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Key Takeaways
- Diageo believes moderation offers the company an opportunity, interim CEO Nik Jhangiani said.
- The London-based business can serve those looking to drink “better, not more,” as well as for smaller bottles and lower-alcohol beverages, Jhangiani said.
- Changing cultural norms around drinking are having less of an impact on sales than poor consumer sentiment and economic headwinds, the company has said.
One of the world’s largest sellers of spirits has spent months downplaying the significance of Americans drinking less. Now, it says moderation may be a money-maker.
Diageo (DEO), the company behind brands such as Johnnie Walker, Captain Morgan and Smirnoff, sees an opportunity to cater to those cutting back on drinking, interim CEO Nik Jhangiani said on a conference call Tuesday. The company wants to serve those reaching for smaller bottles, beverages with little or no alcohol and premium blends, which underscore that—for some—drinking is more of an occasional treat, he said.
“What can we offer to be able to gain back some of those drinkers?,” Jhangiani said, according to a transcript made available by AlphaSense. “Whether that’s RTDs [ready-to-drink beverages], whether it’s smaller formats, whether it’s around low ABVs [alcohol by volume drinks], whether it’s about when I drink, I drink better, not more—those are all elements we want to tap into.”
The volume of alcohol Diageo sold in North America fell 0.8% in fiscal 2025, which ended on June 30. Diageo forecasts “slightly negative” sales in the first half of this fiscal year, Jhangiani told investors.
Diageo has had success with alcohol-free products, such as Ritual Zero Proof and Guinness 0.0, Jhangiani said. Pre-mixed beverages with a set amount of alcohol, mixers and flavor have also been popular, potentially because they help with portion control, he said.
Offering something in the middle—low-alcohol blends—may draw in consumers, Jhangiani said, including one woman a Diageo executive found making her own version of such a product. She was buying one full-strength bottle and one alcohol-free bottle of Tanqueray to mix together and create a less potent gin and tonic, Jhangiani said.
Diageo has told analysts that it believes economic uncertainty and poor consumer sentiment are the main factors holding back sales. Other developments have had less of an impact on sales, including new weight loss drugs, changing cultural norms and the legalization of marijuana in some states, the company said on prior earnings calls.
“We clearly do see today’s pressures being largely more macro and cyclical. Having said that, we also do believe moderation in some form is here to stay, right?” Jhangiani said, adding: “That’s what we’ve got to tap into.”
