To Get U.S. Spirits Growing Again, Put Money In People's Pockets

That's the gist of a presentation during Diageo's Capital Markets Day by Hannah Brooks, chief strategy officer.

Spirits sales in the U.S. won't turn around this year, but they will turn around in two or more likely three years. It all depends on how consumers feel about their finances. "Alcohol, ultimately, is a discretionary category and so if you see affordability pressure, you see people getting squeezed, you see discretionary spend come down and alcohol is impacted," Brooks said. But in markets "where there is economic growth, emerging middle class, category participation broadens and we see premiumization, we see tailwinds."

Impact of Trump's Immigration Policies: Spirits penetration across leading markets remains at or above pre-Covid lelve But personal finance isn't the only factor affecting alcohol sales. Another is demographics, and, Brooks said, "Demographics are a tailwind." In 2024, population growth in the U.S. was 1.2%, in 2025 it was 0.5%, this year it's expected to be 0.6%. "That drop is primarily due to net migration. In fact, historically, immigration has been at least a 50 basis-point tailwind in the U.S. and so, if immigration were in a different place in the U.S., we would expect that population growth number to be different."

When it comes to age, "there is an elevated spend on spirits ranging from 35 through 74." Whether it is spirits or RTDs, we see that Gen-Z penetration is higher than general population not just in the U.S., but across a range of markets.

As for spending of spirits, "once you account for income and expenditure, "they're not spending differently than other cohorts."

Income Growth Lags Inflation in US, UK, Australia. If you look at income versus inflation, "quite simply income hasn’t kept pace. For the last four years we have seen income growth lagging inflation growth across markets like the UK, US and Australia.

About 12 months ago, middle-income consumers in both the US and Great Britain would have had slightly more money coming in than going out, Brooks said. "that has flipped in the past 12 months. This is a consumer group that is now very stretched, increasingly using debt to protect lifestyle, but they are feeling squeezed."

In Diageo research, consumers said "they were trying to protect their engagement with alcohol. People were looking for happy hours to make trips to the pub more affordable, they were really looking at small formats. People were trying to stay in the brands they love but they were looking for a smaller format. Interestingly, when they were looking at RTDs, which many were, they were comparing to the price in the pub and relative to a price in the pub or a bar that RTD was very affordable."

In the second quarter, she said, as a result of the war in Iran, essentials are taking more and more of the wallet, more and more squeeze Discretionary getting squeezed more and more and alcohol is in that bracket.

Attitudes toward Alcohol Evolving. Consumers in Diageo's proprietary research are claiming to drink less, but what they say isn't necessarily what they do, Brooks said. Asked why are you moderating, "Without question, health-and-wellness related concerns are an issue across all the markets where we talk to the consumer. Interestingly, financial considerations also come up a lot as well. In the US, 26% of consumers are citing financial considerations; in GB and Australia, it is as high as 34%.

Around 10% to 12% of U.S. adults are using GLP-1s. Diageo expects that to go up to between 20-25% by 2029. Here's where it gets interesting: "People on GLP-1s spent 2% less on spirits than the people who weren't on GLP-1. That corresponds to -4% on beer and -5% on wine. That is a one-time number. It does not compound."

50% on GLP-1s Still Go to Bar Once a Week. And despite the hysteria about GLP-1s, at least 50% of people on GLP-1s still go to the pub or a bar at least once a week, she said. "People are protecting special occasions, and we know spirits over-indexes in special occasions. People also tend to be pulling out the more habitual boredom snacking, eating and drinking; that is not where our brands and categories play."

A Look at the North American Market. Brooks turned to discuss the broad market, not Diageo, growth over the next three years.

North America. "Without question, North America will remain a challenging region through the next three years. Over the planned period - three-year growth, value growth for the US, we are expecting to be -2% to 0%. While there is some behavioural pressure, affordability is the
predominant pressure. We see correlation with consumer confidence and volume and value. If the consumer confidence piece picks back up, we would expect to see a comeback come through faster.

RTDs will drive both volume and price-mix. Diageo expects the market in North America to remain soft and challenged in fiscal 2027.

Other Markets:

• EMEA - Great Britain to follow a US trajectory. Developed Europe, as affordability develops, we would expect to see getting back to flat or slightly positive. The growth story here is emerging EMEA, so both the Middle East and Africa, where there is population
  growth, economic development and an emerging middle class.
• APAC - Expect return to modest growth. Wild card is China. China, excluding Chinese white spirits, has been down double-digits in the last two years, so that will take some time to recover. The rest of the region remains pretty resilient. Even in Australia where inflation and the economy isn’t great, immigration remains very positive.
• Latin America/Caribbean – a very strong growth opportunity. Diageo forecasts the market growing 4% to 6%..
• India – Another very strong growth story from a market perspective, again up 4% to 6% over the plan period, with very similar reasons around economic development and population growth, and also, of
  course, a very strong and buoyant whisky market which will hopefully be further supported by the tariff reduction.

Summary: In Premium Beer, Diageo expects overall growth across its portfolio of 1% to 3% over three years. Spirits, including RTDs, also 1% to 3% growth.