UK drinks group Diageo has posted a -4% reported (organic -2.8%) decline in net sales to US$10.5 billion for the six months ended 31 December 2025.
Reported operating profit declined -1.2%, while reported operating profit margin increased 85 basis points, primarily due to the positive impact of disposals.
Organic operating profit declined -2.8%, and organic operating profit margin was broadly flat. The company cited adverse market mix and tariff costs as key headwinds, partially offset by efficiencies in advertising and promotional investment.
The company said strong organic net sales growth in Europe (+2.5%) , Latin America and the Caribbean (+4.5) and Africa (+10.9%) was more than offset by softer performance in North America (-6.8%) and Asia Pacific (-11.1%).
Diageo Chief Executive Officer Sir Dave Lewis commented: “Our performance in the first half of fiscal 26 was mixed. Strong performance in Europe, LAC and Africa, was offset by a weakening performance in North America and continued weakness in Chinese white spirits in Asia Pacific.
Diageo Chief Financial Offier Nik Jhangiani said: “In APAC, performance was adversely impacted by weaker Chinese white spirits consumption as a result of market policy.”
That was a reference to policy-linked headwinds related to Chinese government measures that have restricted premium Chinese white spirits (baijiu) consumption at official occasions. Diageo’s primary Chinese white spirit (baijiu) brand is Shui Jing Fang (水井坊), in which the company holds a controlling stake of over 63% through Sichuan Swellfun.
Excluding CWS, group organic net sales would have been approximately +2% higher, with volume down around -0.5% and price/mix broadly flat.
For fiscal 2026, Diageo has updated its guidance to a reduction of -2-3% in organic net sales due to further weakness in the US. It projects operating profit growth to remain flat or up to low-single-digit, reflecting further weakness in the US, Chinese white spirits and the impact of tariffs.
“This includes the impacts of tariffs, assuming a 10% rate on UK imports and a 15% rate on European imports as well as assuming that the United States–Mexico–Canada Agreement (USMCA) remains,” explained Jhangiani. “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.”
Lewis added: “Only several weeks in I can already see significant opportunities for Diageo to act more decisively to enhance its competitiveness and broaden the portfolio offering leading to higher growth. As we refine our new strategy to deliver stronger shareholder value, the immediate priorities for the team are clear:
- Build competitive category strategies, winning with relevant brands
- Customer, customer, customer
- Redesign of the Diageo operating framework to drive sustainable returns
He added: “To deliver on these opportunities, we need to create more financial flexibility. Accordingly, the Board has taken the difficult decision to reduce the dividend to a more appropriate level which will accelerate the strengthening of our balance sheet.”
“We are confident that this is the right action which will ensure that Diageo can reinforce its position as the leading international spirits business and drive stronger shareholder value over the coming years. I am encouraged by the depth of the passion and pride that our people have for our brands across the business. This will be invaluable given the significant work ahead.” ✈
