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Will Emerging Markets Drive the Next Leg of Growth for Diageo?
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Key Takeaways
Diageo's fiscal 2025 organic sales rose 1.7% y/y, driven by emerging market growth.
India, Africa and Latin America showed strong premiumization and sales momentum.
North America and Europe lagged, with weaker volumes and cautious consumer behavior.
Diageo Plc’s (DEO - Free Report) fiscal 2025 results underscored the diverging fortunes of its portfolio across developed and emerging markets. While overall organic sales rose 1.7%, growth was disproportionately supported by emerging economies, wherein both volume and price/mix trends were positive. In regions such as India, Diageo continued to benefit from consumer premiumization, particularly in the prestige and above whisky segment, aided by smaller pack sizes and the potential tailwind of the U.K.-India Free Trade Agreement.
Africa also delivered organic net sales growth across all markets, led by Ghana, while Latin America and the Caribbean saw improving conditions in Brazil and premiumization-led growth in Mexico. These gains reflect Diageo’s strategic intent to expand its footprint in high-growth, middle-class-driven markets.
In contrast, developed markets painted a more subdued picture. North America saw volume declines despite modest net sales growth, as pressured consumer wallets weighed on discretionary spending. Europe also experienced softer volumes amid macroeconomic uncertainty and downtrading in certain categories, with price/mix gains from Guinness offsetting weakness elsewhere. Together, these trends highlight how mature markets are being shaped by moderation and cautious consumer behavior, while emerging markets provide a stronger demand runway.
Diageo’s plans to deepen its presence in emerging regions remain central to its growth strategy. Targeted investments, localised marketing activations and portfolio innovation are expected to sustain momentum in these geographies. With demographic tailwinds and rising premium spirits consumption, emerging markets can serve as the company’s key growth engine, offsetting near-term pressures in its core developed markets.
Diageo’s Zacks Rank & Share Price Performance
Shares of this Zacks Rank #3 (Hold) company have lost 22.7% in the year-to-date period, underperforming the industry’s decline of 7.4% and the broader Consumer Staples sector’s growth of 2.9%. The stock also lagged the S&P 500’s 13.3% rally in the same period.
DEO Stock's YTD Performance
Image Source: Zacks Investment Research
Is DEO a Value Play Stock?
Diageo currently trades at a forward 12-month P/E ratio of 14.23X, higher than the industry average of 13.95X and below the S&P 500’s average of 23.32X. This valuation positions the stock at a premium relative to both its direct peers and the broader market.
PEP delivered a trailing four-quarter earnings surprise of 1.01%, on average. The Zacks Consensus Estimate for PepsiCo’s current financial-year sales indicates growth of 1.3% from the year-ago reported number, and that for EPS suggests a year-over-year decline of 1.6%.
Zevia (ZVIA - Free Report) is focused on addressing health challenges resulting from excess sugar consumption by offering a portfolio of zero-sugar, zero-calorie, naturally sweetened beverages. It currently has a Zacks Rank #2.
Zevia delivered a trailing four-quarter earnings surprise of 45.9%, on average. The Zacks Consensus Estimate for ZVIA’s current financial-year sales and EPS indicates growth of 3.8% and 48.4%, respectively, from the year-ago reported numbers.
Coca-Cola HBC (CCHGY - Free Report) sells and distributes non-alcoholic ready-to-drink beverages under bottlers' arrangements, franchise arrangements with third parties and under its brand names. It presently carries a Zacks Rank #2.
The Zacks Consensus Estimate for CCHGY’s current financial-year sales and EPS implies growth of 23% and 22.8%, respectively, from the year-ago reported numbers.
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Will Emerging Markets Drive the Next Leg of Growth for Diageo?
Key Takeaways
Diageo Plc’s (DEO - Free Report) fiscal 2025 results underscored the diverging fortunes of its portfolio across developed and emerging markets. While overall organic sales rose 1.7%, growth was disproportionately supported by emerging economies, wherein both volume and price/mix trends were positive. In regions such as India, Diageo continued to benefit from consumer premiumization, particularly in the prestige and above whisky segment, aided by smaller pack sizes and the potential tailwind of the U.K.-India Free Trade Agreement.
Africa also delivered organic net sales growth across all markets, led by Ghana, while Latin America and the Caribbean saw improving conditions in Brazil and premiumization-led growth in Mexico. These gains reflect Diageo’s strategic intent to expand its footprint in high-growth, middle-class-driven markets.
In contrast, developed markets painted a more subdued picture. North America saw volume declines despite modest net sales growth, as pressured consumer wallets weighed on discretionary spending. Europe also experienced softer volumes amid macroeconomic uncertainty and downtrading in certain categories, with price/mix gains from Guinness offsetting weakness elsewhere. Together, these trends highlight how mature markets are being shaped by moderation and cautious consumer behavior, while emerging markets provide a stronger demand runway.
Diageo’s plans to deepen its presence in emerging regions remain central to its growth strategy. Targeted investments, localised marketing activations and portfolio innovation are expected to sustain momentum in these geographies. With demographic tailwinds and rising premium spirits consumption, emerging markets can serve as the company’s key growth engine, offsetting near-term pressures in its core developed markets.
Diageo’s Zacks Rank & Share Price Performance
Shares of this Zacks Rank #3 (Hold) company have lost 22.7% in the year-to-date period, underperforming the industry’s decline of 7.4% and the broader Consumer Staples sector’s growth of 2.9%. The stock also lagged the S&P 500’s 13.3% rally in the same period.
DEO Stock's YTD Performance
Image Source: Zacks Investment Research
Is DEO a Value Play Stock?
Diageo currently trades at a forward 12-month P/E ratio of 14.23X, higher than the industry average of 13.95X and below the S&P 500’s average of 23.32X. This valuation positions the stock at a premium relative to both its direct peers and the broader market.
Diageo P/E Ratio (Forward 12 Months)
Image Source: Zacks Investment Research
Better-Ranked Stocks to Consider
PepsiCo Inc. (PEP - Free Report) is one of the leading global food and beverage companies. The company presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PEP delivered a trailing four-quarter earnings surprise of 1.01%, on average. The Zacks Consensus Estimate for PepsiCo’s current financial-year sales indicates growth of 1.3% from the year-ago reported number, and that for EPS suggests a year-over-year decline of 1.6%.
Zevia (ZVIA - Free Report) is focused on addressing health challenges resulting from excess sugar consumption by offering a portfolio of zero-sugar, zero-calorie, naturally sweetened beverages. It currently has a Zacks Rank #2.
Zevia delivered a trailing four-quarter earnings surprise of 45.9%, on average. The Zacks Consensus Estimate for ZVIA’s current financial-year sales and EPS indicates growth of 3.8% and 48.4%, respectively, from the year-ago reported numbers.
Coca-Cola HBC (CCHGY - Free Report) sells and distributes non-alcoholic ready-to-drink beverages under bottlers' arrangements, franchise arrangements with third parties and under its brand names. It presently carries a Zacks Rank #2.
The Zacks Consensus Estimate for CCHGY’s current financial-year sales and EPS implies growth of 23% and 22.8%, respectively, from the year-ago reported numbers.