Post-pandemic, Diageo looked like the perfect consumer goods company. The Guinness owner, whose stable of brands also includes Baileys, Smirnoff and Johnnie Walker, benefited from a powerful combination of premiumisation, strong global brands and resilient consumer demand.

At its peak in 2021, Diageo’s shares traded above £40. It’s been downhill from there. The shares are now around £15, down more than 60%. In fact, the stock is now trading at levels last seen in 2012.

So is it finally Guinness time again, or is there more pain to come?

How did Diageo lose its cheer?

The company’s problems emerged from several directions at once.

Perhaps the biggest challenge has been the fading appeal of the premium spirits strategy that served it well for years. Consumers were willing to trade up to more expensive bottles of whiskey, tequila and gin when economic conditions were good. But the cost-of-living squeeze put a big dent in that approach.

At the same time, drinking habits are changing. Younger consumers are generally drinking less alcohol than previous generations, and Guinness 0.0 can’t take up all the slack.  The rise of weight-loss drugs also hits alcohol consumption, because these treatments suppress appetite and cravings. And not all of Diageo’s problems are due to health living: the rise of legal cannabis is also eating into sales.

Diageo has also faced balance sheet concerns. The company built up debt through acquisitions and investment during the boom years, which put strain on the business when sales were weak.

Lastly, the loss of long-serving chief executive Ivan de Menezes has hurt the business. De Menezes died unexpectedly in 2023 aged 63, having steering Diageo through a decade of sustained growth.

Enter “Drastic Dave”

Since the start of this year, Diageo is under new leadership.

CEO Dave Lewis, the former Tesco chief executive who earned his nickname for his willingness to take tough decisions, is at the helm. He has halved the dividend, sold off assets, overseen several senior departures, and the beginnings of a recovery in sales.

Non-core assets are getting the chop. Diageo sold its Indian Premier League cricket franchise, Royal Challengers Bengaluru/ RCB, for over €1.5 billion, and agreed the sale of its majority stake in East African Breweries to Asahi, for around €2 billion. Its Irish cream liquer Sheridan’s has also been sold. These divestments will help cut debt and simplify the business.

The business’s leadership is also evolving. Recent months have seen Diageo’s heads of Great Britain, North America and Africa all leaving their roles.

Investors and staff are also bracing for further cost-cutting measures. Additional job reductions appear likely, with the Dublin workforce likely to affected.

A shift in strategy

Perhaps the most significant change is where management sees future growth.

While premium spirits remain important, Diageo is increasingly focused on more mainstream price points and ready-to-drink (RTD) cocktails. RTDs have become one of the fastest-growing segments of the alcohol market, particularly among younger consumers who favour convenience and on-the-go drinking.

Diageo has also been investing in core brands, with the Littleconnell brewery in Newbridge, Co. Kildare, representing an investment of up to €1 billion, and the Guinness Open Gate visitor experience opening in London’s Covent Garden.

Reasons for optimism

There are early signs that the turnaround effort may be gaining traction.

In its most recent update, Diageo reported organic net sales growth of 0.3% for the quarter ended March 2026. Hardly spectacular, but in the right direction.

The company also retains strengths that competitors would envy. It has an impressive global distribution capability, and makes sales in 180 countries. Guinness continues to enjoys huge global demand. Johnnie Walker remains one of the world’s leading whiskey brands, while Baileys and Smirnoff continue to hold strong positions in their categories.

Sooner or later, investors will be ready for another round.