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FTSE 100 drinks giant Diageo (LSE:DGE) has seen its share price perform miserably over the past few years. Since reaching its post-pandemic peak in December 2021, it’s fallen around 60%.
But with a new boss at the helm, will the group’s results start to show that its turnaround strategy is working? What’s more, could the drinks giant be one of the UK’s top recovery stocks in 2026? Let’s see.
What’s going on?
Diageo’s woes appear to be linked to a change in drinking habits. After Covid, when people started going out and about again, the group experienced an increase in volumes. But then, things began to change.
| Year (30 June) | Volume (million equivalent units) |
|---|---|
| 2019 | 245.9 |
| 2020 | 217.0 |
| 2021 | 238.4 |
| 2022 | 263.0 |
| 2023 | 243.4 |
| 2024 | 230.5 |
| 2025 | 230.1 |
Cost of living pressures led to a cut in consumer discretionary spending. And supply chain cost increases hurt its margin. More recently, tariffs have been damaging.
But there’s also some evidence that members of Generation Z are drinking less than their parents. As the company itself acknowledges: “People are drinking better, not more”. And a recent NHS survey reveals that 39% of young men have abstained from alcohol over the past year. This compares to 16% of males aged over 65. It’s a similar picture for women.
People are also trading up. According to the group, the share of “premium and above” spirits grew from 26% to 35% over the past 10 years. And the “super-premium-plus tier” has grown 50% faster than other sub-groups.
A different approach
Early in 2025, the group said it wants to reduce the number of brands in its portfolio. This seems like the right strategy to me. I think the group should focus on seeking to replicate the success of Guinness — which has become fashionable through the innovative use of social media — with its other 12 so-called billion-dollar brands.
Fortunately, this is right up the street of the group’s new boss, Sir Dave Lewis. During 33 years at Unilever, ‘Drastic Dave’ reduced the number of the group’s products from 1,600 to 400. If he can do the same at Diageo, it should free up some much needed cash to help reduce the group’s significant debt pile.
But despite its problems, the group remains number one in international spirts by retail sales value. This means it’s well positioned to grow again if conditions improve. Of course, nothing’s certain. The group may be too large to respond quickly enough to the changing market. And a slowing global economy could further impact demand.
But one of the benefits of a falling share price is that those taking a stake now could benefit from a yield of 4.6%. I say ‘could’ because dividends cannot be guaranteed and, if sales and earnings continue to go in the wrong direction, there’s a strong chance its payout will be cut.
| Year (30 June) | Share price (pence) | Dividend (pence) | Yield (%) |
|---|---|---|---|
| 2016 | 2,087 | 59.20 | 2.8 |
| 2017 | 2,269 | 62.20 | 2.8 |
| 2018 | 2,722 | 65.30 | 2.4 |
| 2019 | 3,384 | 68.57 | 2.0 |
| 2020 | 2,682 | 69.88 | 2.6 |
| 2021 | 3,461 | 72.55 | 2.1 |
| 2022 | 3,531 | 76.18 | 2.2 |
| 2023 | 3,379 | 80.00 | 2.4 |
| 2024 | 2,490 | 79.28 | 3.2 |
| 2025 | 1,828 | 79.39 | 4.4 |
Final thoughts
Personally, I don’t think shareholders should be — excuse the pun — too dispirited. It has many internationally famous brands and I think it has the right person at the top to oversee a bounce back.
Positively, analysts from MCH Market Insights, Interactive Investor, and AJ Bell have all identified Diageo as their top recovery stock for 2026.
Although there could be some hiccups along the way, with its share price at a 10-year low, I think Diageo could be a once-in-a-decade opportunity to consider.
