by rtds and also in Tanzania driven by strong bear performance.

Speaker #2: Continued impact of declines in Chinese white spirits adversely impacted sales in APAC, with organic sales down approximately 11%. Excluding this, organic sales would have been up slightly.

In the half we grew or held total market share. So I got 30% of markets measured by contribution to net sales.

Speaker #2: In India, continued momentum in prestige and above-segment brands, and locally inspired flavor innovation on Smirnoff, as well as format innovation on Royal Challenge, all contributed to strong results.

This result was clearly disappointing and was largely a reflection of performance in the US, which saw a 9-bit TBA share loss which represents Circa 35% of the total. Net sales value is the main measured markets.

Speaker #2: In LAC, we saw net sales growth in most markets, including both Brazil and Mexico. This was despite the impact in Q2 in Brazil of counterfeit alcohol incidents, which was particularly pronounced in the on-trade.

Heading to North America pressure on consumer wallets and an increasingly competitive. Environment is specially in tequila, is having a marked adverse impact on us Spirits performance,

Speaker #2: More recently, we have seen a gradual recovery of consumer confidence in this market. Across Africa, we saw broad-based net sales growth across the region, with strong double-digit growth in South Africa driven by RTDs, and also in Tanzania driven by strong beer performance.

they will come back and give you more contacts on this performance later, including specifically, the pressure on Ultra Premium to Trula.

[Company Representative] (Diageo): Across Africa, we saw broad-based net sales growth across the region, with strong double-digit growth in South Africa, driven by RTDs, and also in Tanzania, driven by strong beer performance. In the half, we grew or held total market share in circa 30% of markets measured by contribution to net sales. This result was clearly disappointing and was largely a reflection of performance in the US, which saw a 9 basis points TBA share loss, which represents circa 35% of the total net sales value in the measured markets. Turning to North America, pressure on consumer wallets and an increasingly competitive environment, especially in tequila, is having a marked adverse impact on US spirits performance. Dave will come back and give you more context on this performance later, including specifically the pressure on ultra-premium tequila. Organic sales decline was almost entirely driven by Don Julio, Casamigos, and Crown Royal.

Nik Jhangiani: Across Africa, we saw broad-based net sales growth across the region, with strong double-digit growth in South Africa, driven by RTDs, and also in Tanzania, driven by strong beer performance. In the half, we grew or held total market share in circa 30% of markets measured by contribution to net sales. This result was clearly disappointing and was largely a reflection of performance in the US, which saw a 9 basis points TBA share loss, which represents circa 35% of the total net sales value in the measured markets. Turning to North America, pressure on consumer wallets and an increasingly competitive environment, especially in tequila, is having a marked adverse impact on US spirits performance. Dave will come back and give you more context on this performance later, including specifically the pressure on ultra-premium tequila. Organic sales decline was almost entirely driven by Don Julio, Casamigos, and Crown Royal.

Organic sales decline was almost entirely driven by Don Julio C Amigos and Crown Royal

in the first half tough comparatives plus an increasingly competitive dealer environment, put pressure on results.

Speaker #2: In the half, we grew or held total market share in circa 30% of markets measured by contribution to net sales. This result was clearly disappointing, and was largely a reflection of performance in the US, which saw a nine-bits TBA share loss, which represents circa 35% of the total net sales value in measured markets.

This was exacerbated by both ongoing, tequila litigation and media on additives and adulteration 2 separate issues with both negatively impacting consumer sentiment.

Baseless and a pushing for case dismissal in New York.

Speaker #2: Turning to North America, pressure on consumer wallets and an increasingly competitive environment, especially in tequila, is having a marked adverse impact on U.S. spirits performance.

We are also working with industry influencers, to inform the narrative and we are confident that our tequilas are crafted from 100% Blue Agave.

Speaker #2: Dave will come back and give you more context on this performance later, including specifically the pressure on ultra-premium tequila. Our organic sales decline was almost entirely driven by Don Julio, Casamigos, and Crown Royal.

There was good performance on Johnny, Walker driven by Johnny Walker, Blue and encouraging performance in smaller Spirits Brands such as Kettle, 1 and astral.

Kettle 1 pricedale platform. Activated at all, consumer touch points, gain share of vodka and maintained Spirits share.

Speaker #2: In the first half, tough comparatives plus an increasingly competitive tequila environment put pressure on results. This was exacerbated by both ongoing tequila litigation and media on additives and adulteration—two separate issues, but both negatively impacting consumer sentiment.

[Company Representative] (Diageo): In the first half, tough comparatives, plus an increasingly competitive tequila environment, put pressure on results. This was exacerbated by both ongoing tequila litigation and media on additives and adulteration, two separate issues, but both negatively impacting consumer sentiment. We continue to view the litigation claims as baseless and are pushing for case dismissal in New York. We are also working with industry influencers to inform the narrative, and we are confident that our tequilas are crafted from 100% blue agave. There was good performance on Johnnie Walker, driven by Johnnie Walker Blue, and encouraging performance in smaller spirits brands such as Ketel One and Astral. Ketel One, priced in super premium and with a consistent made to cocktail platform, activated at all consumer touchpoints, gained share of vodka and maintained spirits share. RTDs and Guinness also delivered positive growth.

Nik Jhangiani: In the first half, tough comparatives, plus an increasingly competitive tequila environment, put pressure on results. This was exacerbated by both ongoing tequila litigation and media on additives and adulteration, two separate issues, but both negatively impacting consumer sentiment. We continue to view the litigation claims as baseless and are pushing for case dismissal in New York. We are also working with industry influencers to inform the narrative, and we are confident that our tequilas are crafted from 100% blue agave. There was good performance on Johnnie Walker, driven by Johnnie Walker Blue, and encouraging performance in smaller spirits brands such as Ketel One and Astral. Ketel One, priced in super premium and with a consistent made to cocktail platform, activated at all consumer touchpoints, gained share of vodka and maintained spirits share. RTDs and Guinness also delivered positive growth.

Rtds and Guinness also delivered positive growth.

RTD share games were driven by customer Migos margaritas and Innovation from smyrnos sunny days which Taps into nostalgic flavors and smell off shorties as well.

Speaker #2: We continue to view the litigation claims as baseless and are pushing for case dismissal in New York. We are also working with industry influencers to inform the narrative, and we are confident that our tequilas are crafted from 100% blue agave.

Guinness game, share every week of half. 1 fiscal 26 with continued participation in culture.

In APAC, performance was adversely impacted by weaker, Chinese white Spirits consumption as a result of Market policy.

Excluding Chinese wide Spirits AAC would have reported slightly positive, net sales growth,

Speaker #2: There was good performance on Johnnie Walker, driven by Johnnie Walker Blue, and encouraging performance in smaller spirits brands such as Ketel One and Astral.

Speaker #2: Ketel One, priced in super-premium and with a consistent made-to-cocktail platform, activated at all consumer touchpoints, gained share of vodka, and maintained spirits share. RTDs in Guinness also delivered positive growth.

Additionally and as we guided previously, we saw some impact across the region from the later, Chinese New Year, as well as the macroeconomic impact in North Asia.

I mentioned earlier that India delivered strong results from both core Brands and Innovation and successful recruitment. Rural challenge Learners and Johnny Walker, all performed. Well,

Speaker #2: RTD share gains were driven by Casamigos Margaritas, an innovation from Smirnoff Sunny Days, which taps into nostalgic flavors, and Smirnoff Shorties as well. Guinness gained share every week of half one, fiscal '26, with continued participation in culture.

[Company Representative] (Diageo): RTD share gains were driven by Casamigos Margarita and innovation from Smirnoff Sunny Daze, which taps into nostalgic flavors and Smirnoff Ice Shorties as well. Guinness gained share every week of half one fiscal 2026, with continued participation in culture. In APAC, performance was adversely impacted by weaker Chinese white spirits consumption as a result of market policy. Excluding Chinese white spirits, APAC would have reported slightly positive net sales growth. Additionally, as we guided previously, we saw some impact across the region from the later Chinese New Year, as well as the macroeconomic impact in North Asia. I mentioned earlier that India delivered strong results from both core brands, innovation, and successful recruitment. Royal Challenge, Smirnoff, and Johnnie Walker all performed well.

Nik Jhangiani: RTD share gains were driven by Casamigos Margarita and innovation from Smirnoff Sunny Daze, which taps into nostalgic flavors and Smirnoff Ice Shorties as well. Guinness gained share every week of half one fiscal 2026, with continued participation in culture. In APAC, performance was adversely impacted by weaker Chinese white spirits consumption as a result of market policy. Excluding Chinese white spirits, APAC would have reported slightly positive net sales growth. Additionally, as we guided previously, we saw some impact across the region from the later Chinese New Year, as well as the macroeconomic impact in North Asia. I mentioned earlier that India delivered strong results from both core brands, innovation, and successful recruitment. Royal Challenge, Smirnoff, and Johnnie Walker all performed well.

Finally in APAC, although Guinness organic growth was impacted by the route to Market changes in China and Australia in the latter. The brands. So strong double digit growth in distribution and record on trade market, share.

During half 1, we've made good progress with accelerate with around 50% of the 625 million of total savings. Now expected to be delivered in physical 26.

Speaker #2: In APAC, performance was adversely impacted by weaker Chinese white spirits consumption as a result of market policy. Excluding Chinese white spirits, APAC would have reported slightly positive net sales growth.

I have previously shared that these savings were expected to be greater in the second half and consistent with this resource circle of 40% of the total estimated Savings in the first half.

Speaker #2: Additionally, and as we guided previously, we saw some impact across the region from the later Chinese New Year, as well as the macroeconomic impact in North Asia.

Taking use for the main drivers. The majority of the accelerate Savings in the first half were in Supply agility and cost efficiencies as well as through A&P, which I will come back to shortly.

Speaker #2: I mentioned earlier that India delivered strong results from both core brands and innovation, and successful recruitment. Royal Challenge, Smirnoff, and Johnnie Walker all performed well.

there were also some Savings in overheads but these are smaller and related to improved, cost control and corporate functions, as well as some headcount reductions

Speaker #2: Finally, in APAC, although Guinness organic growth was impacted by the route-to-market changes in China and Australia, in the latter, the brands saw strong double-digit growth in distribution and record on-trade market share.

[Company Representative] (Diageo): Finally, in Asia Pacific, although Guinness organic growth was impacted by the route to market changes in China and Australia, in the latter, the brand saw strong double-digit growth in distribution and record on-trade market share. During half one, we've made good progress with Accelerate, with around 50% of the $625 million of total savings now expected to be delivered in fiscal 2026. I have previously shared that these savings were expected to be greater in the second half, and consistent with this, we saw circa 40% of the total estimated savings in the first half. Taking you through the main drivers, the majority of the Accelerate savings in the first half were in supply agility and cost efficiencies, as well as through A&P, which I will come back to shortly.

Nik Jhangiani: Finally, in Asia Pacific, although Guinness organic growth was impacted by the route to market changes in China and Australia, in the latter, the brand saw strong double-digit growth in distribution and record on-trade market share. During half one, we've made good progress with Accelerate, with around 50% of the $625 million of total savings now expected to be delivered in fiscal 2026. I have previously shared that these savings were expected to be greater in the second half, and consistent with this, we saw circa 40% of the total estimated savings in the first half. Taking you through the main drivers, the majority of the Accelerate savings in the first half were in supply agility and cost efficiencies, as well as through A&P, which I will come back to shortly.

On Supply agility. We benefited from improved utilization rates, facility and Logistics optimization and digital supply chain transformation. For example, using sip are Scotch intelligence platform

Speaker #2: During half one, we've made good progress with Axelerate, with around 50% of the $625 million of total savings now expected to be delivered in fiscal '26.

Speaker #2: I had previously shared that these savings were expected to be greater in the second half, and consistent with this, we saw circa 40% of the total estimated savings in the first half.

You will recall the other bucket we shared that would drive accelerate savings with straight efficiency which we have always said would take longer to come through in the first half. We didn't see any savings from this. As we say, we are typically tied to renegotiations with our large customers, which are normally on a calendar year basis.

Speaker #2: Taking you through the main drivers, the majority of the Axelerate savings in the first half were in supply agility and cost efficiencies, as well as through ANP, which I will come back to shortly.

On mmm, let me start by saying that nothing has changed in terms of our commitment to investing in our brands for the future.

Speaker #2: There were also some savings in overheads, but these were smaller and related to improved cost control and corporate functions, as well as some headcount reductions.

[Company Representative] (Diageo): There were also some savings in overheads, but these were smaller and related to improved cost control and corporate functions, as well as some headcount reductions. On supply agility, we benefited from improved utilization rates, facility and logistics optimization, and digital supply chain transformation. For example, using SIP, our Scotch Intelligence Platform. You will recall the other bucket we shared that would drive Accelerate savings was trade efficiency, which we have always said would take longer to come through. In the first half, we didn't see any savings from this, as these savings are typically tied to renegotiations with our large customers, which are normally on a calendar year basis. On A&P, let me start by saying that nothing has changed in terms of our commitment to investing in our brands for the future.

Nik Jhangiani: There were also some savings in overheads, but these were smaller and related to improved cost control and corporate functions, as well as some headcount reductions. On supply agility, we benefited from improved utilization rates, facility and logistics optimization, and digital supply chain transformation. For example, using SIP, our Scotch Intelligence Platform. You will recall the other bucket we shared that would drive Accelerate savings was trade efficiency, which we have always said would take longer to come through. In the first half, we didn't see any savings from this, as these savings are typically tied to renegotiations with our large customers, which are normally on a calendar year basis. On A&P, let me start by saying that nothing has changed in terms of our commitment to investing in our brands for the future.

However, we are committed to being more effective and efficient with our spend and being choice where we invest and where we may choose not to given the market conditions.

Speaker #2: On supply agility, we benefited from improved utilization rates, facility and logistics optimization, and digital supply chain transformation—for example, using SIP, our Spot Intelligence Platform.

Our tools such as catalysts are helping us to do this and to maximize both Roi and volume. For example, during the first half, we visited investment tours Guinness in Europe, and we've reallocated investments from Spirits to rtds in Brazil.

Speaker #2: You will recall the other bucket we shared that would drive Axelerate savings was trade efficiency, which we have always said would take longer to come through.

Speaker #2: In the first half, we didn't see any savings from this, as these savings are typically tied to renegotiations with our large customers, which are normally on a calendar year basis.

You will have seen in the stand down. So the 10% on last year taking you through the reasons for this and consistent with accelerate. We saw Savings in amb primarily from lower development costs, which were 15% of the amp spend compared with about 17.5% last year.

I have shared some examples of the areas of savings on the slide.

Speaker #2: On ANP, let me start by saying that nothing has changed in terms of our commitment to investing in our brands for the future. However, we are committed to being more effective and efficient with our spend, and being choiceful where we invest and where we may choose not to, given the market conditions.

AI content using virtual content Studios facilitating Market customization at scale. Procurement savings with improved rates in new contracts.

[Company Representative] (Diageo): However, we are committed to being more effective and efficient with our spend and being choiceful where we invest and where we need to not to, given the market conditions. Our tools, such as Catalyst, are helping us to do this and to maximize both ROI and volume. For example, during the first half, we pivoted investment towards Guinness in Europe, and we reallocated investment from spirits to RTDs in Brazil. You will have seen A&P spend down circa 10% on last year. Taking you through the reasons for this, and consistent with Accelerate, we saw savings in A&P, primarily from lower development costs, which were 15% of A&P spend, compared with about 17.5% last year. I have shared some examples of the areas of savings on the slide.

Nik Jhangiani: However, we are committed to being more effective and efficient with our spend and being choiceful where we invest and where we need to not to, given the market conditions. Our tools, such as Catalyst, are helping us to do this and to maximize both ROI and volume. For example, during the first half, we pivoted investment towards Guinness in Europe, and we reallocated investment from spirits to RTDs in Brazil. You will have seen A&P spend down circa 10% on last year. Taking you through the reasons for this, and consistent with Accelerate, we saw savings in A&P, primarily from lower development costs, which were 15% of A&P spend, compared with about 17.5% last year. I have shared some examples of the areas of savings on the slide.

Speaker #2: Our tools, such as catalysts, are helping us to do this and to maximize both ROI and volume. For example, during the first half, we pivoted investment to Guinness in Europe, and we reallocated investment from spirits to RTDs in Brazil.

Concentrated development spend on fewer bigger opportunities, Johnny Walker, is a great example of this which supported brand growth. And finally, smart media buying using allocation tools to maximize returns

Speaker #2: You will have seen ANP spend down circa 10% on last year. Taking you through the reasons for this, and consistent with Axelerate, we saw savings in ANP primarily from lower development costs, which were 15% of ANP spend compared with about 17.5% last year.

Let me now take you through the movement in net sales for the half year. In more detail the 4 digit. Net sales. We plan 4% with Organic sales Decline, and the adverse impact of Acquisitions and disposals only partially mitigated by favorable foreign exchange and hyperinflation adjustments.

.9% a solid volume broken Africa was offset by volume Ross's across. The other 4 regions.

Speaker #2: I have shared some examples of the areas of savings on the slide. AI content using virtual content studios facilitating market customization at scale, procurement savings with improved rates and new contracts, concentrated development spend on fewer, bigger opportunities—Johnnie Walker is a great example of this, which supported brand growth—and, finally, smart media buying using allocation tools to maximize returns.

Excluding the impact of Chinese, white Spirits volumes were down, approximately half of the Senate.

[Company Representative] (Diageo): AI content using virtual content studios, facilitating market customization at scale, procurement savings with improved rates and new contracts, concentrated development spend on fewer, bigger opportunities. Johnnie Walker is a great example of this, which supported brand growth. Finally, smart media buying, using allocation tools to maximize returns. Let me now take you through the movement in net sales for the half year in more detail. Reported net sales declined 4%, with organic sales decline and the adverse impact of acquisitions and disposals, only partly mitigated by favorable foreign exchange and hyperinflation adjustments. Organic volume declined 0.9%, as solid volume growth in Africa was offset by volume losses across the other four regions. Excluding the impact of Chinese white spirits, volumes were down approximately 0.5%.

Nik Jhangiani: AI content using virtual content studios, facilitating market customization at scale, procurement savings with improved rates and new contracts, concentrated development spend on fewer, bigger opportunities. Johnnie Walker is a great example of this, which supported brand growth. Finally, smart media buying, using allocation tools to maximize returns. Let me now take you through the movement in net sales for the half year in more detail. Reported net sales declined 4%, with organic sales decline and the adverse impact of acquisitions and disposals, only partly mitigated by favorable foreign exchange and hyperinflation adjustments. Organic volume declined 0.9%, as solid volume growth in Africa was offset by volume losses across the other four regions. Excluding the impact of Chinese white spirits, volumes were down approximately 0.5%.

Europe lacked in Africa, delivered positive price, mix with 1.9% climb at group level driven mainly by the adverse impact of Chinese white Spirits, weakness, in China, and the decline in US Spirits primarily due to Tequila, as I talked to earlier,

if you were to exclude the impact of Chinese white Spirits price, mix would have been broadly flat

Speaker #2: Let me now take you through the movement in net sales for the half year in more detail. Reported net sales declined 4%, with organic sales decline and the adverse impact of acquisitions and disposals only partly mitigated by favorable foreign exchange and hyperinflation adjustments.

The negative impact from Acquisitions and disposals was due to the disposal of Guinness Ghana at the beginning of the half and disposals of Guinness. Nigeria completed in September 24, and syrup completed in the fourth quarter of fiscal 25.

Speaker #2: Organic volume declined 0.9%, as solid volume growth in Africa was offset by volume losses across the other four regions. Excluding the impact of Chinese white spirits, volumes were down approximately half a percent.

The positive impact of foreign exchange was primarily driven by favorable movement on Sterling. In Europe, partly offset by adverse impact of the Turkish Bureau.

Turning now to the movement and operating profit for the half year.

[Company Representative] (Diageo): Europe, LAC and Africa delivered positive price mix with 1.9% decline at group level, driven mainly by the adverse impact of Chinese white spirits weakness in China, and the decline in US spirits, primarily due to tequila, as I talked to earlier. If you were to exclude the impact of Chinese white spirits, price mix would have been broadly flat. The negative impact from acquisitions and disposals was due to the disposal of Guinness Ghana at the beginning of the half and disposals of Guinness Nigeria, completed in September 2024, and Cîroc, completed in Q4 of fiscal 2025. The positive impact of foreign exchange was primarily driven by favorable movement on sterling and euro, partly offset by adverse impact of the Turkish lira. Turning now to the movement in operating profit for the half year.

Nik Jhangiani: Europe, LAC and Africa delivered positive price mix with 1.9% decline at group level, driven mainly by the adverse impact of Chinese white spirits weakness in China, and the decline in US spirits, primarily due to tequila, as I talked to earlier. If you were to exclude the impact of Chinese white spirits, price mix would have been broadly flat. The negative impact from acquisitions and disposals was due to the disposal of Guinness Ghana at the beginning of the half and disposals of Guinness Nigeria, completed in September 2024, and Cîroc, completed in Q4 of fiscal 2025. The positive impact of foreign exchange was primarily driven by favorable movement on sterling and euro, partly offset by adverse impact of the Turkish lira. Turning now to the movement in operating profit for the half year.

Speaker #2: Europe lagged, in Africa delivered positive price mix, with a 1.9% decline at group level driven mainly by the adverse impact of Chinese white spirits' weakness in China.

Reported offering profit before, exceptionals declined, Circa 3 and a half percent as lower gross profit and the movement in Acquisitions and disposals was in part mitigated. By lower marketing, spend overheads and FX benefits.

Speaker #2: And the decline in US spirits was primarily due to tequila, as I talked to earlier. If you were to exclude the impact of Chinese white spirits, price mix would have been broadly flat.

Gross profit declined, 324 million organically driven by Topline performance adverse product, mix cost inflation and tariffs.

Speaker #2: The negative impact from acquisitions and disposals was due to the disposal of Guinness Ghana at the beginning of the half, and disposals of Guinness Nigeria completed in September ’24 and Ciroc completed in the fourth quarter of fiscal ’25.

Efficiencies across manufacturing Logistics and Supply networks, partly mitigated this with gross margin remain, broadly flat.

Lower marketing, spend provided 178 million benefit to operating profit, which I talked to earlier.

Speaker #2: The positive impact of foreign exchange was primarily driven by favorable movement on sterling and euro, partly offset by the adverse impact of the Turkish lira.

Speaker #2: Turning now to the movement in operating profit for the half year, reported operating profit before exceptionals declined circa 3.5%, as lower gross profit and the movement in acquisitions and disposals was in part mitigated by lower marketing spend, overheads, and FX benefits.

[Company Representative] (Diageo): Reported operating profit before exceptionals declined circa 3.5%, as lower gross profit and the movement in acquisitions and disposals was in part mitigated by lower marketing spend, overheads, and FX benefits. Gross profit declined $324 million organically, driven by top-line performance, adverse product mix, cost inflation, and tariffs. Efficiencies across manufacturing, logistics, and supply networks partly mitigated this, with gross margin remaining broadly flat. Lower marketing spend provided a $178 million benefit to operating profit, which I talked to earlier. Overhead savings were largely due to lower indirect overhead costs, given savings from the Accelerate program, such as optimized IT costs.

Nik Jhangiani: Reported operating profit before exceptionals declined circa 3.5%, as lower gross profit and the movement in acquisitions and disposals was in part mitigated by lower marketing spend, overheads, and FX benefits. Gross profit declined $324 million organically, driven by top-line performance, adverse product mix, cost inflation, and tariffs. Efficiencies across manufacturing, logistics, and supply networks partly mitigated this, with gross margin remaining broadly flat. Lower marketing spend provided a $178 million benefit to operating profit, which I talked to earlier. Overhead savings were largely due to lower indirect overhead costs, given savings from the Accelerate program, such as optimized IT costs.

Overhead savings were largely due to lower indirect overhead costs given savings from the accelerate program, such as optimized item costs. We'll need to cash free cash flow decreased by 164 million versus half 1 fiscal 25 to just over 1.5 billion representing approximately half of the 3 billion dollars guided to for the folio.

Speaker #2: Gross profit declined $324 million organically, driven by top-line performance, adverse product mix, cost inflation, and tariffs. Efficiencies across manufacturing, logistics, and supply networks partly mitigated this, with gross margin remaining broadly flat.

This was because we lacked a very favorable movement, incredible balances in the prior year and also a lower creditor balance at the end of the half.

Importantly, credited days compared to Prior more, broadly flat.

The cash outflow from maturing stock in the half was minimal as we continue to optimize investment in our mid to long-term maturing liquid requirements.

Speaker #2: Lower marketing spend provided a $178 million benefit to operating profit, which I mentioned earlier. Overhead savings were largely due to lower indirect overhead costs, given savings from the Axelerate program, such as optimized IQ costs.

Tax paid was lowered due to low operating profit and the timing of payments. And net interest paid reduced given both a lower effective interest rate and the capitalization of certain borrowing costs.

Speaker #2: Moving to cash, free cash flow decreased by $164 million versus half one fiscal '25 to just over $1.5 billion, representing approximately half of the $3 billion guided to for the full year.

[Company Representative] (Diageo): Moving to cash, free cash flow decreased by $164 million versus H1 fiscal 2025, to just over $1.5 billion, representing approximately half of the $3 billion guided to for the full year. This was because we lacked a very favorable movement in creditor balances in the prior year, and also a lower creditor balance at the end of the half. Importantly, creditor days compared to prior year were broadly flat. The cash outflow from maturing stock in the half was minimal, as we continued to optimize investment in our mid to long-term maturing liquid requirements. Tax paid was lower due to lower operating profit, and the timing of payments and net interest paid reduced, given both a lower effective interest rate and the capitalization of certain borrowing costs.

Nik Jhangiani: Moving to cash, free cash flow decreased by $164 million versus H1 fiscal 2025, to just over $1.5 billion, representing approximately half of the $3 billion guided to for the full year. This was because we lacked a very favorable movement in creditor balances in the prior year, and also a lower creditor balance at the end of the half. Importantly, creditor days compared to prior year were broadly flat. The cash outflow from maturing stock in the half was minimal, as we continued to optimize investment in our mid to long-term maturing liquid requirements. Tax paid was lower due to lower operating profit, and the timing of payments and net interest paid reduced, given both a lower effective interest rate and the capitalization of certain borrowing costs.

Speaker #2: This was because we lacked a very favorable movement in credit balances in the prior year, and also had a lower credit balance at the end of the half.

Capex was approximately 50090 million, the decrease of about 40 million on last year, reflecting a disciplined approach to investing in projects including Guinness production capacity, extension Supply agility and digital infrastructure. Our full year. Guidance for capex remains unchanged at the lower end of the 1.2 to 1.3 billion range.

Speaker #2: Importantly, creditor days compared to the prior year were broadly flat. The cash outflow from maturing stock in the half was minimal, as we continued to optimize investment in our mid- to long-term maturing liquid requirements.

EPS, pre exceptionals declined, 2 and a half percent on last year to 95.3% and lapping the impact of disposals.

Speaker #2: Tax paid was lower due to lower operating profit and the timing of payments, and net interest paid reduced given both a lower effective interest rate and the capitalization of certain borrowing costs.

There was also some offset from a lower tax charge and reduced minority interests as previously. Guided, I exceptionals were significantly reduced versus fiscal 25 with details shared in the appendix.

Speaker #2: CapEx was approximately $590 million, a decrease of about $40 million on last year, reflecting a disciplined approach to investing in projects including Guinness production capacity expansion, supply agility, and digital infrastructure.

[Company Representative] (Diageo): CapEx was approximately $590 million, a decrease of about $40 million on last year, reflecting a disciplined approach to investing in projects, including Guinness production, capacity expansion, supply, agility, and digital infrastructure. Our full year guidance for CapEx remains unchanged at the lower end of the $1.2 to 1.3 billion range. EPS pre-exceptionals declined 2.5% of last year to $0.953, largely driven by the impact of lower organic operating profit and lapping the impact of disposals. There was also some offset from a lower tax charge and reduced minority interests. As previously guided, our exceptionals were significantly reduced versus fiscal 2025, with details shared in the appendix.

Nik Jhangiani: CapEx was approximately $590 million, a decrease of about $40 million on last year, reflecting a disciplined approach to investing in projects, including Guinness production, capacity expansion, supply, agility, and digital infrastructure. Our full year guidance for CapEx remains unchanged at the lower end of the $1.2 to 1.3 billion range. EPS pre-exceptionals declined 2.5% of last year to $0.953, largely driven by the impact of lower organic operating profit and lapping the impact of disposals. There was also some offset from a lower tax charge and reduced minority interests. As previously guided, our exceptionals were significantly reduced versus fiscal 2025, with details shared in the appendix.

Moving to the balance sheet, we closed the half with lower net debt of 21.7 billion. A small decrease compared with the balance at the end of fiscal 25.

Speaker #2: Our full-year guidance for CapEx remains unchanged at the lower end of the $1.2 to $1.3 billion range. EPS pre-exceptionals declined 2.5% on last year to 95.3 cents, largely driven by the impact of lower organic operating profit and lapping the impact of disposals.

Given our leverage ratio, remain flat, compared to June 2025. As a reminder, we have guided that the completion of the sale of our 65% shareholding, eabl announced in December, is expected to de-lever our balance sheet by Circa, 0.25, turns and we are making progress to the Strategic review by USL of this ownership in Royal Challengers Bangalore.

Speaker #2: There was also some offset from a lower tax charge and reduced minority interest. As previously guided, our exceptionals were significantly reduced versus fiscal '25, with details shared in the appendix.

This is consistent with our guidance to deliver and strengthen our balance sheet and increase Financial flexibility.

Let me take you through our difficult. 26 guidance. Firstly, we've updated organic, net, sales growth guidance. Given further weakness in the US.

Speaker #2: Moving to the balance sheet, we closed the half with lower net debt of $21.7 billion, a small decrease compared with the balance at the end of fiscal '25.

[Company Representative] (Diageo): Moving to the balance sheet, we closed the half with lower net debt of $21.7 billion, a small decrease compared with the balance at the end of fiscal 2025. Given lower EBITDA year-on-year, our leverage ratio remained flat compared to June 2025. As a reminder, we have guided that the completion of the sale of our 65% shareholding in EABL, announced in December, is expected to delever our balance sheet by circa 0.25 terms. We are making progress through the strategic review by USL of its ownership in Royal Challengers Bengaluru. This is consistent with our guidance to delever and strengthen our balance sheet and increase financial flexibility. Let me take you through our fiscal 2026 guidance. Firstly, we've updated organic net sales growth guidance, given further weakness in the US.

Nik Jhangiani: Moving to the balance sheet, we closed the half with lower net debt of $21.7 billion, a small decrease compared with the balance at the end of fiscal 2025. Given lower EBITDA year-on-year, our leverage ratio remained flat compared to June 2025. As a reminder, we have guided that the completion of the sale of our 65% shareholding in EABL, announced in December, is expected to delever our balance sheet by circa 0.25 terms. We are making progress through the strategic review by USL of its ownership in Royal Challengers Bengaluru. This is consistent with our guidance to delever and strengthen our balance sheet and increase financial flexibility. Let me take you through our fiscal 2026 guidance. Firstly, we've updated organic net sales growth guidance, given further weakness in the US.

We now expect this to be down 2 to 3%, which Compares with flat slightly down previously.

Speaker #2: Given lower EBITDA year on year, our leverage ratio remained flat compared to June 2025. As a reminder, we have guided that the completion of the sale of our 65% shareholding in EABL announced in December is expected to delever our balance sheet by circa 0.25 turns, and we are making progress through the strategic review by USL of its ownership in Royal Challengers Bangalore.

Change. We've also updated our gaming operating profit guidance which is now expected to be flat to up low single digits. This Compares with low to mid single digit growth before.

this includes the impact of tariffs, assuming a 10% rate on UK Imports and a 15% rate on European Imports as well as assuming that the US MCA exemption remains

Speaker #2: This is consistent with our guidance to delever and strengthen our balance sheet and increase financial flexibility. Let me take you through our fiscal '26 guidance.

However, we note that the recent ruling on tariff policy by the United States Supreme Court has increased uncertainty, and potentially increased risk surrounding the impact of us tariff policy, which we continue to Monitor and are not updated our guidance for this.

Speaker #2: Firstly, we've updated organic net sales growth guidance given further weakness in the US. We now expect this to be down 2 to 3 percent, which compares with flat to slightly down previously.

Our tax interest and capex guidance are all unchanged. From what we share previously as shown on the slide.

[Company Representative] (Diageo): We now expect this to be down 2% to 3%, which compares with flat, slightly down previously. As a result of this change, we've also updated our organic operating profit guidance, which is now expected to be flat to up low single digits. This compares with low to mid single digit growth before. This includes the impact of tariffs, assuming a 10% rate on UK imports and a 15% rate on European imports, as well as assuming that the USMCA exemption remains. However, we note that the recent ruling on tariff policy by the United States Supreme Court has increased uncertainty and potentially increased risk surrounding the impact of US tariff policy, which we continue to monitor and have not updated our guidance for this. Our tax, interest, and CapEx guidance are all unchanged from what we shared previously, as shown on the slide.

Nik Jhangiani: We now expect this to be down 2% to 3%, which compares with flat, slightly down previously. As a result of this change, we've also updated our organic operating profit guidance, which is now expected to be flat to up low single digits. This compares with low to mid single digit growth before. This includes the impact of tariffs, assuming a 10% rate on UK imports and a 15% rate on European imports, as well as assuming that the USMCA exemption remains. However, we note that the recent ruling on tariff policy by the United States Supreme Court has increased uncertainty and potentially increased risk surrounding the impact of US tariff policy, which we continue to monitor and have not updated our guidance for this. Our tax, interest, and CapEx guidance are all unchanged from what we shared previously, as shown on the slide.

Speaker #2: As a result of this change, we've also updated our organic operating profit guidance, which is now expected to be flat to up low single digits.

Speaker #2: This compares with low- to mid-single-digit growth before. This includes the impact of tariffs, assuming a 10% rate on UK imports and a 15% rate on European imports, as well as assuming that the remains.

Finally on free cash flow. We have reiterated, our 3 billion guidance for fiscal 26. As a reminder, this is after exceptional costs relating to accelerate. However, it does not include an approximate 100 million. 1-off impact on working capital given inventory, Bill ahead of the implementation of S4 Hannah in early fiscal 27,

And with that, left hand back today.

Speaker #2: However, we note that the recent ruling on tariff policy by the United States Supreme Court has increased uncertainty and potentially increased risk surrounding the impact of U.S. tariff policy, which we continue to monitor and have not updated our guidance for this.

Thanks, Nick. As I said at the introduction, I'm 7 weeks in.

It's been pretty intense. It's been great meeting the team about a fantastic. Welcome and the energy in the business is really very high and infectious. This energy is going to be crucial and a key, requirement to the tenor and journey ahead.

Speaker #2: Our tax, interest, and CapEx guidance are all unchanged from what we shared previously, as shown on the slide. Finally, on free cash flow, we have reiterated our $3 billion guidance for fiscal 2026.

[Company Representative] (Diageo): Finally, on free cash flow, we have reiterated our $3 billion guidance for fiscal 2026. As a reminder, this is after exceptional costs relating to Accelerate. However, it does not include an approximate $100 million one-off impact on working capital, given inventory build ahead of the implementation of S/4HANA in early fiscal 2027. With that, let me hand back to Dave.

Nik Jhangiani: Finally, on free cash flow, we have reiterated our $3 billion guidance for fiscal 2026. As a reminder, this is after exceptional costs relating to Accelerate. However, it does not include an approximate $100 million one-off impact on working capital, given inventory build ahead of the implementation of S/4HANA in early fiscal 2027. With that, let me hand back to Dave.

In the last 7 weeks. I spent time in North America, in New York, Florida, Texas. I spent time with the whole Latin American team in Colombia. And I spent time in Europe, Middle East and India, as well as getting functional briefings here in London.

Speaker #2: As a reminder, this is after exceptional costs relating to Axelerate. However, it does not include an approximate $100 million one-off impact on working capital, given inventory build ahead of the implementation of S4 HANA in early fiscal ’27.

Obviously, the induction is not complete.

We'll take 2 weeks out now for the results and then I'll spend time in Africa and in Asia.

We're looking to have an updated strategy proposal for the board in calendar Q2 before sharing with the market made calendar. Q3

Speaker #2: And with that, let me hand back to Dave.

Speaker #1: Thanks, Nick. As I said at the introduction, I'm seven weeks in. It's been pretty intense. It's been great meeting the team. I've had a fantastic welcome, and the energy in the business is really very high and infectious. This energy is going to be crucial and a key requirement to the turnaround journey ahead.

Dave: Thanks, Nick. As I said at the introduction, I'm seven weeks in. It's been pretty intense. It's been great meeting the team. I've had a fantastic welcome, and the energy in the business is really very high and infectious. This energy is gonna be crucial and a key requirement to the turnaround journey ahead. In the last seven weeks, I've spent time in North America, in New York, Florida, and Texas. I've spent time with the whole Latin American team in Colombia, and I spent time in Europe, Middle East, and India, as well as getting functional briefings here in London. Obviously, the induction is not complete. We'll take two weeks out now for the results, and then I'll spend time in Africa and in Asia. We're looking to have an updated strategy proposal for the board in calendar Q2 before sharing with the market mid calendar Q3.

Dave Lewis: Thanks, Nick. As I said at the introduction, I'm seven weeks in. It's been pretty intense. It's been great meeting the team. I've had a fantastic welcome, and the energy in the business is really very high and infectious. This energy is gonna be crucial and a key requirement to the turnaround journey ahead. In the last seven weeks, I've spent time in North America, in New York, Florida, and Texas. I've spent time with the whole Latin American team in Colombia, and I spent time in Europe, Middle East, and India, as well as getting functional briefings here in London. Obviously, the induction is not complete. We'll take two weeks out now for the results, and then I'll spend time in Africa and in Asia. We're looking to have an updated strategy proposal for the board in calendar Q2 before sharing with the market mid calendar Q3.

But the business moves on and as Nick says, we Face from challenges now so I want to share with you a few first impressions before sharing 3 immediate priorities that will guide our endeavors before sharing with you any strategy revision.

I understand that the commentary of TVA, but I'd like to focus where our business actually is spirits and beer.

Speaker #1: In the last seven weeks, I spent time in North America—in New York, Florida, and Texas. I spent time with the whole Latin American team in Colombia, and I spent time in Europe, the Middle East, and India, as well as getting functional briefings here in London.

Spirits including rcd format account for more than 18% of our sales and if they are Guinness, we get to more than 95% of our business.

The spirits category is a very very stable category. In fact, it's 1 of the most stable I've ever seen.

Speaker #1: Obviously, the induction is not complete. We'll take two weeks out now for the results, and then I'll spend time in Africa and in Asia.

Between 2010 and 2024 volume growth is around 30%.

The significant feature of the market.

Is the strong Trend to premiumization.

Speaker #1: We're looking to have an updated strategy proposal for the Board in calendar Q2 before sharing with the market mid-calendar Q3. For the business moves on, and as Nick says, we face some challenges now.

Dave: The business moves on, and as Nick says, we face some challenges now. I want to share with you a few first impressions before sharing three immediate priorities that will guide our endeavors before sharing with you any strategy revision. I understand the commentary of TBA, but I'd like to focus where our business actually is, spirits and beer. Spirits, including our RTD format, account for more than 80% of our sales, and if I add Guinness, we get to more than 95% of our business. The spirits category is a very, very stable category. In fact, it's one of the most stable I've ever seen. Between 2010 and 2024, volume growth is around 13%. The significant feature of the market is a strong trend to premiumization, and Diageo deserves great credit here for seeing the opportunity and driving this trend.

Dave Lewis: The business moves on, and as Nick says, we face some challenges now. I want to share with you a few first impressions before sharing three immediate priorities that will guide our endeavors before sharing with you any strategy revision. I understand the commentary of TBA, but I'd like to focus where our business actually is, spirits and beer. Spirits, including our RTD format, account for more than 80% of our sales, and if I add Guinness, we get to more than 95% of our business. The spirits category is a very, very stable category. In fact, it's one of the most stable I've ever seen. Between 2010 and 2024, volume growth is around 13%. The significant feature of the market is a strong trend to premiumization, and Diageo deserves great credit here for seeing the opportunity and driving this trend.

And the AIO deserves great credit here for seeing the opportunity and driving this trend. It was a fantastic strategy and it developed a portfolio of truly exceptional brands.

Speaker #1: So, I want to share with you a few first impressions before sharing three immediate priorities that will guide our endeavors, before sharing with you any strategy revision.

and was a fully recognized that there are factors affecting

Speaker #1: I understand that the country is TBA, but I’d like to focus on where our business actually is: spirits and beer. Spirits, including RCD format, account for more than 80% of our sales, and if I add Guinness, we get to more than 95% of our business.

This category and we'll continue to affect this category, going forward questions, like glp1, and the attitude of certain, sectors of society to the category. The core category drivers are still really stable.

On the chart, you see are the penetration frequency and the consumption profile for 4 of our key markets.

Speaker #1: The spirits category is a very, very stable category. In fact, it's one of the most stable I've ever seen. Between 2010 and 2024, volume growth is around 13%.

And what you see is that, penetration of spirits is really, very stable.

Speaker #1: The significant feature of the market is the strong trend to premiumization. And Diageo deserves great credit here for seeing the opportunity and driving this trend.

The consumption frequency of spirits is actually slightly increasing due to the different lifestyle that people. Now, follow a number of new occasions being in third places, as people consume on the go.

Speaker #1: It was a fantastic strategy, and it developed a portfolio of truly exceptional brands. And whilst I fully recognize that there are factors affecting this category, and will continue to affect this category going forward—questions like GLP-1 and the attitude of certain sectors of society to the category—the core category drivers are still really stable.

Dave: It was a fantastic strategy, and it developed a portfolio of truly exceptional brands. While I fully recognize that there are factors affecting this category, and will continue to affect this category going forward, questions like GLP-1 and the attitude of certain sectors of society to the category, the core category drivers are still really stable. On the chart, you see the penetration frequency and the consumption profile for four of our key markets. What you see is that penetration of spirits is really very stable. The consumption frequency of spirits is actually slightly increasing due to the different lifestyle that people now follow. A number of new occasions being in places as people consume on the go.

Dave Lewis: It was a fantastic strategy, and it developed a portfolio of truly exceptional brands. While I fully recognize that there are factors affecting this category, and will continue to affect this category going forward, questions like GLP-1 and the attitude of certain sectors of society to the category, the core category drivers are still really stable. On the chart, you see the penetration frequency and the consumption profile for four of our key markets. What you see is that penetration of spirits is really very stable. The consumption frequency of spirits is actually slightly increasing due to the different lifestyle that people now follow. A number of new occasions being in places as people consume on the go.

But it's the serves per occasion where we see the change.

And these fewer says per occasion, point to a pressure in the economics that our consumer groups are facing.

So, whilst they do not diminish at all factors, like glp1.

You know, all the attitudes towards the category at this moment in time, they show a very small impact on Spirits consumption, but there is a challenge, which is broader economically.

Speaker #1: On the chart you see, the penetration frequency and the consumption profile for four of our key markets. And what you see is that penetration of spirits is really very stable.

To get under the skin of this, I've been asking you to do as your team to focus first on consumers. How they live their lives before we even get to the alcohol category?

Disposable income.

Speaker #1: The consumption frequency of spirits is actually slightly increasing due to the different lifestyles that people now follow. The number of new occasions is also increasing, as people consume on the go and in more places.

Speaker #1: But it's the serves per occasion where we see the change. And these fewer serves per occasion point to a pressure in the economics that our consumer groups are facing.

Dave: It's the serves per occasion where we see the change, and these fewer serves per occasion point to a pressure in the economics that our consumer groups are facing. Whilst I do not diminish at all factors like GLP-1, you know, or the attitudes towards the category, at this moment in time, they show a very small impact on spirits consumption, but there is a challenge which is broader economically. To get under the skin of this, I've been asking the Diageo team to focus first on consumers, how they live their lives, before we even get to the alcohol category. What you see is a very significant squeeze on disposable income.

Dave Lewis: It's the serves per occasion where we see the change, and these fewer serves per occasion point to a pressure in the economics that our consumer groups are facing. Whilst I do not diminish at all factors like GLP-1, you know, or the attitudes towards the category, at this moment in time, they show a very small impact on spirits consumption, but there is a challenge which is broader economically. To get under the skin of this, I've been asking the Diageo team to focus first on consumers, how they live their lives, before we even get to the alcohol category. What you see is a very significant squeeze on disposable income.

Speaker #1: So, whilst I do not diminish at all factors like GLP-1, or the attitudes towards the category, at this moment in time, they show a very small impact on spirits consumption.

If you look at the charts on the left hand side and look at us households, this is a a basket of cpg, Staples over the last 5 years. And you see that the cost of that basket has increased by more than 25% and actually, the volume for that 25%, increase is some 8% fewer items. There's a very significant squeeze for us consumers and that's before you start talking about the cost of Health Care and other costs that us consumers are having to bear.

Speaker #1: But there is a challenge, which is broader economically. To get under the skin of this, I've been asking the Diageo team to focus first on consumers—how they live their lives—before we even get to the alcohol category.

Slightly different study in the UK looks at discretionary household expenditure. And you see the increase in the costs around the essentials, be that housing Fuel and power transport and and essential food and non-alcoholic drinks.

There's a change in profile also in terms of discretionary effort. And what you see is that in our category of alcohol, the spend is flat.

Speaker #1: And what you see is a very significant squeeze on disposable income. If you look at the chart on the left-hand side and look at US households, this is a basket of CPG staples over the last five years, and you see that the cost of that basket has increased by more than 25%. And actually, the volume for that 25% increase is some 8% fewer items.

Dave: If you look at the chart on the left-hand side and look at US households, this is a basket of CPG staples over the last five years, and you see that the cost of that basket has increased by more than 25%. Actually, the volume for that 25% increase is some 8% fewer items. There's a very significant squeeze for US consumers, and that's before you start talking about the cost of healthcare and other costs that US consumers are having to bear. Slightly different study in the UK looks at discretionary household expenditure, and you see the increase in the costs around the essentials, be that housing, fuel and power, transport, and essential food and non-alcoholic drinks. There's a change in profile also in terms of discretionary effort.

Dave Lewis: If you look at the chart on the left-hand side and look at US households, this is a basket of CPG staples over the last five years, and you see that the cost of that basket has increased by more than 25%. Actually, the volume for that 25% increase is some 8% fewer items. There's a very significant squeeze for US consumers, and that's before you start talking about the cost of healthcare and other costs that US consumers are having to bear. Slightly different study in the UK looks at discretionary household expenditure, and you see the increase in the costs around the essentials, be that housing, fuel and power, transport, and essential food and non-alcoholic drinks. There's a change in profile also in terms of discretionary effort.

It's not down, it's flat and whilst there's the inflation in the category. Is that consumption level? Uh, that I talked about earlier? In terms of service per occasion, that is the dynamic behind that flat but we need to recognize that the discretionary spending power of consumers, in key markets is under some pressure.

Speaker #1: There's a very significant squeeze for US consumers, and that's before you start talking about the cost of healthcare and other costs that US consumers are having to bear.

Looking at that a little more. If we start on the right hand side of this chart, we look at the North American Market, the USA Market by age,

Speaker #1: A slightly different study in the UK looks at discretionary household expenditure, and you see the increase in the costs around the essentials—be that housing, fuel and power, transport, and essential food and non-alcoholic drinks.

young people LPA to 34.

Penetration of spirits is actually slightly increasing.

The frequency is also up as people change their lifestyle.

But the service for occasion is dropping.

Speaker #1: There's a change in profile also in terms of discretionary effort. And what you see is that, in our category of alcohol, the spend is flat.

Dave: What you see is that in our category of alcohol, the spend is flat. It's not down, it's flat. Whilst there's been inflation in the category, it's that consumption level that I talked about earlier in terms of serves per occasion, that is the dynamic behind that flat. We need to recognize that the discretionary spending power of consumers in key markets is under some pressure. Looking at that a little more, if we start on the right-hand side of this chart, we look at the North American market, the USA market, by age. Young people, of the age of 34, penetration of spirits is actually slightly increasing. The frequency is also up as people change their lifestyle, but the serves per occasion is dropping, and this is mainly due to the economic factors I talked about before.

Dave Lewis: What you see is that in our category of alcohol, the spend is flat. It's not down, it's flat. Whilst there's been inflation in the category, it's that consumption level that I talked about earlier in terms of serves per occasion, that is the dynamic behind that flat. We need to recognize that the discretionary spending power of consumers in key markets is under some pressure. Looking at that a little more, if we start on the right-hand side of this chart, we look at the North American market, the USA market, by age. Young people, of the age of 34, penetration of spirits is actually slightly increasing. The frequency is also up as people change their lifestyle, but the serves per occasion is dropping, and this is mainly due to the economic factors I talked about before.

Speaker #1: It's not down, it's flat. And whilst there's been inflation in the category, it's that consumption level that I talked about earlier in terms observed per occasion.

And it's this is mainly due to the economic factors. I talked to about before. So on the left hand side, we try and recognize that there are a number of things that are impacting our category by Far and Away. The strongest is those pressurized consumer wallets. Yes, there is some moderation in drinking.

and there is

some impact from glp ones.

Speaker #1: That is the dynamic behind that flat . But we need to recognize that the discretionary spending power of consumers in key markets is under some pressure Looking at that a little more , if we start on the right hand side of this chart , we look at the North American market , the USA market by age , young people , lpas are 34 .

but it's small, when you think of spirits specifically,

We need to keep an eye out on the emerging substitutes. But as we speak today at a global level, these are small impact on the category.

So if that's the category, how are we done in this very stable space?

Speaker #1: Penetration of spirits is actually slightly increasing. The frequency is also up as people change their lifestyle. But the service for occasion is dropping, and this is mainly due to the economic factors I talked about before.

The chart shows you, he has used market, share again, going back to 2010.

and with all of that drive in premiumization that, you know, about our core share of spirits is up 118 basis points to 16.7%,

Speaker #1: So, on the left-hand side, we try and recognise that there are a number of things that are impacting our category. By far and away, the strongest is those pressurised consumer wallets.

Dave: On the left-hand side, we try and recognize that there are a number of things that are impacting our category. By far and away, the strongest is those pressurized consumer wallets. Yes, there is some moderation in drinking, and there is some impact from GLP-1, but it's small when you think of spirits specifically. We need to keep an eye out on the emerging substitutes, but as we speak today, at a global level, these are a small impact on the category. If that's the category, how have we done in this very stable space? The chart shows you Diageo's market share, again, going back to 2010, and with all of that drive in premiumization that you know about, our core share of spirits is up 118 basis points to 16.7%.

Dave Lewis: On the left-hand side, we try and recognize that there are a number of things that are impacting our category. By far and away, the strongest is those pressurized consumer wallets. Yes, there is some moderation in drinking, and there is some impact from GLP-1, but it's small when you think of spirits specifically. We need to keep an eye out on the emerging substitutes, but as we speak today, at a global level, these are a small impact on the category. If that's the category, how have we done in this very stable space? The chart shows you Diageo's market share, again, going back to 2010, and with all of that drive in premiumization that you know about, our core share of spirits is up 118 basis points to 16.7%.

However, if I include rtds, then I'll share a total spirit has come down by 46 basis points.

Speaker #1: Yes , there is some moderation in drinking and there is some impact from GLP one , but it's small when you think of spirits specifically , we need to keep an eye out on the emerging substitutes .

The majority of consumers come to our CDs with the same motivation of spirits.

They appreciate the convenience, the consistency, and the control, and very importantly, the lower out of pocket expenditure.

That accompanies those purchases.

Speaker #1: But as we speak today , at a global level , these are small impact on the category . So if that's the category , how are we done in this very stable space ?

So we have very stable shares in a very stable Spirit Market, but with a premium portfolio, which over the last 5 years is relatively got slightly more premium. Given the price makes changes Illustrated on the bottom of the chart.

Speaker #1: The chart shows you Diageo's market share, again, going back to 2010. And with all of that drive in premiumization that you know about, our core share of spirits is up 118 basis points to 16.7%.

so, if we look specifically at the US market as a key example,

The chart looks at the percentage of the market sold at each price point and compares, the Dio portfolio contribution.

Speaker #1: However, if I include RTDs, then our share of total spirits has come down by 46 basis points. The majority of consumers come to RTDs with the same motivation as spirits.

Dave: However, if I include RTDs, our share of total spirits has come down by 46 basis points. The majority of consumers come to RTDs with the same motivation as spirits. They appreciate the convenience, the consistency, and the control, and very importantly, the lower out-of-pocket expenditure that accompanies those purchases. We have very stable shares in a very stable spirits market, but with a premium portfolio, which over the last 5 years has relatively got slightly more premium, given the price mix changes illustrated on the bottom of the chart. If we look specifically at the US market as a key example, the chart looks at the percentage of the market sold at each price point and compares the Diageo portfolio contribution. For example, in the US spirits market, 21% of the market is sold in the US, $45 and above.

Dave Lewis: However, if I include RTDs, our share of total spirits has come down by 46 basis points. The majority of consumers come to RTDs with the same motivation as spirits. They appreciate the convenience, the consistency, and the control, and very importantly, the lower out-of-pocket expenditure that accompanies those purchases. We have very stable shares in a very stable spirits market, but with a premium portfolio, which over the last 5 years has relatively got slightly more premium, given the price mix changes illustrated on the bottom of the chart. If we look specifically at the US market as a key example, the chart looks at the percentage of the market sold at each price point and compares the Diageo portfolio contribution. For example, in the US spirits market, 21% of the market is sold in the US, $45 and above.

So for example, in the US Spirits Market, 21% of the market is sold in units, 45s and above for the AIO that percentage of our portfolio is 31%.

Speaker #1: They appreciate the convenience , the consistency and the control and very importantly , the lower out of pocket expenditure that accompanies those purchases .

In Tequila, the concentration is even more significant. 35% of the market, is above 45 and for the AIO. That's 70%.

Speaker #1: So we have very stable shares in a very stable spirits market. But with a premium portfolio, which over the last five years has relatively got slightly more premium, given the price mix changes illustrated on the bottom of the chart.

As a consequence in the mass Market part of the portfolio, we are significantly under represented. This is both a challenge and indeed an opportunity.

The final thing I will pull out of this chart is to look at the sales below ten dollars.

Speaker #1: So if we look specifically at the US market as a key example, the chart looks at the percentage of the market sold at each price point, and compares the Diageo portfolio contribution.

This recognizes a growth in small packs and again an economic pressure as found its way into the US category.

Speaker #1: So , for example , in the US , spirits market , 21% of the market is sold in units $45 and above for Diageo .

Dave: For Diageo, that percentage of our portfolio is 31%. In tequila, the concentration is even more significant. 35% of the market is above $45, and for Diageo, that's 70%. As a consequence, in the mass market, part of the portfolio, we are significantly underrepresented. This is both a challenge and indeed an opportunity. The final thing I will pull out of this chart is to look at the sales below $10. Again, as economic pressure has found its way into the US category, we see a down trading to smaller pack sizes. Here, if you look at US spirits, 9% of the market is now in those pack sizes, but Diageo's portfolio is only contributing 5% from that particular segment. Again, an opportunity for Diageo.

Dave Lewis: For Diageo, that percentage of our portfolio is 31%. In tequila, the concentration is even more significant. 35% of the market is above $45, and for Diageo, that's 70%. As a consequence, in the mass market, part of the portfolio, we are significantly underrepresented. This is both a challenge and indeed an opportunity. The final thing I will pull out of this chart is to look at the sales below $10. Again, as economic pressure has found its way into the US category, we see a down trading to smaller pack sizes. Here, if you look at US spirits, 9% of the market is now in those pack sizes, but Diageo's portfolio is only contributing 5% from that particular segment. Again, an opportunity for Diageo.

Speaker #1: That percentage of our portfolio is 31% . In tequila , the concentration is even more significant , 35% of the market is above $45 , and for Diageo , that's 70% .

Contributing 5% from that specific segment, again, an opportunity for the AIO.

if we move to rtds,

Speaker #1: As a consequence, in the mass market part of the portfolio, we are significantly underrepresented. This is both a challenge and indeed an opportunity.

this is an increasingly relevant role in the spirits socializing occasion on the left hand side.

Speaker #1: The final thing I would pull out of this chart is to look at the sales below $10. This recognizes a growth in small packs.

Significant to see how the AIO who created this category with the launch of snow ice circuit, 26 years ago. Uh drove a very significant share but a lot of focus on rtds since around. 2008 means that we now have a share of rtds which is below 10%.

Speaker #1: And again , as economic pressure has found its way into the US Category , we see a downtrading to smaller pack sizes and here , if you look at us , spirits , 9% of the market is now in those pack sizes .

from a high of more than 25%, at the time, when RTE share of the spirit Market has increased significantly, and is now around 15%, if you take those rtds and see where the growth is coming from,

Speaker #1: But Diageo's portfolio is only contributing 5% from that particular segment . Again , an opportunity for Diageo . If we move to Rtds , this is an increasingly relevant role in the spirits socialising occasion .

Dave: We move to RTDs, this is an increasingly relevant role in the spirits socializing occasion. On the left-hand side, significant to see how Diageo, who created this category with the launch of Smirnoff Ice circa 26 years ago, drove a very significant share. A lot of focus on RTDs since around 2008, means that we now have a share of RTDs, which is below 10%, from a high of more than 25%, at the time when RTD share of the spirits market has increased significantly and is now around 15%. You take those RTDs and see where the growth is coming from, you can see that of the GBP 8 billion of growth between 2021 and 2024, 50% of the growth is in their higher ABV ready-to-drink segment.

Dave Lewis: We move to RTDs, this is an increasingly relevant role in the spirits socializing occasion. On the left-hand side, significant to see how Diageo, who created this category with the launch of Smirnoff Ice circa 26 years ago, drove a very significant share. A lot of focus on RTDs since around 2008, means that we now have a share of RTDs, which is below 10%, from a high of more than 25%, at the time when RTD share of the spirits market has increased significantly and is now around 15%. You take those RTDs and see where the growth is coming from, you can see that of the GBP 8 billion of growth between 2021 and 2024, 50% of the growth is in their higher ABV ready-to-drink segment.

Speaker #1: On the left-hand side, it's significant to see how Diageo, who created this category with the launch of Smirnoff Ice circa 26 years ago, drove a very significant share.

Uh, you can see that at the 8 billion of growth between 2021 and 2024. 50% of the growth is in their higher ABV related to drink segment. Again, giving some illustration of what it is, is happening in terms of attitude to alcohol. Young people are choosing rtds for their choosing rtds with higher ABV, which gives some indication of their attitude towards this category.

we believe that there's a very significant

Speaker #1: But a lot of focus on RTDs since around 2008 means that we now have a share of RTDs which is below 10%, down from a high of more than 25% at the time when RTDs' share of the spirits market has increased significantly and is now around 15%.

and profitable opportunity for Dio in LCDs, but we have work to do.

I'd like to talk a little about Guinness.

Speaker #1: If you take those RTDs and see where the growth is coming from, you can see that, of the $8 billion of growth between 2021 and 2024, 50% of the growth is in the higher ABV.

Speaker #1: Ready to drink segment . Again , giving some illustration of what it is it's happening in terms of attitude to alcohol , giving .

Guinness is a brand, I thought I knew from the outside of Dio a brand that I respected and admired. I thought it was a phenomenally strong brand before I joined the show. Uh now I can see it from the inside. It's even stronger than I thought. It's growing very strongly everywhere in North America. In the last period, is growing by more than 15%, and is the fastest growing beer brand in North America.

Dave: Again, giving some illustration of what it is that's happening in terms of attitude to alcohol. Young people are choosing RTDs, but they're choosing RTDs with higher ABV, which gives some indication of their attitude towards this category. We believe that there's a very significant and profitable opportunity for Diageo in RTDs, but we have work to do. I'd like to talk a little about Guinness. Guinness is a brand I thought I knew from the outside of Diageo, a brand that I respected and admired. I thought it was a phenomenally strong brand before I joined Diageo. Now I can see it from the inside, it's even stronger than I thought. It's growing very strongly everywhere. In North America, in the last period, it's growing by more than 15% and is the fastest growing beer brand in North America.

Dave Lewis: Again, giving some illustration of what it is that's happening in terms of attitude to alcohol. Young people are choosing RTDs, but they're choosing RTDs with higher ABV, which gives some indication of their attitude towards this category. We believe that there's a very significant and profitable opportunity for Diageo in RTDs, but we have work to do. I'd like to talk a little about Guinness. Guinness is a brand I thought I knew from the outside of Diageo, a brand that I respected and admired. I thought it was a phenomenally strong brand before I joined Diageo. Now I can see it from the inside, it's even stronger than I thought. It's growing very strongly everywhere. In North America, in the last period, it's growing by more than 15% and is the fastest growing beer brand in North America.

Its historic. We generally invested capital is very high.

Speaker #1: People are choosing rtds , but they're choosing rtds with higher ABV , which gives some indication of their attitude towards this category . We believe that there's a very significant , unprofitable opportunity for Diageo in Rtds , but we have work to do .

But you see from the chart on the right hand side that we are geographically constrained State markets are more than 85% of the business and if you try to buy a pint in uh London you also know that we have some capacity constraints, too.

Speaker #1: I'd like to talk a little about Guinness. Guinness as a brand. I thought I knew from the outside of Diageo, a brand that I respected and admired.

This capacity and geographical constraints is an issue that we need to address and quickly, but please be in no doubt. We're a phenomenal asset. I think the Guinness is so with that simplified overview of Reflections. I like to share my thoughts on how immediate priorities.

Speaker #1: I thought it was a phenomenally strong brand. Before I joined Diageo, and now I can see it from the inside. It's even stronger than I thought.

Immediate priority. Number 1.

Competitive category strategies winning with relevant brands.

Speaker #1: It's growing very strongly everywhere in North America. In the last period, it is growing by more than 15% and is the fastest growing beer brand in North America.

now, I've chosen these words, very deliberately

Competitive category, strategies.

Dio is known for its focus on brand.

Speaker #1: Its historic return on invested capital is very high, but you see from the chart on the right-hand side that we are geographically constrained.

Dave: Its historic return on invested capital is very high. You see from the chart on the right-hand side, that we are geographically constrained. 8 markets are more than 85% of the business, and if you've tried to buy a pint in London, you also know that we have some capacity constraints, too. This capacity and geographical constraint is an issue that we need to address, and quickly, but please be in no doubt what a phenomenal asset I think that Guinness is. With that simplified overview of reflections, I'd like to share my thoughts on our immediate priorities. Immediate priority number 1, competitive category strategies, winning with relevant brands. Now, I've chosen these words very deliberately. Competitive category strategies. Diageo is known for its focus on brand. I want to keep the focus on outstanding brands, but I'd like to add the category lens.

Dave Lewis: Its historic return on invested capital is very high. You see from the chart on the right-hand side, that we are geographically constrained. 8 markets are more than 85% of the business, and if you've tried to buy a pint in London, you also know that we have some capacity constraints, too. This capacity and geographical constraint is an issue that we need to address, and quickly, but please be in no doubt what a phenomenal asset I think that Guinness is. With that simplified overview of reflections, I'd like to share my thoughts on our immediate priorities. Immediate priority number 1, competitive category strategies, winning with relevant brands. Now, I've chosen these words very deliberately. Competitive category strategies. Diageo is known for its focus on brand. I want to keep the focus on outstanding brands, but I'd like to add the category lens.

Speaker #1: Eight markets are more than 85% of the business, and if you tried to buy a pint in London, you also know that we have some capacity constraints to this capacity.

I want to keep the focus on outstanding Brands but I'd like to add the category lens. It's our customers think and buy is our consumers navigate their off trade purchases.

Speaker #1: And geographical constraint is an issue that we need to address—and quickly. But please be in no doubt what a phenomenal asset.

Speaker #1: I think that Guinness is. So, with that simplified overview of reflections, I'd like to share my thoughts on our immediate priorities.

Speaker #1: Immediate priority number one , competitive category strategies . Winning with relevant brands . Now I've chosen these words very deliberately competitive category strategies Diageo is known for its focus on brand .

And it's the lens through which we can focus and leverage our Innovation resources rather than Brands because I believe there are some proposition spaces that are opportunities for the Azure but it's also relevant through the lens of price point and that's particularly relevant given the economic backdrop that I've shared earlier so we'll continue to invest in the premium portfolio being. No doubt. The premium portfolio is a massive asset. We will continue to invest in it, but we will also, in addition, explore new port for the opportunities that might involve some price repositioning and it might open up new proposition spaces.

Speaker #1: I want to keep the focus on outstanding brands, but I'd like to add the category lens. It's how our customers think.

Dave: It's how our customers think and buy. It's how our consumers navigate their off-trade purchases, and it's the lens through which we can focus and leverage our innovation resources. Relevant brands, because I believe there are some proposition spaces that are opportunities for Diageo, but it's also relevant through the lens of price point, and that's particularly relevant given the economic backdrop that I've shared earlier. We'll continue to invest in the premium portfolio. Be in no doubt, the premium portfolio is a massive asset. We will continue to invest in it, but we will also, in addition, explore new portfolio opportunities. That might involve some price repositioning, and it might open up new proposition spaces. In addition, we need to sharpen our price pack architecture and particularly address the opportunity that I've already referred to in the growth of small packs.

Dave Lewis: It's how our customers think and buy. It's how our consumers navigate their off-trade purchases, and it's the lens through which we can focus and leverage our innovation resources. Relevant brands, because I believe there are some proposition spaces that are opportunities for Diageo, but it's also relevant through the lens of price point, and that's particularly relevant given the economic backdrop that I've shared earlier. We'll continue to invest in the premium portfolio. Be in no doubt, the premium portfolio is a massive asset. We will continue to invest in it, but we will also, in addition, explore new portfolio opportunities. That might involve some price repositioning, and it might open up new proposition spaces. In addition, we need to sharpen our price pack architecture and particularly address the opportunity that I've already referred to in the growth of small packs.

Speaker #1: And buy . It's how our consumers navigate their off trade purchases , and it's the lens through which we can focus and leverage our innovation resources , relevant brands .

Speaker #1: Because I believe there are some proposition spaces that are opportunities for Diageo, but it's also relevance through the lens of price point, and particularly relevant given the economic backdrop that I've shared earlier.

Speaker #1: So we'll continue to invest in the premium portfolio , being no doubt the premium portfolio is a massive asset . We will continue to invest in it , but we will also in addition , explore new portfolio opportunities that might involve some price repositioning .

In addition, we need to sharpen our prize pack architecture and particularly address the opportunity that I've already referred to and the growth of small packs. The idea is that we build truly competitive category strategies and I'd like to illustrate 1 of those by sharing. An example, from the Middle East. This is the market UAE the team in UAE have been thinking about how it can serve all consumers in 1 of the markets which has really quite a strong premium consumer and brand portfolio, already. Let me briefly, explain the chart. What you see is from left to, right? All of the brands in the UAE Market

The uh, shaded columns.

Positioning the liter.

Speaker #1: And it might open up new proposition spaces. In addition, we need to sharpen our price pack architecture and particularly address the opportunity that I've already referred to.

What you see is?

Speaker #1: And the growth of small packs. The idea is that we build truly competitive category strategies, and I'd like to illustrate one of those by showing an example from the Middle East.

Dave: The idea is that we build truly competitive category strategies, and I'd like to illustrate one of those by sharing an example from the Middle East. This is the market, UAE. The team in UAE have been thinking about how it can serve all consumers in one of the markets, which has really quite a strong premium consumer and brand portfolio already. Let me briefly explain the chart. What you see is, from left to right, all of the brands in the UAE market. The shaded columns relate to the volume of that brand within that market, and the red line is their price positioning per liter.

Dave Lewis: The idea is that we build truly competitive category strategies, and I'd like to illustrate one of those by sharing an example from the Middle East. This is the market, UAE. The team in UAE have been thinking about how it can serve all consumers in one of the markets, which has really quite a strong premium consumer and brand portfolio already. Let me briefly explain the chart. What you see is, from left to right, all of the brands in the UAE market. The shaded columns relate to the volume of that brand within that market, and the red line is their price positioning per liter.

In the front and 2 that actually, what we've done, what the team in the UAE has done really, very well is introduced new premium offerings, Jay Walker black Ruby and bullet uh to show 2 on the right hand side but also a small reposition of price on black work, Johnny Walker, Black Label and red label.

Speaker #1: This is the market UAE. The team in UAE has been thinking about how it can serve all consumers in one of the markets, which really has quite a strong premium consumer and brand portfolio already.

Speaker #1: Let me briefly explain the chart. What you see is, from left to right, all of the brands in the UAE market. The shaded columns relate to the volume of that brand within that market, and the red line is their price positioning per litre.

Speaker #1: What you see is in the from and to that actually what we've done , what the team in the UAE has done really very well is introduced new premium offerings , Johnnie Walker Black Ruby and Bulleit to show two on the right hand side .

Dave: What you see is in the from and to, that actually, what we've done, what the team in the UAE has done really very well, is introduce new premium offerings, Johnnie Walker Black Ruby and Bulleit, to show two on the right-hand side. Also a small reposition in price on Johnnie Walker Black Label and Red Label. A significant repositioning of the about 69 Black & White and J&B Rare brands against a more value-based opportunity. What we do with this portfolio is we appeal to reach and service the broader consumer universe within that market. Whilst the percentage margin of the portfolio in today's portfolio is slightly diluted to that which we had before, the absolute quantum of gross profit is significantly higher.

Dave Lewis: What you see is in the from and to, that actually, what we've done, what the team in the UAE has done really very well, is introduce new premium offerings, Johnnie Walker Black Ruby and Bulleit, to show two on the right-hand side. Also a small reposition in price on Johnnie Walker Black Label and Red Label. A significant repositioning of the about 69 Black & White and J&B Rare brands against a more value-based opportunity. What we do with this portfolio is we appeal to reach and service the broader consumer universe within that market. Whilst the percentage margin of the portfolio in today's portfolio is slightly diluted to that which we had before, the absolute quantum of gross profit is significantly higher.

But a significant repositioning of the bat 69 black and white and J&B Rare Browns against the more value based opportunity. So what we do with this portfolio is we appeal to reach and service the broader consumer Universe within that market and whilst the percentage margin of the portfolio in today's portfolio is slightly diluted to that which we have before the absolute Quantum of gross profit is significantly higher. Put in another way. What's the percentage margin in the new portfolio is lower the value creation for shareholders is significantly greater in that view portfolio immediate priority too customer customer customer customer

Speaker #1: But also a small reposition of price on black Johnnie Walker Black Label . And Red label . But a significant repositioning of the VAT 69 black and white and JMB rare Brands against a more value based opportunity .

If there is 1 surprise over the last 7 weeks, it's the low level of investment in how we build and execute our business with our customers in the on trade. We know that this is key to how we build our brands.

Speaker #1: So what we do with this portfolio is we appeal to reach and service the broader consumer universe. Within that market, and whilst percentage margin of the portfolio in today's portfolio is slightly dilutive to that which we had before, the absolute quantum of gross profit is significantly higher.

Speaker #1: Put it another way: whilst the percentage margin in the new portfolio is lower, the value creation for shareholders is significantly greater in that new portfolio.

Dave: Put it another way, while the percentage margin in the new portfolio is lower, the value creation for shareholders is significantly greater in that new portfolio. Immediate priority 2: customer, customer. If there is 1 surprise over the last 7 weeks, it's the low level of investment in how we build and execute our business with our customers. In the on-trade, we know that this is key to how we build our brands. Our capability here was dismantled, understandably, during COVID, given the closure of that sector, but our build back has been slow and patchy, and therefore leads to an opportunity. I've seen the power of this done exceptionally well in Latin America and the Middle East, but we need to build that capability and invest in it around the world. Our customer service in the off-trade is, frankly, really very poor.

Dave Lewis: Put it another way, while the percentage margin in the new portfolio is lower, the value creation for shareholders is significantly greater in that new portfolio. Immediate priority 2: customer, customer. If there is 1 surprise over the last 7 weeks, it's the low level of investment in how we build and execute our business with our customers. In the on-trade, we know that this is key to how we build our brands. Our capability here was dismantled, understandably, during COVID, given the closure of that sector, but our build back has been slow and patchy, and therefore leads to an opportunity. I've seen the power of this done exceptionally well in Latin America and the Middle East, but we need to build that capability and invest in it around the world. Our customer service in the off-trade is, frankly, really very poor.

Our capability here was dismantled but understandably during coid given the closure of that sector, but our build back as being slow and patchy and therefore, leads to an opportunity. I've seen the power of this done exceptionally well in Latin America and the Middle East, but we need to build that capability and invest in it around the world. Our customer service in the off trade is frankly, really very poor I've shared with you here. The customer service levels are experiencing North America Latin America in the UK.

Speaker #1: Immediate priority two customer . Customer . Customer . If there is one surprise over the last seven weeks , it's the low level of investment in how we build and execute our business with our customers .

And they really are not acceptable. When we're looking for growth, the idea that we can't service the demand, that's there is both a source of significant regret but it's also an opportunity for us.

A big part of this is Guinness and the capacity constraint, I talked about earlier but it's not all.

Speaker #1: In the on trade , we know that this is key to how we build our brands . Our capability here was dismantled , understandably during Covid , given the closure of that sector , but our build back has been slow and patchy and therefore leads to an opportunity .

Speaker #1: I'd seen the power of this done exceptionally well in Latin America and the Middle East, but we need to build that capability and invest in it around the world.

And the systems and processes that we have in place that facilitate the engagements with our customers, frankly are just not fit for purpose. And if I told you that 60% of all the orders, uh, that the asio enters their into manually, it would give you some semblance for how developed those processes are. We need to address this? We need to start.

Speaker #1: Our customer service in the off trade is frankly , really very poor . I've shared with you here the customer service levels are experienced in North America , Latin America and the UK , and they really are not acceptable when we're looking for growth .

Dave: I've shared with you here the customer service level they experienced in North America, Latin America, and the UK. They really are not acceptable. When we're looking for growth, the idea that we can't service the demand that's there is both a source of significant regret, but it's also an opportunity for us. A big part of this is Guinness and the capacity constraint I talked about earlier. It's not all. The systems and processes that we have in place that facilitate the engagements with our customers, frankly, are just not fit for purpose. If I told you that 60% of all the orders that Diageo enters are entered manually, it would give you some semblance for how developed those processes are. We need to address this.

Dave Lewis: I've shared with you here the customer service level they experienced in North America, Latin America, and the UK. They really are not acceptable. When we're looking for growth, the idea that we can't service the demand that's there is both a source of significant regret, but it's also an opportunity for us. A big part of this is Guinness and the capacity constraint I talked about earlier. It's not all. The systems and processes that we have in place that facilitate the engagements with our customers, frankly, are just not fit for purpose. If I told you that 60% of all the orders that Diageo enters are entered manually, it would give you some semblance for how developed those processes are. We need to address this.

To build joint business plans for the development of the business but also the execution of the business and ultimately, our approach to our customers must be that we grow. Our customers categories and we look to gain disproportionately from that growth. We grow with our customers significant opportunity for the Azure immediate priority 3 is the redesign of the AIO operating framework.

Speaker #1: The idea that we can't service the demand that's there is both a source of significant regret, but it's also an opportunity for us.

Feedback inside of Dio is really very loud.

Speaker #1: A big part of this is Guinness and the capacity constraint I talked about earlier , but it's not all . And the systems and processes that we have in place that facilitate the engagements with our customers , frankly , are just not fit for purpose .

That we can improve the clarity of our operations Global Regional local.

Speaker #1: And if I told you that 60% of all the orders that Diageo enters are entered manually, it would give you some semblance for how developed those processes are.

Speaker #1: We need to address this. We need to start to build joint business plans for the development of the business, but also the execution of the business, and ultimately our approach to our customers must be that we grow our customers' categories and we look to gain disproportionately from that growth.

Dave: We need to start to build joint business plans for the development of the business, but also the execution of the business. Ultimately, our approach to our customers must be that we grow our customers' categories, and we look to gain disproportionately from that growth. We grow with our customers. Significant opportunity for Diageo. Immediate priority three is the redesign of the Diageo operating framework. Feedback inside of Diageo is really very loud, that we could improve the clarity of our operations, global, regional, local, clear accountability, clear responsibilities. There's an opportunity for us to be clearer. That clarity will help us in our agility. A lot of the time cycles inside the business are not quick enough, and there's an opportunity for us to design a much more agile Diageo operating framework.

Dave Lewis: We need to start to build joint business plans for the development of the business, but also the execution of the business. Ultimately, our approach to our customers must be that we grow our customers' categories, and we look to gain disproportionately from that growth. We grow with our customers. Significant opportunity for Diageo. Immediate priority three is the redesign of the Diageo operating framework. Feedback inside of Diageo is really very loud, that we could improve the clarity of our operations, global, regional, local, clear accountability, clear responsibilities. There's an opportunity for us to be clearer. That clarity will help us in our agility. A lot of the time cycles inside the business are not quick enough, and there's an opportunity for us to design a much more agile Diageo operating framework.

Speaker #1: We grow with our customers. A significant opportunity for Diageo immediate priority three is the redesign of the Diageo operating framework. Feedback inside of Diageo is really very loud that we could improve the clarity of our operations.

Clear accountability, clear responsibilities. There's an opportunity for us to be clearer that Clarity will help us in in our agility. Uh, a lot of the time Cycles inside the business are not quick enough and there's an opportunity for us to design a much more agile, Dio, operating framework. And when I look at it from an Effectiveness point of view, also, there's an opportunity for us to be better. That Effectiveness is, however, in the output and some of that you've seen in what I've said around our engagement with customers. But, if it was also to talk about our Innovation process, I would say that we have a lot, a lot of very small projects and there's an opportunity for the effectiveness of the Innovation part of our business to be significantly more impactful.

Speaker #1: Global , regional , local , clear accountability , clear responsibilities . There is an opportunity for us to be clearer that clarity will help us in our agility .

Speaker #1: A lot of the time, cycles inside the business are not quick enough, and there's an opportunity for us to design a much more agile Diageo operating framework.

Speaker #1: And when I looked at it from an effectiveness point of view, also, there's an opportunity for us to be better. That effectiveness is either in the output, and some of that you've seen in what I've said around our engagement with customers.

Dave: When I look at it from an effectiveness point of view, also, there's an opportunity for us to be better. That effectiveness is either in the output, and some of that you've seen in what I've said around our engagement with customers. If it was also to talk about our innovation process, I would say that we have a lot, but a lot of very small projects. There's an opportunity for the effectiveness of the innovation part of our business to be significantly more impactful. There's also an opportunity to be more effective in terms of cost, and again, I've given some indication of that in the customer space, but there are also other areas of the business where I see significant cost opportunities.

Dave Lewis: When I look at it from an effectiveness point of view, also, there's an opportunity for us to be better. That effectiveness is either in the output, and some of that you've seen in what I've said around our engagement with customers. If it was also to talk about our innovation process, I would say that we have a lot, but a lot of very small projects. There's an opportunity for the effectiveness of the innovation part of our business to be significantly more impactful. There's also an opportunity to be more effective in terms of cost, and again, I've given some indication of that in the customer space, but there are also other areas of the business where I see significant cost opportunities.

Speaker #1: But it was also to talk about our innovation process . I would say that we have a lot , but a lot of very small projects .

And we'll drive a more competitive. The issue we need to build sharpened and constantly invest in a Competitive Edge.

Speaker #1: And there's an opportunity for the effectiveness of the innovation part of our business to be significantly more impactful. There's also an opportunity for more effectiveness in terms of cost.

And we'll do that.

Speaker #1: And again, I've given some indication of that in the customer space. But there are also other areas of the business where I see significant cost opportunities.

By always being very disciplined about how we deploy our Capital, those of you who know me from Francesco days, know that I take this responsibility really very seriously. So overall the opportunity to redesign the dajio operating framework

Speaker #1: If I give you a small example, I was in India recently and saw that the cost of running the payroll system for Diageo with circa 30,000 employees is ten times more expensive than my previous place of employment, which had more than fifteen times that number.

Dave: If I give you a small example, I was in India recently and saw that the cost of running the payroll system for Diageo with circa 30,000 employees, is 10 times more expensive than my previous place of employment that had more than 15 times, and that number gives you some idea of the opportunity. We're redesigning the operating framework also to identify and invest in the differentiating competencies that will drive a more competitive Diageo. We need to build, sharpen, and constantly invest in a competitive edge, and we'll do that by always being very disciplined about how we deploy our capital. Those of you who know me from my Tesco days, know that I take this responsibility really very seriously.

Dave Lewis: If I give you a small example, I was in India recently and saw that the cost of running the payroll system for Diageo with circa 30,000 employees, is 10 times more expensive than my previous place of employment that had more than 15 times, and that number gives you some idea of the opportunity. We're redesigning the operating framework also to identify and invest in the differentiating competencies that will drive a more competitive Diageo. We need to build, sharpen, and constantly invest in a competitive edge, and we'll do that by always being very disciplined about how we deploy our capital. Those of you who know me from my Tesco days, know that I take this responsibility really very seriously.

Is through the lens of how we can build a more competitive organization that is focused on shareholder value creation. So in summer, I find the AIO to be a very strong business but then enviable position and lots of energy

The market provides significant opportunity.

Speaker #1: This gives you some idea of the opportunity, but we’ll be redesigning the operating framework also to identify and invest in the differentiating competencies that will drive a more competitive Diageo.

But we have some significant work to do. We'll start by focusing on the portfolio and the category strategies. Our customer relationships and our operating model.

It's true that Spirits Market has some headwinds

principally, economic

Speaker #1: We need to build, sharpen, and constantly invest in a competitive edge. And we'll do that by always being very disciplined about how we deploy our capital.

And there is also a small impact on glp ones, and changing lifestyle.

Uh, leadership position is strong.

And those ample room to grow.

Speaker #1: Those of you who know me from my Tesco days know that I take this responsibility really very seriously. So overall, the opportunity to redesign the Diageo operating framework is through the lens of how we can build a more competitive organization that is focused on shareholder value creation.

and we will go on this turnaround journey by maintaining very strong, Capital deployment discipline,

Dave: Overall, the opportunity to redesign the Diageo operating framework is through the lens of how we can build a more competitive organization that is focused on shareholder value creation. In summer, I find Diageo to be a very strong business with an enviable position and lots of energy. The market provides significant opportunity, but we have some significant work to do. We'll start by focusing on the portfolio and the category strategies, our customer relationships, and our operating model. It's true the spirits market has some headwinds, principally economic, and there is also a small impact from GLP-1 and changing lifestyle. Our leadership position is strong, and there is ample room to grow. We will go on this turnaround journey by maintaining very strong capital deployment discipline. On this last point, let me say a few words on the board's dividend decision.

Dave Lewis: Overall, the opportunity to redesign the Diageo operating framework is through the lens of how we can build a more competitive organization that is focused on shareholder value creation. In summer, I find Diageo to be a very strong business with an enviable position and lots of energy. The market provides significant opportunity, but we have some significant work to do. We'll start by focusing on the portfolio and the category strategies, our customer relationships, and our operating model. It's true the spirits market has some headwinds, principally economic, and there is also a small impact from GLP-1 and changing lifestyle. Our leadership position is strong, and there is ample room to grow. We will go on this turnaround journey by maintaining very strong capital deployment discipline. On this last point, let me say a few words on the board's dividend decision.

On this last Point, let me say a few words on the board's Dividend Decision.

Firstly this is not an easy decision to make but we believe it is the right 1.

The North American Market is challenged.

Speaker #1: So , in summary , I find Diageo to be a very strong business with an enviable position and lots of energy . The market provides significant opportunity , but we have some significant work to do .

Our portfolio needs some time and investment to make it more competitive at the same time. We need to invest in our business. Specifically Guinness capacity and capability investment

Speaker #1: We'll start by focusing on the portfolio and the category strategies, our customer relationships, and our operating model. It's true the spirits market has some headwinds, principally economic, and there is also a small impact from GLP-1 and changing lifestyle.

We want to do both of these things and strengthen the balance sheet.

We will make disposals if appropriate, but we will not sell Brands cheaply.

All this leads to a change in the dividend policy.

Speaker #1: But our leadership position is strong, and there is ample room to grow. And we will go on this turnaround journey by maintaining very strong capital deployment discipline.

It gives us the space. We need to turn around the business and the optionality around Capital returns to shareholders as this turnaround unfolds.

Thank you very much for your time and look forward to your questions later.

Speaker #1: On this last point , let me say a few words on the board's dividend decision . Firstly , this is not an easy decision to make , but we believe it is the right one .

Dave: Firstly, this is not an easy decision to make, but we believe it is the right one. The North American market is challenged. Our portfolio needs some time and investment to make it more competitive. At the same time, we need to invest in our business, specifically in its capacity and capability investment. We want to do both of these things and strengthen the balance sheet. We will make disposals if appropriate, but we will not sell brands cheaply. All this leads to a change in the dividend policy. It gives us the space we need to turn around the business and the optionality around capital returns to shareholders as this turnaround unfolds. Thank you very much for your time, and look forward to your questions later.

Dave Lewis: Firstly, this is not an easy decision to make, but we believe it is the right one. The North American market is challenged. Our portfolio needs some time and investment to make it more competitive. At the same time, we need to invest in our business, specifically in its capacity and capability investment. We want to do both of these things and strengthen the balance sheet. We will make disposals if appropriate, but we will not sell brands cheaply. All this leads to a change in the dividend policy. It gives us the space we need to turn around the business and the optionality around capital returns to shareholders as this turnaround unfolds. Thank you very much for your time, and look forward to your questions later.

Speaker #1: The North American market is challenged . Our portfolio needs some time and investment to make it more competitive . At the same time , we need to invest in our business , specifically Guinness capacity and capability investment .

Speaker #1: We want to do both of these things and balance sheet. We will make disposals if appropriate, but we will not sell brands cheaply.

Speaker #1: All this leads to a change in the dividend policy. It gives us the space we need to turn around the business and the optionality around capital returns to shareholders.