Diageo has reported an unexpected rise in quarterly sales, driven by buoyant demand for Guinness in the UK and Ireland, which helped offset weaker trading in the United States. The FTSE 100 drinks giant posted a 0.3% increase in organic net sales for the three months to March, with volumes up 0.4%, defying analysts' expectations of a decline.
European Strength Offsets US Weakness
The company, which also owns Johnnie Walker whisky and Gordon's gin, said that North America remained its 'biggest challenge' amid 'soft' market conditions. Sales in the region fell by a high single-digit percentage, reflecting ongoing weakness in the US spirits market. However, this was more than compensated by strong growth in Europe, Latin America and the Caribbean (LAC), and Africa.
In Europe, organic net sales surged by 8.8% to $1.05 billion (£770 million), led by exceptional demand for Guinness. The timing of Easter and advance purchases ahead of the 2026 World Cup also contributed to the regional uplift.
Turnaround Under Sir Dave Lewis
The update comes as Diageo undergoes a major turnaround under former Tesco boss Sir Dave Lewis, who took the helm last year. Sir Dave acknowledged that North America was the group's primary challenge but stressed that actions were already being taken to address the issue. 'We are pleased with the strong growth across Europe, LAC and Africa,' he said. 'While we are mindful of continued geopolitical uncertainty, including the impact of the ongoing conflict in the Middle East on energy, supply and distribution, we are reiterating our fiscal 2026 guidance.'
Shares in the company rose on Wednesday morning following the announcement, as investors welcomed the unexpected growth.
Analyst Reaction
Adam Vettese, market analyst at eToro, commented: 'Diageo's Q3 trading update this morning shows tentative signs of stabilisation after a bumpy period, but the group is not out of the woods yet.' He noted that while the European performance was encouraging, the persistent weakness in the US market remains a concern.
