Diageo CMD 2026

Very good. Thank you, Sonya. Good afternoon, everyone, and thank you very much for being here. On behalf of the Diageo Executive, I'd like to extend a very warm welcome. We're delighted you're here, but it's our responsibility, first and foremost, to make sure you're safe this afternoon. This is not a building that you know. There are no alarms. There are no anything planned. If you hear a signal, it means that something is happening, and you will need to evacuate the building. In every room you're going to be in, as we move you around the place, there will be someone there with a hi-vis if this were to happen. Please follow them out of the building. You know not to use the lifts. There are escape stairs on either end of the building. We'll escort you out of the building if there were to be.

It's very important to while you're with us, we make sure that you're always safe. Okay? Cool. This team you know to a large extent. Two new people that I want to call out. Natalie Bickford. Natalie, where are you? Where has she gone? There you go. Natalie joined us from Sanofi as Chief People Officer recently. This gentleman here hasn't officially joined us, Sujay, where are you? There we go. Sujay's joining us from Procter & Gamble on the 15th of August, and will be the President in our Asia Pacific region. This is the Diageo Executive. I'm not going to ask either of those guys to speak to you this afternoon. We'll let them get bedded in a little bit more before we do. You are going to hear from most of the other people in the course of this afternoon.

What are we going to share with you? We're going to share with you a plan that has two very clear focus. A focus on spirits, including RTDs. We see that as one market. We see it as a very robust category, and we think we can grow share in that growing category. We're going to continue the double-digit growth that we have on Guinness today, and we'll share with you the plans we have to continue that growth and indeed gain more share. The plan we'll share with you will talk about how we retain, very much retain the premiumization capability we have that has created so much value historically.

We are going to broaden and be a little bit more active with our portfolio and allow us to serve more consumers on more occasions as we become more active in category strategies as opposed to just brand-led strategies. You're going to see some of those this afternoon. We're really clear that we have a turnaround to execute in North America, but we need to do that whilst we continue to accelerate the growth elsewhere in the world. I think very importantly for investors, the way that we're going about this turnaround for Diageo doesn't require us to reset the profit in order to support the plan. You've heard me talk about the need for us to develop a more agile, more competitive operating framework. We've been working hard on that. It's also significantly more cost-effective than where we are today. We're investing GBP 1.2 billion of restructuring.

GBP 1.1 billion of that in the operating framework work and another GBP 100 million in the supply chain. We've charged GBP 752 million of that in FY 2026. Cash goes out in 2027. The balance will be spent and committed in 2027. That investment saves us $1 billion. All right? About $850 million of that comes from the operating framework work, and $150 million comes from the supply chain. The intention is that I'm going to invest that back into advancing some innovation, selectively improving our competitiveness, and indeed protecting that underlying profitability I talked about. I will come back to talk about what I mean by investing in competitiveness, because it seems that everybody thinks that's just price. It's not just price. In fact, it's actually quite a lot of not price activity.

You'll see it particularly in the North American plan that John will share with you, but I'm sure we can debate that later. This plan, including the restructuring charge, generates GBP 8 billion of cash over that three-year period. With the sale of EABL and the conclusion of the RCB deal, we anticipate the leverage will drop into the middle of the range in 2027. If we weren't to change anything, this is obviously hypothetical, that would allow us to be down at two, i.e. below our current guidance, by 2029. That's whilst we increase the CapEx to GBP 1.25 billion a year for three years. We'll share with you how we're going to spend that. We retain our capital allocation priorities, as we lower leverage, the board can then explore whether to change the dividend policy or indeed to think about share buybacks.

The other thing we'd like to be really clear with you about is the plan that we're sharing with you today is an organic turnaround. Very aware of lots of speculation, lots of things that people write in the marketplace. Being clear, we're not buying, we're not selling. This is an organic turnaround, we're basically, we have what we need to turn the business around. Finally, I'll share with you right at the end how we've simplified the incentive programs inside Diageo to align it to that investment case. That's what you're going to see from me and the team this afternoon. I think the summary of it is we've built a plan we believe in. We're really clear we've got an awful lot of work to do.

We're very confident as we do that work, that we can return this business to a very strong, very consistent creator of shareholder value. How are we going to share that plan with you? This is the agenda. It starts with me, I'm afraid. You've got me for a little while. I'm going to tell you what we've been doing over the last six months, particularly as it relates to strategy and particularly as it relates to the operating framework behind that restructuring plan. The rest of the day, this is not a I remember somebody telling me about previous Diageo Capital Markets Day, this is not a marketing show and tell. In fact, you're going to see very little, in terms of pure marketing sizzle reel from us today.

We've tried to construct the agenda through the lens of the investment thesis to try and address the questions that you ask us and other commentators comment on. We'll start with the market opportunity, Hannah, our strategy lead, will share with you our thinking on how we see this market evolving and the assumptions that we're making about each of the regions over the next three years. We'll also move to how we think we can win, and that really is the category strategy. Cristina will share with you a couple, and we'll share with you a couple because we've only got time to share with you a couple. And we'll share with you a couple with enough detail so you understand what we're doing, but not enough detail that we give anything competitively away.

Just be aware, we'll always try and walk that line, that we don't give too much away, whisky, tequila, RTDs. You're going to get a different sort of Guinness presentation. Ernie has got massive amount of marketing she could share with you. That's not what she's going to share with you. We're going to share with you the investment plan on Guinness and how it is we're going to drive capacity against that growth agenda. We'll take all of that work, we'll go to two regions. John's been in North America three months. He's going to share with you quite candidly, what he's found and what we need to do. It's fair to say our North American business has been underperforming for quite a while. The growth of tequila covered up some of that.

We now need to face into some of the realities, John will share with you exactly what we're thinking, what we're doing, and how we're going to phase ourselves as we turn around the North American business. I've asked Alvaro to share with you where we are in Latin America, because actually, of all of the regions in Diageo, the one that's most advanced down the category lens, that's most a reflection of where we're going, for the group in total, is actually in Latin America. Some really good and very clear examples of the direction of travel in what it is Alvaro has been leading for in Latin America.

Ewan will, the other question you've asked of me many times is the deployment of capital inside Diageo, Ewan will take you through how it is not only we're going to deploy that $1.25 billion of CapEx, he'll also talk to you about working capital, mature inventory, and we'll also finish by touching on how that supports customer service. We'll let Nik bring that all together in terms of the financial algorithm, and I'll pop back up right at the end to give you one slide on the incentive program and how we're changing that. We'll then have the opportunity for Q&As in this room. We're going to go downstairs. We've got an innovation showcase for you for half an hour, by which stage it'll be transformed up here, and we'll invite you back up here for a drink.

All the time able to answer any and all of your questions. Big thing for me and my team is we've got to be bang on time because we've got people on the webcast. We need to make sure that we hit. If there is any time in the sessions, we'll take questions, but only up to the limit of the time. Otherwise, we'll do it at the end of the day. Okay? Cool. We've been busy. We have been busy. It's been a busy six months. We shared some of this with you before. We started from a very objective review through the lens of multiple stakeholders, how we were performing from a market point of view, from a competitive point of view, a very extensive piece of work.