Diageo -2%, Pernod Ricard -4.4% — Both Declined, But for Opposite Reasons

On August 6, Diageo — owner of Johnnie Walker, Guinness and Smirnoff, and the world's largest spirits company — reported results for fiscal 2026 (July 2025 to June 2026). Organic sales were down 2.0%, and the dividend was cut by more than half from the prior year. Yet the stock jumped nearly 8% on the day of the announcement. The same week, No. 2 Pernod Ricard disclosed that its nine-month cumulative sales were also down 4.4%, and headlines naturally followed declaring that "the global spirits market is shaking."

That's not wrong, exactly. But lay the two companies' results side by side and a different story emerges. Diageo's weakness is the result of American consumers drinking less tequila. Pernod Ricard's weakness is closer to the result of being unable to sell cognac in Chinese airport duty-free stores. One is a pure consumption-trend problem; the other is a travel-retail and trade-policy problem operating on a completely different level. Lump the two "declines" together under one word, and the travel-retail industry misses the signal that actually matters to it.

Diageo — Dividend Cut in Half, Stock Up Anyway

Start with Diageo's FY2026 scorecard.

Metric	Figure
Net sales	US$19.643B, organic -2.0% / reported -3.0%
Organic operating profit	+2.0%, margin +116bp
Reported operating profit	-27.2%
North America (37% of total)	US$7.2B, -8.4%
Europe	Organic +3.4% (net sales +5.7%)
Asia Pacific	Slight decline
Africa	+13.3%
Latin America & Caribbean	+7.7%
Full-year dividend per share	50 cents (down ~52% from 103.48 cents)

The standout number is North America. The region accounts for 37% of total sales, and it alone declined 8.4% — with tequila at the center of it. US tequila sales fell roughly 21% year over year. Don Julio swung from +41.9% growth the prior year to a 19% decline, a 60.9-percentage-point reversal. Casamigos, already down 18%, saw that decline deepen to 28%. The premium tequila boom that exploded in the US during the pandemic years is unwinding, and Diageo is absorbing the full rebound effect.

Europe, by contrast, grew (organic +3.4%), driven by strong Guinness performance in Great Britain and Turkey — though within the region, Central & Eastern Europe (-4.9%), Iberia (-7.5%) and France (-3.5%) all pulled back. Asia Pacific slipped only slightly, as weakness in the Chinese white-spirits brand Shui Jing Fang offset modest growth in premium spirits. The regional picture is uneven, but the single factor dragging down the group's overall results is unmistakably US tequila.

The reported operating profit drop to -27.2% has a separate cause. Hyperinflationary accounting treatment in Turkey and the write-down of the Don Papa brand, among others, generated US$1.5B in impairment charges, on top of US$0.9B in restructuring costs tied to building out the new operating framework. Organic operating profit actually grew 2.0% — it's the one-off charges that crushed the reported number.

Behind the Dividend Cut — the New CEO's "Reset"

Diageo has had three different CEOs in the past three years. Dave Lewis (formerly of Tesco and Unilever), who took over in January, paired this results announcement with a US$1.2B turnaround plan. Its core: roughly US$1B in cost savings over three years (US$540M already realized in FY26 alone) and a leaner organization. The dividend policy changed too — where Diageo previously paid out about 63% of earnings as dividends, it has now adopted a new floor policy of "30-50% of earnings, with an annual minimum of 50 cents." The result: the annual dividend fell from 103.48 cents to 50 cents, a cut of more than half.

That's why a company that just halved its dividend saw its stock jump 8% on the day. The market welcomed not the dividend cut itself, but the fact that a company carrying US$21.7B in net debt had finally laid out a clear principle for where its cash will go. The announcement also included a deleveraging plan built around asset sales, including the US$2.3B disposal of its East African Breweries (EABL) stake. CEO Lewis emphasized three priorities — "brand relevance, customer, customer, customer, and an agile operating model" — and notably, nowhere in the announcement was there a specific mention of travel retail or the duty-free channel. Diageo's crisis was, through and through, a US domestic consumption-trend problem.

Pernod Ricard — When Cognac Got Shut Out, So Did the Results

Pernod Ricard's scorecard over the same period tells a different kind of story.

Period	Net sales	Organic growth	Notes
FY2025 (Jul 2024–Jun 2025)	€10.959B	-3.0%	Weakness in China, US, GTR Asia
H1 FY26 (Jul–Dec 2025)	€5.253B	-5.9%	Double-digit declines for Martell, Havana Club
Q3 FY26 (Jan–Mar 2026)	€1.945B	+0.1%	Entering stabilization
9M FY26 cumulative	€7.199B	-4.4%	—

In its FY2025 results, Pernod Ricard explicitly named "China, the US, and GTR Asia (Global Travel Retail Asia)" as the source of its weakness — with cognac, effectively shut out of China's duty-free channel since December 2024, as the decisive blow. That pattern continued into H1 FY26, when Martell cognac sales fell 17% on China-driven weakness and Havana Club rum also posted a double-digit decline. Group-wide sales did rebound to +0.1% by Q3, a sign of stabilization — but a new variable, travel disruption tied to conflict in the Middle East, emerged, and Pernod Ricard cut its FY26 full-year guidance to a 3-4% organic decline. The company also noted that, excluding the US and China, the rest of its markets grew 5% in Q3 — meaning the weakness is concentrated in two specific markets (the US and China) and one specific channel (travel retail).

The Core Insight — Portfolio Composition Decided the Outcome

Line up the two decline rates — Diageo -2.0%, Pernod Ricard -4.4% — and it's tempting to conclude simply that "Pernod Ricard had it worse." But look at the causes, and this isn't a gap in management skill so much as a gap in portfolio composition.

China launched an anti-dumping investigation into EU brandy in January 2024 and, in July 2025, imposed tariffs of up to 34.9% (later reduced to 32.2%) for a five-year term. Thirty-four companies — including Rémy Martin, Martell and Hennessy — were exempted from the duty as long as they held to pledged minimum prices. But during the roughly 18 months the investigation was underway, cognac was effectively pushed out of China's duty-free channel altogether. Only in 2026 did the situation begin to ease, with a zero-tariff policy for Hainan Free Trade Port residents (effective March 2026) helping the category gradually recover.

The companies that took the direct hit were the ones holding cognac houses — Pernod Ricard (Martell) and LVMH (Hennessy). Diageo, by contrast, has no meaningful cognac brand in its portfolio to begin with — its center of gravity is Johnnie Walker (Scotch), Don Julio and Casamigos (tequila), Smirnoff (vodka) and Guinness (beer). In other words, Diageo didn't "dodge" the travel-retail risk in this episode so much as it simply had no product exposed to that risk in the first place. Conversely, the US tequila collapse that hammered Diageo was a relatively small category for Pernod Ricard, and barely registered. The two companies declined in the same period, but they were, in effect, sitting different exams.

What Travel Retail Should Take Away

The implication for Korea's duty-free and travel-retail industry is clear. When a headline says "a global spirits giant is struggling," it's a separate question entirely whether that actually touches any specific brand or category on your own shelves. Diageo's -2.0% decline has almost nothing to do with the Johnnie Walker or Guinness shelf at a Korean duty-free store. Pernod Ricard's weakness, on the other hand, is directly tied to the cognac and premium-category mix that actually sits on those shelves — Martell, Absolut and others — and has likely already affected Korean duty-free operators' cognac allocation and promotion planning.

Practical Implications

• Duty-free MDs/buyers: When reading a supplier's earnings release, check what actually declined before checking the headline growth rate. Consumption-trend weakness like Diageo's may have nothing to do with your own channel, while channel- or policy-driven weakness like Pernod Ricard's directly affects allocation and promotion plans
• Category managers: China's tariff risk on cognac hasn't fully resolved, so volume volatility should stay on the radar through the second half of 2026. Tequila, by contrast, hinges on a US market recovery and has relatively little bearing on Korean duty-free volumes
• Buyers/procurement: Understanding a supplier's portfolio composition in advance — whether it holds a cognac house, for instance — makes it easier to anticipate which brands would be caught up if a given country's trade dispute flares up
• Finance/IR teams: Diageo's case — a steep dividend cut followed by a rising stock price — shows that markets weigh "the principle behind the numbers" more heavily than "the direction of the numbers." It's a useful reference for why pairing bad results with a clear cause and a clear plan matters

Conclusion

Diageo and Pernod Ricard were frequently lumped together in 2026 coverage on the strength of one shared fact: both giants' sales declined. But open up the numbers, and one is a pure category problem — tequila fatigue among American consumers — while the other is a travel-retail channel problem created by Chinese trade policy. Bundle both events into a single "spirits industry downturn" narrative, and it becomes easy to miss the signal that actually matters to your own shelves. That's exactly why it pays to read past the headline and ask which brand, in which channel, and why.