Nik Jhangiani, interim CEO of Diageo after Debra Crew’s July departure, spoke at the Barclays Global Consumer Staples Conference on September 4. During this investor-focused “fireside chat,” he addressed the ongoing debate around whether current drinking habits reflect cyclical shifts or structural changes in the spirits industry.
According to The Spirits Business, Jhangiani didn’t mince words. He directly challenged assumptions about Gen Z’s approach to alcohol and described how economic pressures, cannabis, and health concerns intersect with broader industry changes.
Jhangiani explained how Diageo’s Accelerate Programme aims to save US$625 million in three years. He admitted the company had fallen into a cycle of pouring money into trade investments and A&P (advertising and promotion) without seeing proportional growth.
“We kept investing more without getting the growth we expected,” he said. Instead, Diageo now plans to prioritize digital media investments where returns are measurable and adaptable. By trimming inefficiencies, the company expects to reinvest in higher-performing channels.
The Diageo CEO on drinking trends also tackled internal metrics. He argued the company’s obsession with margin percentages led to poor decisions, such as abandoning categories with strong dollar growth potential.
“We were so focused on premiumization and percentage margins that we overlooked profitable opportunities in lower-tier products,” Jhangiani explained. He highlighted Johnnie Walker and Don Julio as brands that benefit from a “ladder strategy,” encouraging consumers to trade up gradually.
In Mexico, for instance, Diageo prioritized Don Julio Blanco (MEX600) alongside premium Ceniza (MEX900). Jhangiani emphasized that ignoring Blanco’s larger market would have been a missed opportunity to build long-term loyalty.
Calling the previous approach a “flawed choice,” Jhangiani stressed the need to pursue absolute profit growth, not just margin percentages. By shifting to dollar-based metrics, Diageo can chase profit pools more effectively and liberate managers from restrictive decision-making.
Looking ahead, Jhangiani said Diageo will align its portfolio more closely with consumer occasions and experiences, while remaining open to mergers, acquisitions, and partnerships that fill portfolio gaps.
When analyzing industry headwinds, Jhangiani distinguished between structural issues—such as cannabis use, GLPs (weight-loss drugs), and moderation habits—and cyclical issues, like macroeconomic downturns.
He noted that moderation doesn’t always stem from health consciousness. “Sometimes people cut back because they want to avoid hangovers. Sometimes they just don’t have the money,” he said. Covid-19 amplified these swings: consumers initially traded up to premium bottles, but the current cost-of-living crisis has tightened wallets.
The Diageo CEO on drinking trends also challenged the belief that Gen Z has abandoned alcohol entirely.
“When people say it’s all about health and wellness and the younger generation, I’ll call a bit of bullshit on that,” he told The Spirits Business.
He argued that many in the Gen Z cohort are still underage or just beginning their drinking years—and often strapped for cash. As they age, Jhangiani believes their habits will normalize.
Jhangiani pointed out ongoing uncertainty in the US market, particularly due to tariffs and economic pressures. “For fiscal 2026, we’re not planning for an improving consumer environment. Instead, we’re preparing for prolonged challenges,” he said.
Despite this, he remains confident in Diageo’s long-term strategy. By focusing on absolute dollar growth, digital efficiency, and consumer-centric innovation, the company expects to stay competitive even in a volatile landscape.
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The Spirits Business Article — Diageo CEO comments on structural vs cyclical debate, written by Melita Kiely
The image of the article is courtesy of © Veeterzy via Canva.com
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