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Diageo’s new chief executive Sir Dave Lewis has cut the group’s dividend and signalled he will lower prices to win back consumers, marking a departure from the spirits maker’s long-standing focus on its high-end brands.
On Wednesday, the FTSE 100 company lowered its dividend from 103.5 cents a share for its 2025 financial year to a minimum of 50 cents a year going forward.
In a presentation after the release of the drinks company’s interim results, Lewis said the board had taken “the difficult decision” to reduce the dividend to a level that would give it the financial flexibility to invest and become more competitive.
In his first public remarks since taking over eight weeks ago, the former Tesco boss slammed Diageo’s “very poor” customer service and indicated he would increase investment behind Diageo’s mass-market brands, such as Smirnoff vodka and Captain Morgan rum.
Diageo has for more than a decade followed a strategy of “premiumisation” — built on the premise that consumers will drink less but opt for increasingly expensive spirits such as its Casamigos tequila.
Lewis said that while this was a “fantastic strategy”, he was considering some “price repositioning”.
Dave Lewis slammed Diageo’s ‘very poor’ customer service and indicated he would increase investment in its mass-market brands © Bloomberg
The group’s chief highlighted that its portfolio was dominated by pricey brands and was “significantly under-represented” in the mass market, which had resulted in Diageo losing market share when consumers’ disposable incomes were under pressure.
Diageo reported a 2.8 per cent fall in organic sales for the final six months of 2025, below analyst expectations, amid weakness in the US and China.
The company now expects full-year organic sales to decline by between 2 and 3 per cent, compared with its previous forecast of “flat to slightly down”. Its shares fell 5.7 per cent in early trading on Wednesday.
Diageo’s weak performance was driven by a 42.3 per cent slump in sales in China, where local spirit baijiu has been hit by government restrictions. In the US, Diageo’s largest market, weak consumer spending led to a 6.8 per cent drop in organic sales.
Lewis, whose reputation for cost-cutting earned him the nickname “Drastic Dave”, took over at Diageo after a tumultuous period.
Debra Crew, Lewis’s predecessor, departed last summer after the board failed to quash speculation that chief financial officer Nik Jhangiani was angling for her job.
Investors have been eagerly anticipating Lewis’s assessment of the reasons behind Diageo’s malaise.
Lewis said that while weight-loss drugs and changing attitudes towards spirits were affecting sales, the biggest challenge was the squeeze on disposable incomes, particularly in the US.
The Yorkshire-born executive said Diageo’s customer service for its distributors and retail customers meant that the group was failing to capitalise on demand for popular brands such as Guinness.
“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,” he said.
Lewis is aiming to end shortages of Guinness, the company’s fastest-growing brand. “If you’ve tried to buy a pint in London, you also know that we have some capacity constraints too,” he said.
Guinness sales rose 10.9 per cent on an organic basis in the final six months of 2025.
Lewis said he would sell brands “if appropriate” but would not do so cheaply.
Diageo’s interim operating profit fell 1.2 per cent to $3.1bn, which the company blamed partly on US tariffs.