As I see it, high inflation since late 2021 has shattered two things underpinning the original Diageo investment case. <\/p>\n
First, tapped-out pricing power, because it’s clear now that Diageo cannot regularly raise prices without hurting volume. To address this, the new management team is strategically lowering prices to become more competitive in certain categories. <\/p>\n
Second, in hindsight, premiumisation was more of a trend than a permanent structural shift. When inflation hit, consumer behaviour proved to be far more price-sensitive than expected. <\/p>\n
The premiumisation trend was built around the idea of ‘drink less, drink better’. Instead, hard-up consumers have preferred to drink less and pay less. <\/p>\n
Why’s the stock up 10%? <\/p>\n
Recently though, there have been a handful of developments that have boosted the stock. The first is another ceasefire in Iran, which raised hopes that inflation might not rise as much as it would during a protracted conflict. <\/p>\n
Meanwhile, Diageo’s Indian unit, United Spirits, recently posted a 51.6% jump in Q1 profits. The world’s fifth-largest economy is still touted as a big growth market for the company’s premium spirits. <\/p>\n
Reuters also reported that CEO Dave ‘Drastic’ Lewis is planning to slash headcount by as much as 30% in some Diageo teams. He’s set to flesh out his plans for a turnaround on 6 August, so more investors might be buying shares ahead of that. <\/p>\n
I’ve bought shares <\/p>\n
July’s gains could quickly reverse if the Iran war restarts and the CEO’s plans fail to convince the market. Therefore, it’s hard to know whether this run has legs. <\/p>\n
For the record, I started a position in Diageo recently. The stock is trading cheaply, offering a decent 3.1% dividend, and I’m confident Lewis can rightsize the business, improve the balance sheet, and restore volume growth. <\/p>\n
But this is going to take time, meaning the stock is only worth considering for the long haul. In the short term, there’s likely more explosive opportunities elsewhere. <\/p>\n
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Ben McPoland owns shares in Diageo. <\/p>\n
The post Here’s why the Diageo share price is up 10.5% since 1 July<\/a> appeared first on The Twelfth Magpie<\/a>. <\/p>\n More reading <\/p>\n The Twelfth Magpie 2026 <\/p>\n","protected":false},"excerpt":{"rendered":"Leading up to 2022, the Diageo (LSE:DGE) share price had glided higher over many years, recovering from every…\n","protected":false},"author":2,"featured_media":573177,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[72,6424,61,60,19144,53505],"class_list":["post-573176","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-business","tag-diageo","tag-ie","tag-ireland","tag-latin-america","tag-share-price"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/573176","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=573176"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/573176\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/573177"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=573176"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=573176"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=573176"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}