EMEA Franchise Picks – Summer Standouts

Research evidence excerpt

EMEA Franchise Picks – Summer Standouts

Europe Insights

Equity Research

July 15, 2026

Diageo (DGE LN, Buy, PT: 2000p) Ed Mundy

Why is the investment case attractive? Diageo is the global leader in premium spirits, owning some emundy@jefferies.com

of the industry’s strongest brands, including Johnnie Walker, Smirnoff, Tanqueray and Guinness.

+44 2070298476

Following more than two decades of premiumisation-led growth, the company is now navigating

what we describe as a “premiumisation hangover”, with consumer budgets under pressure and

demand softening across parts of the premium spirits market. Importantly, we do not believe Research

this represents a structural impairment to the category. Rather, Diageo has become overexposed

to higher price points in selected segments, particularly US tequila, creating an opportunity Addressing The Premiumisation Hangover

for management to rebalance the portfolio and drive renewed participation. The company is

responding proactively through targeted affordability initiatives, broader price ladders, pack-size

innovation and a greater focus on mainstream consumption occasions. Given Diageo’s unmatched

scale, distribution reach and brand portfolio, we believe it is uniquely positioned to adapt to changing

consumer behaviour while preserving the long-term value of its premium franchises. As consumer

spending normalises, the combination of improved volumes, mix management and productivity

initiatives should support a return to sustainable earnings growth.

Why do we have conviction? Our conviction is underpinned by evidence that Diageo’s challenges

are concentrated rather than pervasive, allowing management to implement targeted corrective

actions rather than wholesale strategic changes. The company has already demonstrated the