Diageo first-quarter net sales rise 1.2% to $4.9 billion despite US decline

Diageo reported net sales of US$4.9 billion for its first quarter of fiscal 2027, up 1.2% on the prior year. The Johnnie Walker and Guinness owner said the result was in line with its own expectations as growth across four regions offset continued weakness in North America.

Organic net sales grew 0.6% once the performance of East African Breweries is excluded. Diageo has agreed to sell its 65% stake in that business to Japan's Asahi Group Holdings, and says the deal remains on track to complete in the second half of calendar 2026. Organic volume rose 0.1%.

Chief executive Sir Dave Lewis framed the quarter as a modest step forward. "Results in the first quarter represent a small step in the right direction," he said, adding that the group had reiterated its full-year guidance despite geopolitical uncertainty and the impact of the Middle East conflict.

North America remains the group's hardest problem. Organic net sales there fell 3.6%, and in the US specifically the decline was 3.7%. Lewis called it the biggest challenge while insisting clear actions are underway to make the offer more competitive in that market.

Chief financial officer Nik Jhangiani attributed the American softness partly to market conditions and partly to lagging sales of Casamigos, Don Julio and Crown Royal. A double-digit drop in those names was only partly offset by growth, led mainly by Johnnie Walker.

Where the growth came from

Latin America and the Caribbean led every region with organic sales up 4.8%. Central America, the Caribbean, South LAC and Colombia all grew at a double-digit pace, countering a double-digit decline in Mexico, where consumer pressure weighed. Scotch, led by Buchanan's and Johnnie Walker, performed strongly.

Asia Pacific rose 4.1% organically, helped by double-digit growth in global travel retail and mid-single-digit growth across South East Asia and North Asia. Guinness delivered strong double-digit growth, particularly in South East Asia and Australia, while sales in mainland China were flat.

India grew 3.4% despite a 5.8% drop in volume, as positive price and mix of 9.2% carried the market. The Prestige & Above segment, roughly 90% of Indian sales, rose 7.1% on vodka and Scotch. A packaging quality issue also affected Casamigos's spirits RTD output.

Europe, the Middle East and Africa increased 2.4%, with Türkiye, Africa and the Middle East more than offsetting weakness in Italy and France. Baileys delivered mid-single-digit growth in the region, and Smirnoff Ice helped ready-to-drink lines, while Johnnie Walker grew at a double-digit rate.

East African Breweries, held within Diageo's Corporate division, grew at a double-digit organic pace in Kenya, Uganda and Tanzania. That added 0.8 percentage points to the group's organic net sales growth, a contribution that leaves the group's figures once the Asahi sale completes.

Across the group, Guinness and ready-to-drink lines were positive drivers. In North America both Guinness and Smirnoff Ice RTD delivered double-digit growth, even as the higher-priced spirits brands lagged. Price and mix contributed 0.7% of group organic growth.

What Diageo says comes next

Full-year guidance is unchanged. Diageo still forecasts broadly flat organic net sales growth for fiscal 2027 and low-to-mid-single-digit organic operating profit growth, with North American organic sales expected to decline by a mid-single-digit percentage.

The profit outlook includes roughly US$850 million in cost savings under a plan Lewis announced in August 2026. Those savings are part of a broader US$1 billion programme that has already eliminated more than 2,000 jobs globally, drawing accusations from UK trade unions.

The assumptions rest on US tariffs staying at 10% on EU imports, zero on UK whisky imports and 50% on Canadian imports excluding bulk. Workers at Diageo's largest Scottish distillery, Cameronbridge, voted to strike in September over planned redundancies before the action was called off.

That strike was suspended on 14 October to allow talks between Diageo, GMB Scotland and Unite the Union. Separately, Jhangiani will leave the chief financial officer role at an unspecified date in 2027 and be succeeded by Joanne Wilson, formerly of WPP, Tesco and KPMG.

We reported that a New York judge threw out a proposed class action over Diageo's '100% agave' claims, though the company still faces similar suits in California, Florida and Canada as its two biggest Tequila brands slide. That slide is now visible in the quarterly numbers.

The American decline is the thread running through all of this. Casamigos and Don Julio's double-digit drops, the packaging fault, the tariff assumptions and the job cuts all concentrate in the one market where Diageo is still losing share, while the rest of the world carries growth.

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