The FTSE 100 firm, which owns drinks brands including Johnnie Walker whisky and Guinness, reported a nearly 28% fall in operating profit for the year ending in June. In response, the drinks maker has increased its cost-saving target from £500 million to £625m. Interim CEO Nik Jhangiani stated the savings were “not about job cuts”, clarifying that while some roles may be affected, the overall workforce could still grow.

The poor results follow a period of investor disquiet over the company’s performance, which contributed to Ms Crew stepping down “by mutual agreement”. Her brief tenure, which began in 2023 after the death of her long-serving predecessor Ivan Menezes, was marked by a profit warning linked to a sales slump in Latin America and supply chain issues that affected Guinness distribution last Christmas. Diageo’s shares have fallen by more than a quarter this year and are at the same level as in 2016.

The company also faces significant external pressures, reiterating that it expects a $200m (c. £150m) annual impact from US tariffs on UK and European spirits. Diageo is working to mitigate this through measures like inventory management and supply chain optimisation, and believes it can offset about half of the impact on its operating profit.

Changing consumer habits, particularly among younger people, and the cost of living crisis pushing customers towards cheaper alternatives have also hit performance. Despite the “challenging year”, Mr Jhangiani noted that certain brands, including Guinness, Don Julio tequila, and Crown Royal Blackberry whisky, were standout performers.

AJ Bell investment director Russ Mould said: “Investors are in something of a quandary with Diageo. They need to determine if the downturn in alcohol consumption is a short-term effect of squeezed disposable income or the start of a broader trend away from drinking altogether for health and lifestyle reasons.

“There is certainly little to toast in Diageo’s full-year results – if recently departed CEO Debra Crew had not already left she would have been under renewed pressure had she been the one serving up these numbers.

“The decision to take significant impairments may well be a way of giving her permanent successor, when appointed, the best possible opportunity to succeed.”

Mr Mould added: “There are some positive signs which investors are seizing on – with the company currently seeing organic growth in four out of its five big markets. The exception being Asia Pacific – a region which has been important to recent growth both for Diageo itself and the wider drinks industry.

“Guinness remains very successful, and significantly the alcohol-free Guinness Zero has been an important component of that. This may quieten previous suggestions this part of the business might be sold so the company can focus exclusively on spirits.

“Sales of some brands may be on the agenda for any incoming new boss given a need to get the balance sheet in better shape – although the company will not want to lose any of its crown jewels.”