Sir Dave Lewis, the new CEO of Diageo, is implementing a turnaround strategy centered on expanding into the ready-to-drink (RTD) canned cocktail market and enhancing efficiency. Lewis, known as "Drastic Dave" for his cost-cutting measures at Tesco, aims to innovate with ready-mixed spirits, especially as consumers face economic pressures. Diageo's current RTD offerings include Smirnoff Ice, Gordon's gin and tonic, and Casamigos margaritas. The RTD market is valued at over $300 million and has seen significant growth, with sales up over 17% in two years, attracting 330,000 new shoppers.
Diageo's share of the RTD market has declined from a peak of 25% in 2008 to below 10% today, despite having pioneered the category with Smirnoff Ice in 2000. In 2025, canned and carton cocktail sales values increased by 23.2%, and volumes rose by 22.6%. This growth stands in contrast to the overall alcohol market, where total sales were down 2.8% and volumes declined by 1.4% in 2025. Lewis is expected to pursue a strategy that includes slimming down regional management, potentially adjusting prices, and intensifying the push into canned cocktails, leveraging existing brands and potentially acquiring new ones.
The company has faced challenges, particularly in North America, where sales continued to decline by high single digits, though the 9.4% organic sales decline was better than analysts had predicted. For the three months ending March, Diageo reported a 0.3% growth in organic net sales to $4.5 billion, with volumes up 0.4%, exceeding analysts' expectations of a 2.3% decline. Lewis also recently cut the company's annual sales forecast to a 2-3% decline for 2026 and halved the interim dividend to $0.20 per share, indicating a need for significant investment to boost competitiveness and address capacity issues, particularly for Guinness.
