Diageo operating profit drops 27% as dividend cut to 50c
Sentiment and the balance of points
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Form Type
20-F
Diageo plc reports a mixed fiscal 2026, with reported net sales of $19.6 billion, down 3.0%, and organic net sales down 2.0% as growth in Europe, Latin America and Africa was offset by weakness in North America and Asia Pacific, especially US spirits and Chinese white spirits. Volume declined 0.4% and unfavourable price/mix reduced growth by 1.6%.
Reported operating profit fell 27.2% and basic EPS dropped to 78.1c (down 26.3%), driven by $2.5 billion of exceptional restructuring and impairment charges, including a large write-down in Türkiye and Don Papa. By contrast, organic operating profit rose 2.0% and organic margin improved 116 bps on cost savings.
Free cash flow increased to $3.2 billion and net debt fell to $20.5 billion, improving leverage to 3.1x from 3.4x. Management is investing $1.2 billion in a two-year restructuring expected to deliver about $1 billion in annual savings and has cut the total dividend to 50c (from 103.48c) to strengthen the balance sheet. A new strategy focuses on total spirits (including RTDs), Guinness in premium beer, a more integrated supply chain and a turnaround in North America.
Positive
- Free cash flow increased to $3.2 billion, up $463 million year-on-year, strengthening internal funding capacity for investment and deleveraging.
- Net debt declined to $20.5 billion with leverage improved to 3.1x from 3.4x, with a path guided toward ~2x by fiscal 2029.
- Organic operating profit grew 2.0% and organic operating margin expanded 116 bps, reflecting tangible cost savings despite top-line pressure.
- A $1.2 billion restructuring, expected to generate about $1 billion in annual savings, is largely defined and already delivering Accelerate programme savings of $540 million in fiscal 2026.
- Environmental progress is notable, with Scope 1 and 2 greenhouse gas emissions reduced 25.7% from the fiscal 2022 baseline and water replenishment reaching 100% of operations in water-stressed areas.
Negative
- Reported operating profit declined 27.2% and basic EPS fell 26.3% to 78.1c, weighed down by $2.5 billion of exceptional impairments and restructuring charges.
- Reported net sales decreased 3.0% and organic net sales declined 2.0%, with significant weakness in North America tequila and US spirits.
- The total recommended dividend per share was reduced to 50.00c from 103.48c, a substantial cut aimed at reinforcing the balance sheet.
- Exceptional impairments of about $1,489 million, including the Türkiye cash-generating unit and Don Papa, signal reduced expectations for parts of the portfolio.
- Total shareholder return over the year was -14%, reflecting the lower share price amid operational and earnings pressure.
Filing Explained
Fiscal 27 carries the restructuring cash outflow, while the East African Breweries and Royal Challengers Bengaluru disposals await expected H2 2026 closings.
The Form 20-F reports that Diageo’s two-year restructuring is underway:
The company also reports that the sale of East African Breweries remains on track for calendar H2 2026 and that the Royal Challengers Bengaluru disposal is progressing as planned; both are expected to close in that period.
A Form 20-F is a foreign private issuer’s annual report, the counterpart of a 10-K. The filing itemizes
The next stated milestones are the fiscal-27 restructuring cash outflows and the completion status of the East African Breweries and Royal Challengers Bengaluru disposals.
Key Figures
Reported net sales: $19,643 million
Organic net sales growth: -2.0%
Reported operating profit margin: 16.1%
+5 more
8 metrics
Reported net sales
$19,643 million
Fiscal year ended 30 June 2026; down 3.0% year-on-year
Organic net sales growth
-2.0%
Fiscal 2026 vs fiscal 2025, excluding FX, hyperinflation, M&A
Reported operating profit margin
16.1%
Fiscal 2026; declined 535 bps from 21.4% in fiscal 2025
Organic operating profit growth
2.0%
Fiscal 2026, margin up 116 bps mainly from cost savings
Free cash flow
$3,211 million
Fiscal 2026; increase of $463 million vs fiscal 2025
Basic EPS
78.1 cents
Fiscal 2026; down 26.3% from 105.9 cents in fiscal 2025
Net debt
$20,482 million
As of 30 June 2026; leverage 3.1x adjusted EBITDA
Total dividend per share
50.00 cents
Fiscal 2026 total recommended dividend vs 103.48 cents in 2025
Key Terms
organic net sales, free cash flow, hyperinflation adjustment, Accelerate programme, +2 more
6 terms
organic net sales financial
"Organic net sales declined 2.0% with volume down 0.4%"
Organic net sales represent the revenue generated from a company's core business activities, excluding the effects of acquisitions, divestments, or currency changes. It shows how well the company is growing through its existing products and services, similar to tracking how a plant grows from its own roots rather than by adding new plants. Investors use this measure to assess the true growth and health of a company's ongoing operations.
free cash flow financial
"Free cash flow increased by $463 million to $3.2 billion"
Free cash flow is the amount of money a company has left over after paying all its expenses and investing in its business, like buying equipment or updating facilities. It shows how much cash is available to reward shareholders, pay down debt, or save for future growth. This helps investors understand if a company is financially healthy and able to grow.
hyperinflation adjustment financial
"partly offset by the hyperinflation adjustment of $332 million"
Accelerate programme financial
"we delivered $540 million, or c.85% of the Accelerate programme"
ready-to-drink (RTD) financial
"We should not treat RTDs as separate from spirits"
Ready-to-drink (RTD) are pre-mixed beverages sold in bottles, cans, or cartons that consumers can drink immediately without preparation, covering both alcoholic and nonalcoholic products. Investors pay attention to RTD because these products act like a fast-moving, convenience-focused version of a brand’s portfolio—their ease of use, shelf life, packaging and distribution can drive faster sales, higher repeat purchases and different margins compared with products that require mixing or on-site preparation.
GLP-1s medical
"we continue to watch GLP-1s carefully"
GLP-1s are a class of prescription medicines that mimic a natural gut hormone to lower blood sugar, curb appetite and slow stomach emptying, often used for diabetes and weight management. They matter to investors because prescribing rates, pricing and insurance coverage can drive large, sustained revenue streams and reshape demand across drug makers, medical device vendors and health insurers—like a bestselling product line that shifts an entire market.
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How did Diageo (DEO) perform financially in fiscal 2026?
Diageo reported $19.6 billion in net sales, down 3.0%, with organic net sales down 2.0%. Reported operating profit fell 27.2%, while organic operating profit increased 2.0%, showing margin improvement despite weaker top-line performance in North America and Asia Pacific.
What happened to Diageo (DEO) earnings and EPS in fiscal 2026?
Basic EPS declined 26.3% to 78.1c, mainly due to $2.5 billion of exceptional restructuring and impairment charges. EPS before exceptional items edged up 0.7% to 165.3c, supported by higher organic operating profit and favourable foreign exchange effects.
Why did Diageo (DEO) cut its dividend and what is the new level?
Diageo reduced the total recommended dividend to 50.00c per share from 103.48c to strengthen the balance sheet and increase financial flexibility. The payout aligns with a 30% dividend payout ratio within the company’s stated 30–50% policy range.
How strong is Diageo’s (DEO) cash flow and leverage position?
Net cash from operating activities reached $4.39 billion and free cash flow increased to $3.21 billion. Net debt declined to $20.48 billion, improving the net debt-to-adjusted EBITDA leverage ratio to 3.1x, with further reduction expected following planned disposals.
What restructuring and savings plans has Diageo (DEO) announced?
Diageo is investing $1.2 billion over two years in a new operating framework and supply chain changes, targeting about $1 billion in annual savings. In fiscal 2026 it delivered $540 million of Accelerate programme savings from marketing efficiencies, supply and overhead reductions.
How is Diageo’s (DEO) North America business performing?
North America organic net sales declined 8.4%, with US spirits down 11.5% and tequila particularly weak. Organic operating profit in the region fell 10.0%, and management has outlined a multi-year turnaround plan focused on competitiveness, pricing and customer partnerships.
What environmental targets did Diageo (DEO) achieve in 2026?
Diageo achieved 100% water replenishment at sites in water-stressed areas and improved water efficiency by 14.9% versus fiscal 2020. Scope 1 and 2 greenhouse gas emissions fell 25.7% against a fiscal 2022 baseline, reflecting efficiency projects and optimised bioenergy usage.
AI-generated analysis. How Rhea-AI works. Not financial advice.
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F-1 | Diageo Form 20-F 2026 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
EXCHANGE ACT OF 1934
OR
ACT OF 1934
For the fiscal year ended: 30 June 2026
OR
EXCHANGE ACT OF 1934
OR
EXCHANGE ACT OF 1934
Date of event requiring this shell company report
For the transition period from __ to __
Commission file number 1-10691
(Exact name of Registrant as specified in its charter)
(Jurisdiction of incorporation or organisation)
(Address of principal executive offices)
Tel: +44 20 7947 9100
E-mail: the.cosec@diageo.com
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
New York Stock Exchange(i) | ||
(i)Not for trading, but only in connection with the registration of American Depositary Shares representing such ordinary shares, pursuant to the requirements of the
Securities and Exchange Commission.
F-2 | Diageo Form 20-F 2026 |
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period
covered by the Annual Report: 2,432,397,125 ordinary shares of 28101/108 pence each.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ¨ No þ
Note - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes þ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an
emerging growth company. See the definitions of 'large accelerated filer,' 'accelerated filer,' and 'emerging growth company' in Rule
12b-2 of the Exchange Act :
þ | Accelerated Filer | ☐ | Non-Accelerated Filer | ☐ | Emerging growth company |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by checkmark if
the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards† provided pursuant to Section 13(a) of the Exchange Act. ¨
† | The term 'new or revised financial accounting standard' refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. |
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by
the registered public accounting firm that prepared or issued its audit report. þ
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements. ¨
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive
based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to
§240.10D-1(b). ¨
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this
filing:
U.S. GAAP ¨ | Other ¨ | |||
as issued by the International Accounting Standards Board | ☑ |
If 'Other' has been checked in response to the previous question, indicate by check mark which financial statement item the
registrant has elected to follow. Item 17 ¨ Item 18 ¨
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes ☐ No þ
F-3 | Diageo Form 20-F 2026 |
Contents | ||
F-5 | Cross reference to Form 20-F | |
F-7 | Introduction | |
2 | Strategic report: Our business | |
2 | Diageo at a glance | |
3 | Performance highlights | |
4 | Chair’s statement | |
6 | Chief Executive’s statement | |
8 | Our fiscal 26 performance | |
10 | Our turnaround plan | |
12 | Our business model | |
13 | Market dynamics | |
14 | Investment case | |
16 | Strategic report: Our performance | |
16 | Our performance | |
20 | Summary financial review | |
22 | Business review | |
F-9 | Business review - Corporate | |
30 | Group financial review | |
F-10 | Operating results 2025 compared with 2024 | |
32 | Spirit of Progress | |
34 | Business integrity and human rights | |
36 | Our people and culture | |
38 | Health and safety | |
40 | Promote positive drinking | |
42 | Champion inclusion and diversity | |
44 | Pioneering grain-to-glass sustainability | |
57 | Our ESG reporting approach | |
F-11 | Risk factors | |
69 | Governance report | |
70 | Chair's introduction to Governance | |
71 | Corporate governance structure and division of responsibilities | |
73 | Board of Directors | |
75 | Executive Committee | |
77 | Corporate governance report | |
89 | Audit Committee report | |
F-22 | Management’s report on internal control over financial reporting | |
96 | Nomination Committee report | |
100 | Directors’ Remuneration report | |
130 | Directors’ report | |
134 | Financial statements | |
135 | Report of Independent Registered Public Accounting Firm - PCAOB ID | |
F-4 | Diageo Form 20-F 2026 |
Contents (continued) | ||
204 | Additional information | |
205 | Unaudited financial information | |
213 | Cautionary statement concerning forward-looking statements | |
217 | Other additional information | |
224 | Liquidity and capital resources | |
228 | Exhibits | |
230 | Signature | |
231 | Glossary of terms and US equivalents | |
F-5 | Diageo Form 20-F 2026 |
Cross reference to Form 20-F | ||
Item | Required item in Form 20-F | Page(s) |
Part I | ||
1. | Identity of directors, senior management and advisers | Not applicable |
2. | Offer statistics and expected timetable | Not applicable |
3. | Key information | |
A. [Reserved] | — | |
B. Capitalisation and indebtedness | Not applicable | |
C. Reason for the offer and use of proceeds | Not applicable | |
D. Risk factors | F-11-F-21 | |
4. | Information on the company | |
A. History and development of the company | F-1, F-7-F-8, 4-7, 20-23, 130, 217 | |
B. Business overview | F-7-F-8, 2, 20-29, F-9, 150-152, 217-218 | |
C. Organisational structure | 193 | |
D. Property, plant and equipment | 23, 169-170, 217-218 | |
4A. | Unresolved staff comments | Not applicable |
5. | Operating and financial review and prospects | |
A. Operating results | 3-7, 16-17, 20-29, F-9, 30-31, F-10, F-11- F-12, F-15, F-19, 148-156, 205-207, 213 | |
B. Liquidity and capital resources | 31, 179-187, 224-227 | |
C. Research and development, patents and licenses, etc. | 155, 218 | |
D. Trend information | 4-7, 13, 16-17, 20-29, F-9, 213, 217-218 | |
E. Critical Accounting Estimates | 149 | |
6. | Directors, senior management and employees | |
A. Directors and senior management | 73-76 | |
B. Compensation | 118-127, 155, 171-175, 189, 192 | |
C. Board practices | 4-5, 70-79, 84-88, 92, F-22, 100-107 | |
D. Employees | 22, 37, 102, 155, 218 | |
E. Share ownership | 118-127, 189, 192 | |
F. Disclosure of a registrant’s action to recover erroneously awarded compensation | Not applicable | |
7. | Major shareholders and related party transactions | |
A. Major shareholders | 130 | |
B. Related party transactions | 130, 192 | |
C. Interests of experts and counsel | Not applicable | |
8. | Financial information | |
A. Consolidated statements and other financial information | 143, 193 | |
B. Significant changes | 4-5, 8, 75-77, 83, 92, 96, 119, 131, 157, 182 | |
9. | The offer and listing | |
A. Offer and listing details | 77, 131 | |
B. Plan of distribution | Not applicable | |
C. Markets | 77, 131 | |
D. Selling shareholders | Not applicable | |
E. Dilution | Not applicable | |
F. Expenses of the issue | Not applicable | |
F-6 | Diageo Form 20-F 2026 |
Cross reference to Form 20-F (continued) | ||
Item | Required item in Form 20-F | Page(s) |
10. | Additional information | |
A. Share capital | Not applicable | |
B. Memorandum and articles of association | 77, 131-132 | |
C. Material contracts | 130, 217-218 | |
D. Exchange controls | 223 | |
E. Taxation | 158-160 | |
F. Dividends and paying agents | Not applicable | |
G. Statement by experts | Not applicable | |
H. Documents on display | 223 | |
I. Subsidiary information | Not applicable | |
11. | Quantitative and qualitative disclosures about market risk | 179-185 |
12. | Description of securities other than equity securities | |
A. Debt securities | Not applicable | |
B. Warrants and rights | Not applicable | |
C. Other securities | Not applicable | |
D. American depositary shares | 131-132, 219-221 | |
Part II | ||
13. | Defaults, dividend arrearages and delinquencies | Not applicable |
14. | Material modifications to the rights of security holders and use of proceeds | Not applicable |
15. | Controls and procedures | |
A. Disclosure controls and procedures | 88, 92-93 | |
B. Management’s report on internal control over financial reporting | 88, 92-93, F-22 | |
C. Attestation report of the registered public accounting firm | 135-137 | |
D. Changes in internal control over financial reporting | 88, 92-93, F-22 | |
16A. | Audit committee financial expert | 90 |
16B. | Code of ethics | 94, 218 |
16C. | Principal accountant fees and services | 94-95, 155 |
16D. | Exemptions from the listing standards for audit committees | Not applicable |
16E. | Purchases of equity securities by the issuer and affiliated purchasers | 146, 187-189 |
16F. | Change in registrant’s certifying accountant | Not applicable |
16G. | Corporate governance | 77, 218-219 |
16H. | Mine safety disclosure | Not applicable |
16I. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | Not applicable |
16J. | Insider trading policies | 94 |
16K. | Cybersecurity | 95 |
Part III | ||
17. | Financial statements | Not applicable |
18. | Financial statements | 143-193 |
19. | Exhibits | 228-229, 233-245 |
Additional information | ||
Glossary of terms and US equivalents | 231-232 | |
F-7 | Diageo Form 20-F 2026 |
Introduction
Diageo is a global leader in the beverage alcohol industry with an outstanding collection of brands across spirits and beer. Its
products are sold in nearly 180 countries around the world and its brands include Johnnie Walker, Crown Royal, JεB and Buchanan’s
whiskies, Smirnoff and Ketel One vodkas, Captain Morgan, Baileys, Don Julio, Tanqueray and Guinness. Diageo's new strategy
focuses on relevant brands in competitive category strategies, the customer and a fully integrated end-to-end supply chain.
Diageo plc is incorporated as a public limited company in England and Wales. The company which is now Diageo plc was
incorporated as Arthur Guinness Son and Company Limited on 21 October 1886. The Diageo group was formed by the merger of the
Grand Metropolitan Public Limited Company and Guinness plc groups in December 1997. Diageo plc’s principal executive office is
located at 16 Great Marlborough Street, London W1F 7HS, England and its telephone number is +44 (0) 20 7947 9100. Diageo plc’s
agent for service in the United States for the purposes of Diageo’s registration statement on Form F-3 (333-294004) is General
Counsel, Diageo North America, Inc., 175 Greenwich Street, 3 World Trade Center, New York, NY 10007.
This is the Annual Report on Form 20-F of Diageo plc for the year ended 30 June 2026. The information set out in this Form 20-F
does not constitute Diageo plc’s statutory accounts under the UK Companies Act for the years ended 30 June 2026, 30 June 2025
and/or 30 June 2024. The accounts for the years ended 30 June 2025 and 30 June 2024 have been delivered to the registrar of
companies for England and Wales and those for the year ended 30 June 2026 will be delivered to the registrar of companies for
England and Wales in due course.
This document contains forward-looking statements that involve risk and uncertainty because they relate to, and are dependent upon,
events and circumstances that will occur in the future. There are a number of factors that could cause actual results and developments
to differ materially from those expressed or implied by these forward-looking statements, including factors beyond Diageo’s control.
For more details, please refer to the Cautionary statement concerning forward-looking statements on page 213.
This document may contain inactive textual addresses to websites operated by Diageo (including www.diageo.com) and third parties.
Reference to such websites is made for information purposes only, and any information found at such websites does not form a part
of this document and is not incorporated by reference into this document. Diageo does not make any representation or warranty with
respect to the accuracy or completeness of, or take any responsibility for, any information found at any websites operated by third
parties. This report includes names of Diageo’s products, which constitute trademarks or trade names which Diageo owns or which
others own and license to Diageo for use. In this report, the term ‘company’ refers to Diageo plc and terms ‘group’ and ‘Diageo’ refer
to the company and its consolidated subsidiaries, except as the context otherwise requires. A glossary of terms used in this report is
included at the end of the report.
The consolidated financial statements are prepared in accordance with IFRS® Accounting Standards (IFRSs) adopted by the UK
(UK-adopted International Accounting Standards) and IFRSs, as issued by the International Accounting Standards Board (IASB),
including interpretations issued by the IFRS Interpretations Committee. IFRS as adopted by the UK differs in certain respects from
IFRS as issued by the IASB. The differences have no impact on the group’s consolidated financial statements for the years presented.
The consolidated financial statements are prepared on a going concern basis under the historical cost convention, unless stated
otherwise in the relevant accounting policy.
The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates.
The financial performance expectations related to Diageo’s Accelerate programme, Diageo’s fiscal 27 outlook, Diageo’s medium-
term guidance and any other statements related to Diageo’s performance expectations for the year ending 30 June 2027 or thereafter
included in this document have been prepared by and are the responsibility of Diageo’s management. PricewaterhouseCoopers LLP
has not audited, reviewed, examined, compiled nor applied agreed-upon procedures with respect to the financial performance
expectations and, accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect
thereto. The PricewaterhouseCoopers LLP report included in this document relates to Diageo’s historical financial statements. It does
not extend to the financial performance expectations and should not be read to do so. The financial performance expectations were
not prepared with a view toward compliance with published guidelines of the Securities and Exchange Commission or the guidelines
established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial
information.
F-8 | Diageo Form 20-F 2026 |
Introduction (continued)
Information presented
Organic movements and organic operating margins are before exceptional items. Commentary, unless otherwise stated, refers to
organic movements. Share, unless otherwise stated, refers to value share. See page 205 for explanation and reconciliation of non-
GAAP measures, including organic net sales, organic operating profit, free cash flow, adjusted operating cash flow, eps before
exceptionals, ROIC, adjusted net debt, adjusted EBITDA and tax rate before exceptional items.
The brand ranking information presented in this report, when comparing information with competitors, reflects data published by
sources such as Global Data, Nielsen, NABCA and IWSR. Market data information and competitive set classifications are taken from
independent industry sources in the markets in which Diageo operates. In addition, Diageo’s financial year end is 30 June, and such
data may relate to dates other than 30 June or periods other than the financial year ended 30 June, such as calendar year end.
Disclosures not included in Annual Report on Form 20-F
The following pages and sections of this document do not form part of the Annual Report on Form 20-F and are furnished to the SEC
for information only:
•Disclosures under the heading ‘Fiscal 26 non-financial performance’ on page 3.
•Disclosures under the heading ‘Statement on Section 172 of the Companies Act 2006’ on page 5.
•Disclosures under the headings ‘Spirit of Progress’ and ‘Looking forward’ in the Chair’s statement on page 5.
•Disclosures under the heading ‘Looking to the future’ in the Chief Executive’s statement on page 7.
•Disclosures under the heading ‘An attractive investment case’ on page 14.
•Disclosures under the heading ‘Non-financial performance’ on pages 18 to 19.
•Disclosures under the heading ‘Health and safety’ on pages 38 to 39.
•Disclosures under the heading ‘Stakeholder engagement’ on pages 80 to 83.
•Disclosures under the heading ‘Workforce Engagement statement’ on page 86.
•Disclosures under the headings ‘Going concern’, ‘Risk Management’ and ‘Viability statement’ on pages 91 to 92.
•Disclosures under the headings ‘Disclosure of information to the auditor’, ‘Corporate governance statement’ and ‘Political
donations’ on page 130.
2 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information |
Diageo at a glance
A broad portfolio of iconic brands
Our global footprint
200+
brands
c.180
countries and territories
27,500+
employees
110+
manufacturing sites
Our performance
$19.6bn
fiscal 26 reported net sales
1.8x
larger than nearest international spirits
competitor(1)
#1
in international spirits by retail sales value(1)
Our key categories
Reported net sales by category (%)
ò | Scotch | 24 |
ò | Tequila | 12 |
ò | Vodka | 8 |
ò | Canadian whisky | 6 |
ò | Rum | 5 |
ò | Liqueurs | 5 |
ò | Gin | 4 |
ò | IMFL whisky | 4 |
ò | US whiskey | 2 |
ò | Chinese white spirits | 2 |
ò | Beer | 18 |
ò | Ready-to-drink (RTD) | 4 |
(1)IWSR 2025
3 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Performance highlights
Fiscal 26 financial performance
Volume (equivalent units) | ||
EU227.1m | ||
(2025: EU230.1m) | ||
Reported movement | (1)% | |
Organic movement(1) | — | — |
Reported operating profit | ||
$3,156m | ||
(2025: $4,335m) | ||
Reported movement | (27)% | |
Organic movement(1) | 2% | |
Reported net sales(2) | ||
$19,643m | ||
(2025: $20,245m) | ||
Reported movement | (3)% | |
Organic movement(1) | (2)% | |
Net cash from operating activities | ||
$4,392m | ||
(2025: $4,297m) | ||
2026 free cash flow(1) | $3,211m | |
2025 free cash flow(1) | $2,748m | |
Earnings per share (eps) | ||
78.1c | ||
(2025: 105.9c) | ||
Reported movement | (26)% | |
Eps before exceptional items movement(1) | 1% | |
Total recommended dividend per share(3) | ||
50.00c | ||
(2025: 103.48c) | ||
Fiscal 26 non-financial performance
Positive drinking
2.96m
(2025: 3.60m) Total to date: 14.98m
Reach of Diageo Positive Drinking education
programmes and partnerships. Comprising:(4)
Number of people educated on the dangers of
underage drinking through a Diageo-supported
education programme is 1.71m (2025: 1.99m(5));
Number of drink driving educational experiences
delivered 1.25m (2025: 1.61m(5)).
Water replenishment
100%
(2025: 84%)
Cumulative progress: Replenish more water than
we use for operations in water-stressed areas.
Inclusion and diversity
44% |
(2025: 43%) |
Percentage of female leaders globally |
46% |
(2025: 46%) |
Percentage of ethnically diverse leaders globally |
Greenhouse gas emissions(6)
(25.7)%
(2025: (20.9)%)
Percentage change in absolute direct and indirect
greenhouse gas emissions (market/net based)
compared to fiscal 22 baseline
(1)See definitions and reconciliation of non-GAAP measures to GAAP measures on pages 205-211.
(2)Net sales are sales less excise duties.
(3)Includes recommended final dividend of 30c for fiscal 26.
(4)These programmes measure different outcomes and are reported over different reporting periods. Refer to the Non-Financial Reporting Boundaries and Methodologies document for
further information.
(5)Comparative fiscal 25 target results are presented to two decimal places to improve comparability with current year reporting.
(6)Data for the baseline year and for the intervening period up to the end of last financial year has been recalculated in line with our Non-Financial Reporting Boundaries and
Methodologies.
Unless otherwise stated in this document, percentage movements refer to organic movements. For a definition of organic movement and reconciliation of all non-GAAP measures to GAAP
measures, see pages 205-211. Share refers to value share. Percentage figures presented are reflective of a year-on-year comparison, namely 2025-2026, unless otherwise specified.
4 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Chair's statement
A year of change
This has been a year of significant change for Diageo, but
one in which we have taken important steps to drive the
company’s transformation.
The operating environment has remained volatile, largely owing to continued
macroeconomic and geopolitical uncertainty. We also recognise that Diageo
should be doing more to reach its potential. I want to be clear about that. As we
close the fiscal, we are looking to Diageo’s future with confidence and
conviction.
Whilst we continue to face challenges, spirits remain an attractive and resilient
category, with growth in Europe, LAC, Africa and Asia Pacific (when
excluding Chinese White Spirits). There is much work to be done, particularly
in North America, which remains a softer market, but as a Board we are
encouraged by the new direction of the business and the progress made in
establishing a clearer path forward.
When I wrote to you a year ago, I said my immediate focus was to appoint the
right Chief Executive. I would like to thank Nik Jhangiani for his leadership as
Interim Chief Executive while the Board and I focused on that process.
In November, we were delighted to announce the appointment of
Sir Dave Lewis as Chief Executive. Dave joined the business in January and has
made a strong start.
He is a proven Chief Executive with extensive marketing and brand-building
experience, coupled with an outstanding track record of leading global
consumer businesses.
The Board is confident that Dave will work with the team to lead Diageo
through its next successful chapter.
He has hit the ground running, spending time across the regions, listening to
colleagues, customers and partners, and working with his leadership team to
establish a clear view of what needs to change. In early August, he updated both
our employees and then investors on his plans and strategy.
This strategy sets out some of the significant moves that are already being
implemented across the business, including changes to the operating framework
to make Diageo more competitive. We recognise that changes of this scale can
be difficult in the short term, and I would like to thank colleagues across Diageo
for the commitment and passion they have shown throughout the year.
5 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information |
Under Dave and his leadership team, the Board is confident that Diageo is on
the right path to returning to consistent growth and delivering stronger
shareholder returns.
Driving long-term shareholder value and
strengthening the balance sheet
As we look to the task ahead, our focus is firmly on restoring stronger
performance across the business as a whole.
We recognise that the full benefits of the new strategy will take time to come
through.
Consumer confidence remains fragile across many developed markets, which in
turn has an impact on willingness to spend. North America has continued to
experience softer demand, while geopolitical uncertainty, including ongoing
conflict in the Middle East and tensions affecting global trade, have added
further complexity.
We need to ensure that our portfolio is positioned for how consumers are
engaging with brands today, that our pricing remains relevant and that
investment is focused on the areas with the greatest potential to drive
sustainable growth.
Delivering long-term growth also requires a stronger financial foundation. For
the Board, that has meant a clear focus on strengthening Diageo’s balance sheet
and reducing financial leverage. Over the course of the year, we took a number
of important actions to deliver on that ambition, while continuing to drive
investment behind our portfolio of brands.
Steps included improving operating cash flow, progressing strategic disposals
and taking the necessary decision to reduce the dividend.
On disposals, we announced the sale of East African Breweries PLC, where we
would like to thank colleagues across Kenya, Uganda and Tanzania for their
commitment and professionalism. We also announced the sale of our stake in
Royal Challengers Bengaluru cricket team.
We know the dividend is important to our shareholders, and the Board did not
take its decision to change the dividend policy lightly. However, we believe it
was a necessary and responsible step to strengthen the balance sheet, create
greater flexibility and put the business in a stronger position to invest for
growth. We have already seen the impact of those decisions start to come
through, with net debt to adjusted EBITDA of 3.1x at year-end, down from 3.4x
year-on-year.
By focusing the business on a simpler set of priorities and measures, we are
confident Diageo can reinforce its position as the leading international spirits
business and deliver stronger shareholder value over the coming years.
Leadership changes
Alongside the appointment of a new Chief Executive, the composition of the
Board has continued to evolve.
We were delighted to welcome John Rishton as a Non-Executive Director
in November 2025. John brings more than 40 years of experience across large
multinational companies and global industries, including senior roles at Rolls-
Royce, Informa and British Airways.
He has joined the Audit and Nomination Committees, and I would like to thank
him for the contribution he has already made.
The Board will also be strengthened by the appointment of Alex Keith,
who joins in November. She brings with her more than 30 years of leadership
experience at Procter & Gamble, most recently as CEO of P&G Beauty,
alongside expertise in strategy, brand-building, international business, and
sustainability.
In addition to these Board changes, this financial year has marked a period of
change for Diageo’s Executive Committee.
While Nik Jhangiani served as Interim Chief Executive, Deirdre Mahlan
returned as Interim Chief Financial Officer. We are very grateful to Deirdre for
once again supporting Diageo and for her many contributions over the course of
her distinguished career with the company. The Board also supported the Chief
Executive as he reshaped his Executive Committee for fiscal 27 and beyond, as
detailed in his statement.
Having the right management team in place is essential to delivering Diageo’s
strategic priorities and strengthening performance. The Board is confident that
the reshaped Executive Committee brings the experience, focus and energy
needed to do so.
Spirit of Progress
As we reshape the business, we are also maintaining our focus on the areas that
are central to Diageo’s long-term resilience and values.
We have continued to make progress against our Spirit of Progress ESG action
plan and have achieved our ambition of replenishing more water than we use in
our operations in water-stressed areas, with work continuing across markets
including Mexico, India and countries across Africa.
Water stewardship remains critical to the resilience of our operations and to the
communities in which we operate. It is one of the areas where Diageo can make
a substantial and lasting contribution.
Positive drinking also remains central to our approach. Ahead of the FIFA
World Cup this year, we launched “The Best Move: Celebrate Responsibly”
across Latin America and the Caribbean, using the reach of the tournament and
our brands to encourage simple moderation habits and responsible celebration.
While Spirit of Progress is no longer part of the long-term incentive plan, the
accelerated work undertaken in recent years has embedded its priorities more
deeply within the business and will continue to be a focus for the Board.
Together, this work reflects our continued commitment to using Diageo’s scale
and influence responsibly, while supporting the long-term resilience of the
business and the communities in which we operate.
Looking forward
The decisions made this year have laid the foundations for the next phase of
Diageo’s transformation.
I believe we will look back on this financial year as a year in which we took
important steps to set the business up for the future.
We are clear on Diageo’s growth priorities and, as a Board, we believe we have
the right leadership, culture and strategy in place to deliver on them.
There remains much to do, and we do not underestimate the challenges ahead.
However, we remain confident in the fundamentals of the business; in the long-
term attractiveness of the spirits market and the role of our spirits portfolio,
including RTDs; in the continued growth potential of Guinness; and in the
strength of Diageo’s market positions.
I am encouraged by the start Dave and his team have made and the work they
are doing to accelerate Diageo’s repositioning into a fundamentally more
competitive business, capable of delivering sustainable growth and long-term
value for shareholders.
Finally, I would like to thank all our colleagues that were part of the journey
this past year. Their commitment, resilience and passion for our brands have
been deeply appreciated throughout a demanding time.
The Board and I look forward to working with Dave, his leadership team and
colleagues across Diageo as we take the company into its next chapter.
Sir John Manzoni
Chair
Statement on Section 172 of the Companies Act 2006
Section 172 of the Companies Act 2006 requires the Directors to promote
the success of the company for the benefit of the members as a whole,
having regard to the interests of stakeholders in their decision-making. In
making decisions, the Directors consider what is most likely to promote the
success of the company for its shareholders in the long term, as well as
the interests of the group’s stakeholders. The Directors understand the
importance of taking into account the views of stakeholders and the impact
of the company’s activities on local communities, the environment,
including climate change, and the group’s reputation.
Read more about how stakeholders were taken into account in decision-making
on pages 80-86.
6 | Diageo Form 20-F 2026 |
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Chief Executive's statement
The case for change
I was delighted to be asked to join Diageo in January this
year. This is a business I have long admired, a company
with an extraordinary portfolio of brands, steeped in
history and craft.
There is no denying that fiscal 26 was a challenging year, particularly given the
macroeconomic backdrop and continued pressure on consumer wallets. There
are some positives, we have seen growth in three out of five of our regions,
however, we have been uncompetitive in our largest market, North America,
and urgent work is underway to address this.
7 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information |
Between January and April, the Executive team and I looked back to objectively
analyse how we were performing. We did this through the lens of four key
stakeholders (shareholders, customers, colleagues and our supply partners). This
resulted in the revised strategy we recommended to the Board in April.
When we look at the evolutions of our markets, three factors are really
important. Demographics and the size of the Legal Drinking Age population,
consumer economics and specifically disposable income and consumer attitudes
and behaviours. The biggest pressure we see today is economic, with consumers
being more selective about their discretionary spending. Moderation and low
and no alcohol remain important trends that we stay close to and we continue to
watch GLP-1s carefully. Yet, early data indicates that the impact is lower on
spirits when compared to beer and wine.
The shape of the spirits sector is also evolving. Premiumisation remains integral
to our strategy but this is now more nuanced. We need to keep growing
premium and luxury where the opportunity exists, whilst also utilising the full
price and format ladder of our brand portfolio. That means better price-pack
architecture, more relevant propositions, and formats that meet consumers
where they are.
The growth in ready-to-drink (RTD) cocktails is also interesting in this regard.
We should not treat RTDs as separate from spirits. Consumers come to many
RTD occasions with similar motivations to spirits occasions, and RTDs are
increasingly important to how consumers engage with our brands, they are
portable, consistent and represent good value for money vs an on-premise
purchase. We created this space with Smirnoff Ice 25 years ago, but we lost
focus. We are now aligning RTDs with our spirits brands and reassessing the
opportunity.
This is why we are changing the way we define the market we compete in.
Going forward, our focus is on winning in total spirits, including RTDs, and on
Guinness in premium beer.
At our interim results in February, I outlined that customers are a critical part of
the case for change. Diageo has too often relied on the strength of its brands
without prioritising its customer partnership, category management, service and
execution. That has to change. Our ambition is to help grow our customers’
categories and to gain from that growth – winning together.
We also need to think differently about suppliers. We will have clearer
expectations, stronger partnerships, more collaborative innovation and better
end-to-end processes so that our suppliers can help us build a more resilient,
more agile and more competitive Diageo.
We have also listened very closely to our colleagues. They want a clearer,
simpler, and more efficient Diageo. This has informed the new operating
framework, the rewiring of the business, and the work we are doing on purpose
and behaviours.
As an Executive team we are confident that these changes will create stronger
total shareholder returns and will allow us to look at the choices we make, the
capital we deploy, and the returns these generate. Over the next two years, we
will invest $1.2 billion in restructuring to generate $1 billion in annual savings.
We will invest this back to advance innovation, our overall competitiveness and
to protect underlying profitability.
Strategic choices: people, purpose, performance
Since January, we have undertaken a thorough listening programme with
thousands of our employees, including leadership conversations, colleague
feedback, focus groups and open-ended input from across the organisation. That
work helped us define not just what needed to change but also created a new
purpose for the company.
This was built around a simple idea: crafting iconic drinks chosen for life’s
moments. This reflects what makes Diageo special. We craft drinks, not just
liquids. We build brands that are chosen by name. And we play a role in
moments that matter to people.
Alongside this purpose, we have begun to reset the behaviours we need to
deliver the strategy. Culture is not separate from strategy. It is shaped by the
purpose we pursue, the behaviours we reward, and the way we organise
ourselves. The new Diageo behaviours are: One Team, Competitiveness, and
Decisiveness.
Our strategic focus is clear. Diageo will compete across a full price and format
ladder in spirits, including RTDs, in premium beer through Guinness, and
across the on-trade to ensure consistent global visibility. For Diageo to win, we
have deliberately designed the business to build and extract the benefits of
Diageo’s scale, capability and portfolio.
We have also done significant work on the operating model. We have created
five regions and 23 country or cluster organisation, to produce clearer
accountabilities between global, regional and market teams. This will allow us
to gain advantage from our scale, while preserving the local insight and
execution that matter most to consumers and customers.
During the year, the Board took action to create the financial flexibility needed
to support the turnaround. We have to strengthen the balance sheet and reduce
leverage, while continuing to invest in the areas that will make Diageo more
competitive. These are not separate choices. A stronger balance sheet gives us
greater flexibility and optionality; targeted investment in the right areas is what
will rebuild growth, cash generation and long-term shareholder value. After
investing $3.75 billion of capital expenditure and funding the restructuring
charges, we expect to generate around $8 billion of cash over 3 years. In 2026
we have reduced leverage to 3.1x, with the expected sale of EABL and the
completion of the Royal Challenges Bengaluru cricket team (both expected to
close in H2 calendar 2026) we expect to see leverage be around 2.75x in fiscal
27.
We will prioritise investment where it improves competitiveness,
strengthens our brands, builds the capabilities we need, and has a clear path to
value creation.
Leadership changes
Within the Executive Committee, John O’Keeffe moved to become CEO &
President of Diageo North America, Dayalan Nayager became President of a
newly combined EMEA region, Sujay Wasan was appointed as President,
APAC, and Natalie Bickford as Chief People Officer.
I would also like to thank Louise Prashad, Hina Nagarajan and Sally Grimes for
their service to Diageo and for the important contributions they made to the
business.
Looking to the future
I am encouraged by the strength of our brands, the passion of our people, and
the quality of our craft, but there is hard work ahead.
I want to thank our colleagues around the world for their commitment through a
year of change. I also want to thank the Executive Committee, the Board and
our Chair for their support and challenge as we shape the next phase of Diageo.
Sir Dave Lewis
Chief Executive
8 | Diageo Form 20-F 2026 |
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Our fiscal 26 performance
Our fiscal 26 performance
Diageo’s performance in fiscal 26 saw growth in Europe,
LAC and Africa, offset by weakness in North America
and Asia Pacific. Organic net sales declined 2.0% with
volume down 0.4% and an unfavourable price/mix of
1.6%, primarily as a result of adverse mix due to US
spirits performance and weaker results in Chinese White
Spirits (CWS). Excluding CWS, organic net sales for the
group would have been c.1.5% higher.
Organic operating profit increased by 2.0%, with organic operating profit
margin up 116bps, mainly due to the benefit of cost savings, partly offset by
adverse mix and tariffs.
Our continued focus on cash is delivering lower leverage, as free cash flow
increased by $463 million to $3.2 billion. The sale of East Africa Breweries plc
(EABL) remains on track to complete in calendar H2 2026. The disposal of
Royal Challengers Bengaluru (RCB) cricket team by United Spirits Limited is
progressing as planned.
We are focused on recovering our competitiveness in NAM and we are working
through the consequences of Government policy in Chinese white spirits.
On 6 August, we announced a new strategy, which is set out on page 10.
Our previous strategy, the Growth Ambition, is summarised in the table below.
Former strategy, now retired
Strategy
Unleash the power of our brands and portfolio to lead and shape consumer trends executed
with operational excellence
Brands and portfolio
Consumer trends
Operational excellence
Enablers
Building a more ‘Digital Diageo’ with
end-to-end transformation impact
Diverse and engaged talent with an
inclusive culture, behaviours and new
organisational capabilities
‘Spirit of Progress’ focus; doing
business the right way from grain
to glass
Outcomes
Deliver sustainable
top-line growth
Increase operating
leverage
Optimise
returns
Maximise free
cash flow
9 | Diageo Annual Report 2026 |
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Our new purpose
Brands driving fiscal 2026 performance - case studies
Consumer trends
Smirnoff Ice: From brand
refresh
to category outperformance
Known as the 'OG' RTD, Smirnoff Ice pioneered the RTD
category and celebrated its 25th anniversary last year with the
launch of its first ever global campaign and brand refresh to
take it forward for another 25 years and beyond.
The campaign built on the brand's original witty, self-aware tone which continues to
resonate with consumers today. The move from glass bottles to cans in key markets
including Great Britain, North America, Brazil and Ireland, enabled us to express the
brand's vibrancy and flavour in a modern way while expanding our presence in the
convenience sector, with a single-serve can for consumers on the go.
With flavour remaining the key driver of consumer choice in the RTD category(1), we
extended our core range with new flavours inspired by trusted favourites from around the
world, including Green Apple and Raspberry.
The launch of Smirnoff Crush in Great Britain followed its success in North America and
Australia where 72% of consumers repurchased after initial trial. This big, bold flavour
innovation delivers a higher ABV in a larger RTD format — opening new occasions and
reinforcing the brand's commitment to innovation-led growth and led to the extension of
the flavour line up in June 2026.
Our strong commercial strategy both in-store and across third-party spaces is also showing
great success. Over the past two years, Smirnoff Ice secured more than 170 music event
and festival partnerships worldwide, reaching over four million people.
Smirnoff Ice outperformed the RTD category across Brazil (RTDs grew 10% while
Smirnoff Ice grew 30%) and Germany (RTDs grew 10% while Smirnoff Ice grew 83%).
In Ireland, where Smirnoff Ice became the number one RTD brand in the market, the RTD
category grew 37%, compared with 56% for Smirnoff Ice(2).
With all of this in play, Smirnoff Ice is well positioned for its next chapter of growth —
re-energising the brand for existing fans and a new generation of consumers alike.
(1)Kantar, 2025
(2)IWSR, 2025
Guinness growth
Guinness: Turning
moments that matter
into brand growth
Guinness continues to build momentum
among consumers around the world,
creating significant opportunities ahead
to recruit the next generation of Legal Purchase Age (LPA+) drinkers.
Celebrating the moments that matter most to consumers is a key part
of that strategy.
As consumers look for more ways to connect with each other in real
life, Guinness transformed one of its most iconic brand assets to
invite people to share their own ‘Pint of View’. By removing the pint
silhouette from its beer mats, we created a frame for communities to
fill the space it left behind and capture their own ‘lovely days’. What
began in thousands of pubs across Ireland has been seen by millions
through user-generated content on social media, showing up across
cultural moments from match days to Oasis gigs. Beyond the pub we
scaled ‘Pint of View’ across media channels with life-size builds at
stadiums, night-time projections in capital cities and iconic billboard
placements. ‘Pint of View’ has delivered impressive results. After an
initial rollout of 2.5 million beer mats in Ireland, demand surged, with
more than 10.8 million mats ordered globally to date.
In Ireland, pubs stocking the beer mats saw higher year-on-year rate
of sale growth than those that did not. The momentum has continued
across social media and culture, reaching an audience of 3.7 million
and growing, delivering 480% higher engagement and 595% greater
reach than average Guinness social content. By building on a
behaviour consumers were already embracing — capturing and
sharing life’s moments — Guinness transformed everyday
experiences into a canvas for storytelling, strengthening brand
relevance with a new generation of LPA+ drinkers.
10 | Diageo Annual Report 2026 |
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Our turnaround plan
Our turnaround plan
At our Capital Markets Day on 6 August, we shared our plans for a turnaround of our performance, including a new
purpose, strategy, behaviours and operating framework.
Our new purpose – crafting iconic drinks chosen for life’s moments – sets
out why our business exists and allows every colleague to see how they
contribute to this.
Our strategy sets out where we play and how we win:
Where we play
Full price and format ladder in spirits, including RTDs
Compete across occasions, price points and formats, using the breadth of our
portfolio to grow volume and value market share
Premium beer with Guinness
Accelerate Guinness globally to grow volume and value share in premium beer
On-trade
Build a consistent global on-trade capability through strong customer
partnerships and excellent execution
How we win
Relevant brands in competitive category strategies
Strengthen brand relevance through competitive category strategies to grow share
Customer, customer, customer
Put customers at the centre of planning and execution to grow categories and
create shared value
Fully integrated end-to-end supply chain
Connect demand, production, inventory and delivery through an integrated supply
chain that improves customer service, agility and productivity
As we execute against our new strategy, we will focus all colleagues at Diageo on our three new behaviours – One Team, Decisive, Competitive – hard-wired into
everything we do, including all our systems and processes, how we hire and manage our talented people and in our every day experiences of working in the
organisation.
Finally, our new operating framework is creating a more competitive Diageo, with a single standardised model for our 23 Markets within five Regions, significantly
reducing duplication, while delivering a much more focused and efficient business, able to take decisions much faster.
11 | Diageo Annual Report 2026 |
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Our new strategy is already delivering
The strategy has been deliberately designed to build and extract the benefits of Diageo’s scale, capability and portfolio. Below
we have highlighted some of the ways in which this is already delivering stronger performance and growth.
Relevant brands in competitive category strategies
Whisky in the UAE
Whilst the UAE is often associated with luxury spending, this represents only a
small portion when looking at spirits consumption. In reality, around eight in 10
bottles of whisky consumed in the UAE sit in the standard and value segments.(1)
A review of our portfolio showed that VAT 69, Black & White and JεB
were priced in the same bracket as Johnnie Walker Red Label, a leader in
the standard segment.(1)
Further down the price ladder, however, significant volume was being
captured by entry-level secondary Scotch and Indian whisky brands.
Consumer insights show us that even across all price segments, shoppers are
looking to premiumise. Premiumisation is not defined by a universal price
point; it is relative to each consumer’s income, shopping basket and
perception of value.
This was especially relevant in the UAE, where many standard and value
whisky consumers originate from India. In India, brands such as VAT 69
and Black & White already have strong aspirational appeal.(1) The issue was
not brand relevance, but affordability and availability.
We therefore repriced the brands and improved distribution in the right
outlets. Once these barriers were addressed, demand accelerated quickly. In
just 20 days, VAT 69 sold the same volume it had delivered over the
previous year at the old price. Market share gains began to appear within
three months.
The initiative started in the UAE, the largest opportunity in MENA, and is
now being rolled out selectively across the region.
(1)IWSR, 2025
Bundaberg Rum in Australia
Bundaberg Rum has always had a distinctive place in Australian culture.
Known locally as Bundy, the brand is strongly associated with easy-going
sociability and the moments Australians share together.
When Bundaberg Campfire Bourbon Barrel Finished Rum launched in 2023,
the team set out to create a more contemporary expression of one of
Australia’s most iconic rum brands. Known in-market as Bundy Campfire,
the innovation was designed to broaden the brand’s appeal, recruit younger
LPA+ consumers and stretch Bundy into new occasions.
Launched first as a glass spirit in August 2023, then expanded into RTD in
February 2024, Bundy Campfire has quickly become a significant growth
platform for the Bundaberg trademark. For existing Bundy drinkers,
Campfire offered a fresh expression of a familiar brand. For consumers who
may not have previously considered Bundy, it created a more accessible
entry point into the trademark.
In fiscal 26, the platform was further strengthened with the introduction of
two new variants: Bundy Campfire Zero Sugar and Bundy Campfire & Dry.
These additions expanded the range into more consumer occasions,
responding to growing demand for lighter, more refreshing serves and zero/
lower sugar options. By broadening choice while staying anchored in the
distinctive Campfire liquid story, the new variants have helped accelerate
performance and further build the platform’s relevance with today’s dark
spirits consumers.
Campfire is helping Bundy grow with new consumers and in new
geographies. The platform is over-indexing with younger LPA+ consumers
and expanding Bundy’s footprint outside traditional Heartland areas, helping
the brand appeal to a broader national audience.(1)
Since launch, Bundy Campfire has rapidly become a meaningful growth
platform for the Bundaberg trademark. It now represents more than 10% of
the total Bundaberg trademark, demonstrating the scale and strength of the
proposition across glass and premix. Bundy was the #1 brand for dark spirits
share gains, with Bundy Campfire a key driver of that momentum.(1)
The success of Campfire shows how innovation can unlock new growth for
an iconic trademark.
(1)Circana, 2026
12 | Diageo Annual Report 2026 |
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Our business model
Creating value for all our stakeholders
Creating value
Our business model allows us to create
value across three main areas:
•Financial – for our investors
•Human – for our people, suppliers,
customers and consumers
•Social – for our communities
What we do
1. We source
From smallholder farmers in Africa and Mexico, to
multinational companies, we work with our suppliers to procure
high-quality raw materials and services, with sustainability in
mind. Where it is right for our business, we grow and source
locally.
2. We innovate
Using our deep understanding of consumer trends and
socialising occasions, we focus on driving sustainable
innovation that provides new products and experiences for
consumers; be that a non-alcoholic option, an offering that suits
convenience or improving the on-trade experience.
3. We make
We distil, brew and bottle our spirits and beer brands through a
globally co-ordinated supply operation, working to the highest
quality and manufacturing standards. We prioritise using local
production where it is right for our business.
4. We transport
We move our products to where they need to be in the world;
be that from a local distillery in market or shipping scotch.
5. We sell to customers
We grow by working closely with our customers.
Our global and local sales teams use our data, digital tools and
insights to extend our sales reach, improve our execution and
help generate value for us and for our customers. When our
customers grow, we grow too.
6. We market to consumers
We invest in world-class marketing to build vibrant brands that
resonate with our consumers. To do this responsibly, we have
our rigorous Diageo Marketing Code which guides everything
we do.
7. We help consumers connect
We continually evolve our data tools to understand consumers’
attitudes and motivations. We convert this information into
insights which enable us to respond with agility to our
consumers’ interests and preferences.
Our stakeholders | |||
 | Our people |  | Communities |
 | Consumers |  | Investors |
 | Customers |  | Government and regulators |
 | Suppliers | ||
13 | Diageo Form 20-F 2026 |
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Market dynamics
Understanding market dynamics
We continue to believe in the long-term growth potential of spirits, including RTDs,
and premium beer. The outlook is being shaped by three factors: demographics,
consumer wallets and consumer behaviours. While near-term pressures remain,
particularly on wallets, consumers continue to engage with our categories.
Demographics
Demographics remain a long-term tailwind for
spirits. Population growth expands the legal
purchasing age consumer base, while spirits
continue to engage consumers across a broad range
of ages. Compared with alcohol overall, spirits
spending is sustained across a broader span of
adulthood, making the category well positioned as
populations age.(1) Legal purchasing age Gen-Z
consumers are also engaging strongly with spirits
and RTDs, with penetration above the general
population across a range of markets.(2)
Consumer wallets
Consumer wallets are the most significant near-
term pressure, particularly in developed markets
where income growth has lagged inflation and
discretionary spending has come under pressure.
This is increasingly affecting middle-income
consumers as well as lower-income households.
With wallets under pressure, consumers are
looking for ways to stay in the category and
continue to consume premium brands, including
through smaller formats and RTDs. In many
emerging markets, the picture is a tailwind, with
stronger income growth, economic development
and an expanding middle class supporting category
participation and premiumisation.
Consumer
behaviours
Three behavioural trends are shaping the category:
evolving social behaviours and alcohol's role
within them, convenience, and GLP-1s. While
consumers report moderating their alcohol
consumption, this is a nuanced behaviour driven by
both health and financial considerations, and often
involves continuing to participate in the category
through lower-strength products, smaller formats
and RTDs. Convenience remains a persistent
behavioural trend supporting RTD growth, while
current evidence suggests GLP-1s have a lower
impact on spirits than on beer and wine.(3)
1-3%
Expected global value growth
in spirits, including RTDs over
the next three years(4)
1-3%
Expected global value growth
in premium beer over the next
three years(5)
(1)US Bureau of Labor Statistics, 2024: US Annual HH spend on spirits at home, by age of primary householder, indexed vs US average spend, 2024
(2)BGS Kantar F26, Claimed spirits/RTD penetration of TBA drinkers, Index of LPA-29 vs market average; spirits exclude baijiu
(3)Numerator L12M spend decline delta, GLP-1 users vs non-users (ppt), average of 4 waves of analysis via Numerator - Wave 1 (Jan ’25), Wave 2 (Apr ’25), Wave 3 (Oct ’25), Wave 4 (Jan ’26)
(4)Internal projections
(5)Internal projections
14 | Diageo Form 20-F 2026 |
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Investment case
An attractive investment case
Spirits including RTDs and premium beer are resilient categories with significant growth potential. Diageo will win share
by using our full portfolio of brands in competitive category strategies, with a strong focus on customer partnerships.
Combined with a much more competitive and efficient operating framework, a clear financial plan to improve growth,
cash generation and shareholder value creation, we believe Diageo represents an attractive investment case..
1. Spirits including RTDs and premium
beer are resilient categories with
significant growth potential
We are positive on the outlook for spirits including RTDs, and we see long term
growth potential. We firmly believe that we can grow both volume and value
share. This will be supported by leveraging the strength of our brands and
recruiting LPA+ consumers through a more focused RTD strategy. Our global
footprint will ensure that we benefit from both developed and emerging market
growth; with growth in the earlier years expected to offset performance in North
America.
In premium beer, we continue to see significant growth potential for Guinness.
We are investing in Guinness to help sustain its double-digit growth. We have
clear plans to both add capacity over the coming years and extend brand reach
through a combination of business models; to support and capture Guinness and
Guinness 0.0 growth potential.
2. Category strategy to serve more
consumers across more occasions
While the business will continue to focus on premiumisation, a key growth
driver over the last decade, we are being more active across our broader
portfolio. Implementation of a category strategy across the business will allow
us to serve more consumers across more occasions. While some of this will
involve price repositioning across the portfolio, it will also include additional
formats such as smaller packs and RTD expressions. Results to date have
demonstrated that this can increase both gross profit dollars and market share.
Successful execution of this strategy will also enable us to better serve our
customers, particularly in the off-trade, strengthening Diageo’s ability to
become a category champion across categories and ultimately growing revenue
for both our customers and our business.
The category strategy work will take longer in North America, where a
significant turnaround is required and where the three-tier system adds
complexity. However, early success in Latin America and Caribbean already
demonstrates the potential of this approach to drive outperformance.
3. Operating framework creating a more
agile, more competitive Diageo
We have made significant progress redesigning our operating framework to
become more competitive. We are investing $1.2 billion in a 2-year
restructuring plan, $1.1 billion in the new operating framework and $100
million in the supply chain. $752 million of this has been charged in fiscal 26,
but the cash will flow out in fiscal 27 (the balance will be committed and spent
in fiscal 27). By 1 September 2026, we will have implemented 90% of planned
restructuring changes. More consistent organisational structures across five
regions and 23 markets, a significant reduction in duplication at the centre, and
implementation of end-to-end supply chain management will create a more
focused business. This will enable us to be more agile as the market evolves and
more focused on driver of value creation and returns; with clear accountability
across the business on each division's contribution to this.
This plan will save c.$1 billion, with $850 million coming from the operating
framework and c.$150 million from the supply chain. We will invest these
savings back to advance innovation, selectively improve competitiveness and to
protect underlying profitability.
4. Turnaround plan for North America,
while growth continues in the rest of the
world
We have shared clear financial plans for the next 3 years, as the turnaround
progresses and with detail on planned assumptions for the North America
business, our largest market, where the need for a turnaround is pronounced.
Our commitment to a low-single-digit CAGR in net sales from fiscal 27 to fiscal
29 is expected to be accompanied by a CAGR of mid-single-digit organic
operating profit growth. Excluding North America, the rest of our business is
expected to deliver net sales growth of 3-5%. Eps is expected to grow ahead of
operating profit growth over this period. Our North America assumptions are
clear with improved share trends across the period with share stabilisation from
the second year and a return to share growth in fiscal 29.
5. Clear capital allocation priorities and
significantly increased financial flexibility
from fiscal 28
Cash remains a critical focus and our commitment to deliver remains key and
well on track. We now expect to be at the mid-point of our target leverage range
(2.5-3x net debt(1)/EBITDA) in fiscal 27, and to be at c.2x by the end of fiscal
29 absent any actions that the Board may decide to take. This assumes
completion of the EABL and RCB disposals as expected as well as the higher
capex spend as we invest in Guinness. Delivery on our financial guidance will
result in significantly increased financial flexibility from fiscal 28. Our capital
allocation priorities are clear and unchanged, with the priority for the coming
years an organic turnaround.
(1)Leverage ratio is calculated using adjusted net debt which is the equivalent to adjusted
net borrowings (net borrowings plus post-employment benefit liabilities before tax).
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Our performance
Monitoring performance and progress
Reported measures |
Net sales growth
(%)
Definition
Sales growth after deducting excise duties.
Operating profit growth
(%)
Operating profit growth, including exceptional
operating items.
Basic earnings per share
(cents)
Profit attributable to equity shareholders of the
parent company, divided by the weighted average
number of shares in issue.
Non-GAAP measures |
Organic net sales growth
(%)(1)
(2.0)% |  |  |
Definition
Sales growth after deducting excise duties,
excluding the impact of exchange rate movements,
hyperinflation adjustment and acquisitions and
disposals.
Organic operating profit growth
(%)(1)
2.0% | | |
Organic operating profit growth is calculated on a
constant currency basis, excluding the impact of
exceptional items, certain fair value
remeasurements, hyperinflation adjustment and
acquisitions and disposals.
Earnings per share before
exceptional items (cents)(1)
165.3 | |
Profit before exceptional items attributable to
equity shareholders of the parent company, divided
by the weighted average number of shares in issue.
Why we measure
This measure reflects our delivery of sustainable
top-line growth. Organic net sales growth is the
result of the choices we make between categories
and market participation, and reflects Diageo's
ability to build brand equity and grow market
share.
The movement in operating profit measures our
delivery of increasing operating leverage and
optimising returns. Consistent operating profit
growth is a business imperative, driven by
investment choices, our focus on driving out costs
across the business and improving mix.
Earnings per share reflect the profitability of the
business and how effectively we finance our
balance sheet. Eps measures our delivery of
optimised returns over time.
Performance
Reported net sales of $19.6 billion declined 3.0%
mainly due to organic net sales decline and the
impact of disposals. Organic net sales declined
2.0%. Volume down 0.4% and unfavourable price/
mix 1.6%.
Reported operating profit declined 27.2%, with
organic operating profit growth offset mostly by
exceptional restructuring costs and impairment
charges. Reported operating profit margin declined
535bps. Organic operating profit increased by
2.0%, with organic operating profit margin up
116bps, mainly due to the benefit of cost savings,
partly offset by adverse mix and tariffs.
Basic earnings per share declined 26.3% from
105.9 cents to 78.1 cents mainly due to exceptional
restructuring costs and impairment charges.
Basic eps before exceptional items grew 0.7% from
164.2 cents to 165.3 cents, largely due to higher
organic operating profit and favourable foreign
exchange largely offset by lower fair value
remeasurement, the profit impact of disposed
businesses and higher finance charges. This was
calculated using a weighted average number of
shares in issue excluding own shares of 2,224
million (fiscal 25: 2,222 million).
Read more on page 20.
Read more on page 21.
Read more on page 21.
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Reported measures |
Net cash from operating activities
($ million)
Definition
Net cash from operating activities comprises the
net cash flow from operating activities as disclosed
on the face of the consolidated statement of cash
flows.
Return on closing net assets
(%)
Profit for the year divided by net assets at the end
of the financial year.
| Remuneration |
Key Performance Indicators, which are
included within incentive plans to assess
performance for Directors' remuneration
purposes. More details can be found from
page 100.
| KPI: Key Performance Indicator |
Non-GAAP measures |
Free cash flow
($ million)(1),(2)
3,211 | | |
Definition
Free cash flow comprises the net cash flow from
operating activities aggregated with the net cash
expenditure paid for property, plant and equipment,
and computer software.
Return on average invested capital
(ROIC)
(%)(1)
13.4% | | |
Profit before finance charges and exceptional items
attributable to equity shareholders divided by
average invested capital. Invested capital
comprises net assets excluding net post-
employment benefit assets/liabilities, net
borrowings and non-controlling interests.
Total shareholder return (TSR)
(%)
(14)% | | |
Percentage growth in the value of a Diageo share
(assuming all dividends and capital distributions
are re-invested).
Why we measure
Free cash flow is a key indicator of the financial
management of the business. Free cash flow
reflects the delivery of cash generated by the
business to fund payments to our shareholders and
future growth.
ROIC is used by management to assess the return
obtained from the group’s asset base. Over time,
ROIC reflects optimised returns, as the returns
Diageo generates from its asset base are both
reinvested in the business and used to generate
returns for investors through dividends and return
of capital programmes.
Diageo’s directors have a fiduciary responsibility
to maximise long-term value for shareholders. TSR
reflects the returns Diageo has delivered to
investors in the year and over time. We also
monitor our relative TSR performance against our
peers.
Performance
Free cash flow increased by $463 million to $3.2
billion. Free cash flow increase was driven by lower
capex and maturing stock investment along with
lower year-on-year tax payments, partly offset by an
adverse creditor movement and also the payment of
termination fees to Moët Hennessy. In addition,
fiscal 26 free cash flow includes a one-off working
capital adverse impact of c.$100 million mainly
related to inventory build ahead of the
implementation of the group's S/4HANA ERP
system.
Net capital expenditure was $1,181 million (fiscal
25: $1,549 million) to support investment in the
supply agility programme, supply capacity
expansion projects, including Guinness, and
investment furthering digital capability.
ROIC was 13.4% (fiscal 25: 13.7%) with the
positive impact of organic operating profit growth
more than offset by lower fair value
remeasurement and disposals.
TSR was down 14% over the past 12 months
driven by the lower year-on-year share price.
Read more on page 21.
Read more on page 21.
(1)Organic net sales growth, organic operating profit growth, earnings per share before exceptional items, free cash flow and return on average invested capital are non-GAAP measures.
See definitions and reconciliation of non-GAAP measures to GAAP measures on pages 205-212.
(2)For reward purposes this measure is further adjusted for the impact of exchange rates, hyperinflation adjustment and other factors not controlled by management, to ensure focus on our
underlying performance drivers.
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Our performance continued
Non-financial performance |
Positive drinking
| |
Number of people educated on the dangers of underage drinking through a Diageo-supported education programme | 1.71m |
(2025: 1.99m(1)) | |
Total to date: 9.87m | |
Number of drink driving educational experiences delivered | 1.25m |
(2025: 1.61m(1)) | |
Total to date: 5.11m |
Employee engagement index
79% | |
Inclusion and diversity
| |
Percentage of female leaders globally | 44% |
(2025: 43%) | |
Percentage of ethnically diverse leaders globally | 46% |
(2025: 46%) |
Target
By 2030: 10 million people educated on the
dangers of underage drinking (from fiscal 18) and
5 million educational experiences delivered on the
dangers of drink driving (from fiscal 21).
Ambition
50% female and 45% ethnically diverse global
leader representation by 2030.
Definition
Number of people educated on the dangers of
underage drinking through a Diageo-supported
education programme and number of drink driving
educational experiences delivered.(2)
Measured through the Our Voice survey; includes
metrics for employee satisfaction, advocacy and
pride.
The percentage of women and the percentage of
ethnically diverse individuals who are in Diageo
leadership roles globally.
Why we measure
We want to change the way the world drinks for
the better by promoting moderation and addressing
the abuse of alcohol. We build credibility and trust
by transparently reporting the total number of
people educated on the dangers of underage
drinking and reporting the educational experiences
delivered on drink driving.
Employee engagement releases the full potential of
our people and our business, and it is a key enabler
to our performance. The survey allows us to
measure the extent to which employees believe we
are living our values and is one of the measures of
our culture. Reflecting on the results of our
employee engagement level and taking action on
important areas where needed each year helps us
build credibility and trust with our people.
Building an inclusive and diverse culture helps
drive commercial performance and ensures we
access the best talent. Transparently reporting the
gender and ethnic diversity of our leadership
cohort reflects our commitment to consistent value
creation through our diverse workforce.
Performance
Globally, this year, we educated 1.71 million
young people about the dangers of underage
drinking, and delivered 1.25 million educational
experiences on the dangers of drink driving.
This year 88% of our people completed the Our
Voice survey. 79% were identified as engaged.
88% declared themselves proud to work for
Diageo, 78% would recommend Diageo as a great
place to work and 71% were extremely satisfied
with Diageo as a place to work.
This year, 44% of our leadership roles were held
by women and 46% of our leaders were ethnically
diverse.
Read more on pages 40-41.
Read more on pages 36-37.
Read more on pages 42-43.
(1)Comparative fiscal 25 target results are presented to two decimal places to improve comparability with current year reporting.
(2)These programmes measure different outcomes and are reported over different reporting periods. Refer to the Non-Financial Reporting Boundaries and Methodologies document for
further information.
19 | Diageo Form 20-F 2026 |
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Non-financial performance |
Water efficiency(1)
Change vs baseline year
(14.9)% | | |
Target
30% reduction versus 2020 baseline year by 2030.
Definition
Percentage change in the water efficiency index
across the company compared to fiscal 20 baseline.
Why we measure
Our water efficiency programme is critical to
addressing water security, particularly in water-
stressed areas. In addition to preserving our licence
to operate, minimising water use within our own
operations underpins our commitment to delivering
long-term value by future-proofing our business
against the impacts of a changing climate. It also
helps to ensure this precious resource can continue
to be shared with the communities we live and
work amongst.
Performance
By the end of fiscal 26, our water efficiency across
the company improved by 14.9% compared to our
fiscal 20 baseline, although this year there was a
reduction in efficiency compared to the previous
year due to changes in our production profile. We
implemented various water efficiency and recovery
initiatives, including a new water recovery plant in
Mexico and efficiency improvements at our
distilleries in Scotland and North America.
Read more on pages 52-53.
Water replenishment
| |
Percentage of sites in water-stressed areas where we replenish more water than we use | 100% |
(2025:84%) | |
Replenish more water than we use for operations in
water-stressed areas by 2026.
Percentage of sites in water-stressed areas where
we replenish more water than we use.
Our business will always require water use, so in
water-stressed areas we are aiming to replenish
more water than we use in our own sites by 2026.
We do this mostly through nature based solutions,
that restore and regenerate freshwater ecosystems,
and investing to empower communities through the
provision of clean drinking water, sanitation, and
hygiene. We integrate these efforts with our
regenerative agriculture, smallholder farmer and
other programmes with the aim to contribute to a
positive impact for climate, nature, and people.
In fiscal 26 we are delighted that we have achieved
our target, and we are now replenishing more water
than we use at all our sites located in water-
stressed areas.
Read more on pages 52-53
Scope 1 and 2 greenhouse gas
emissions(1)
Change vs baseline year
(25.7)% | | |
50% reduction versus 2022 baseline year by 2030.
Percentage change in absolute direct and indirect
greenhouse gas emissions (market/net based)
compared to fiscal 22 baseline.
Mitigating our impact on climate change is a
business imperative. Reporting on our efforts to
reduce Scope 1 and 2 greenhouse gas emissions
demonstrates our commitment to reducing our
contribution to global warming and helps build
credibility and trust. This is an important area for
our business and external stakeholders, supporting
our commitment to consistent value creation by
future-proofing our business.
Our Scope 1 and 2 greenhouse gas emissions
reduced in total by 25.7% from our fiscal 22
baseline. The main drivers contributing to the
lower emissions this year are the changes to
production, energy efficiency improvements at our
breweries and packaging sites in our biggest
energy consuming markets and the fact that we
have continued to optimise our bioenergy usage at
key sites.
Read more on pages 53-55.
(1)In accordance with Diageo’s environmental reporting methodologies and, where relevant, WRI/WBCSD GHG Protocol; data for the baseline year and for the intervening period up to the
end of last financial year has been recalculated where relevant.
20 | Diageo Form 20-F 2026 |
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Summary financial review
Chief Financial Officer's introduction
Reported net sales growth
(3.0)%
Reported operating
profit growth
(27.2)%
Reported operating
profit margin
16.1%
Net cash from
operating activities
$4,392m
Return on closing
net assets
15.1%
Basic earnings
per share
78.1c
Total shareholder
return
(14)%
Organic net sales growth(1)
(2.0)%
Organic operating
profit growth(1)
2.0%
Organic operating
profit margin(1)
29.4%
Free cash
flow(1)
$3,211m
Return on average
invested capital(1)
13.4%
Earnings per share before
exceptional items(1)
165.3c
Fiscal 26 was a mixed year, with good momentum in Europe, Latin America
and Caribbean, and Africa, but challenges in North America and Asia Pacific,
particularly in US Spirits and Chinese white spirits. Organic net sales declined
2.0%, while organic operating profit increased 2.0% with organic operating
margin up 116bps, mainly due to cost savings, partly offset by adverse mix and
tariffs. EPS before exceptional items increased 0.7% to 165.3 cents. Reported
operating profit declined 27.2%, with organic operating profit growth offset by
exceptional impairment and restructuring charges as we took action to reshape
the business and implement our new operating framework.
Our strong focus on cash resulted in free cash flow of $3.2 billion, $463 million
higher than fiscal 25, driven by more disciplined investment in capex and
maturing stock and lower tax payments. We closed the year with lower net debt
of $20.5 billion and our leverage ratio at 3.1x, down from 3.4x at the end of
fiscal 25. We have recommended a full-year dividend of 50 cents per share,
equating to a 30% dividend payout ratio, in line with our 30–50% dividend
payout policy.
I am pleased that we delivered $540 million, or c.85% of the Accelerate
programme, in fiscal 26. The savings came from a focus on driving efficiency
and effectiveness from A&P investment, supply and overheads. Separately,
since year end, we have also successfully completed our migration to SAP
S/4HANA, providing a stronger foundation for our data and processes.
The implementation of the new operating framework is already well progressed
and includes bringing together our Digital & Technology and Global Business
Operations functions to drive simpler, more efficient end-to-end processes. In
total, we expect c.$1 billion of savings from the new operating framework and
supply chain changes over the next three years. These savings will allow us to
invest without reducing operating profit.
For fiscal 27, we are guiding for broadly flat organic net sales growth with low
to mid-single-digit organic operating profit growth and free cash flow of c.$2
billion after exceptionals. We expect leverage to end fiscal 27 around the mid-
point of our 2.5–3.0x target range, assuming successful completion of the
EABL and Royal Challengers Bengaluru transactions. Over fiscal 27 to fiscal
29, we expect low-single-digit organic net sales growth and mid-single-digit
organic operating profit growth on a CAGR basis, EPS growth ahead of organic
operating profit growth on an FX-neutral basis, and cumulative free cash flow
of c.$8 billion after c.$850 million of exceptional cash costs.
Growth is critically important, and we are focused on sustainable and profitable
growth. This is an organic turnaround, supported by a clear and disciplined
capital allocation policy. I am confident that disciplined execution will
strengthen Diageo's competitiveness, improve cash generation and create
sustainable value for shareholders.
(1)Organic net sales growth, organic operating profit growth, organic operating profit margin, earnings per share before exceptional items, free cash flow and return on average
invested capital are non-GAAP measures. See definitions and reconciliation on non-GAAP measures to GAAP measures on pages 206-212.
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Net sales
Reported net sales for the year reduced by 3.0% to $19,643 million (fiscal 25:
$20,245 million) given the decline in organic net sales of $386 million (down
2.0%), the negative impact of acquisitions and disposals of $369 million and
unfavourable foreign exchange of $208 million, partly offset by the
hyperinflation adjustment of $332 million.
Organic net sales declined 2.0%. Organic volume declined 0.4%, with a 14.0%
increase in Africa and 3.1% in LAC offset by decline in North America and Asia
Pacific. Unfavourable price/mix of 1.6%, reflecting the weaker results in CWS
and US Spirits partly offset by positive price/mix in Europe and LAC.
Excluding CWS, organic net sales for the group would have been c.1.5%
higher, with volume broadly flat and price/mix down c.0.5%.
Cost of sales
Cost of sales declined 0.8% on a reported basis to $7,931 million (fiscal 25:
$7,997 million), as productivity and disposals more than offset the negative
impact from cost inflation and tariffs.
Marketing
Marketing investment was 13.1% lower on a reported basis at $3,183 million
(fiscal 25: $3,662 million), reflecting a reinvestment rate of 16.2% (fiscal 25:
18.1%). On an organic basis, investment declined by 13.1%. The lower
investment in fiscal 26 reflects the delivery of efficiencies and a more targeted
allocation of marketing investment, while maintaining strong support for our
key brands.
Other operating items and exceptional operating items
Other operating items before exceptional items decreased by 1.2% to $2,846
million (fiscal 25: $2,882 million), largely driven by lower indirect overhead
spend.
Exceptional operating charges increased to $2,527 million (fiscal 25: $1,369
million) mainly due to impairments of $1,489 million comprising a charge of
$786 million in respect of the Türkiye cash-generating unit that included the
goodwill from the Mey İçki acquisition and several brands. The charge is
largely due to the impact of hyperinflationary accounting on carrying values
combined with lower forecast growth assumptions as pricing is not expected to
fully match inflation. In addition, there was an impairment charge of $287
million related to the Don Papa brand. Exceptional items also included
restructuring charges of $908 million, with c.$752 million related to
implementation of our new operating framework and c.$156 million related to
supply chain agility and Accelerate.
Operating profit
Reported operating profit pre-exceptional items declined 0.4% with organic
operating profit growth offset by lower fair value remeasurement and
acquisitions and disposals. Reported operating profit including exceptional
items declined 27.2%. Reported operating profit margin of 16.1% was down
535bps (fiscal 25: 21.4%). Organic operating profit grew 2.0%, with operating
margin up 116bps organically. Organic operating profit growth was due
primarily to lower marketing investment and overheads, partly offset by lower
gross profit. Organic gross margin was down 141bps with the adverse impacts
of negative mix, cost inflation and tariffs partly offset by cost of sales
efficiencies.
Accelerate
Cost savings from the programme over-delivered on guidance with $540 million
Accelerate savings secured through fiscal 26. Savings were delivered through
more efficient marketing investment as well as supply and overheads cost
savings.
Non-operating exceptional items
In the year ended 30 June 2026, exceptional non-operating items were a gain of
$6 million, mainly driven by a gain on the disposal of Seychelles Breweries
Limited ($62 million) and Sheridan's ($46 million), partly offset by a loss on the
sale of Guinness Ghana Breweries PLC ($49 million), charges in respect of the
prospective sale of East African Breweries PLC and the Kenyan spirits business
($43 million) and a charge in respect of the sale of Diageo Operations Italy
S.p.A., inclusive of the Santa Vittoria production facility ($7 million). In the
year ended 30 June 2025, exceptional non-operating items were a loss of $220
million, mainly driven by the loss on the prospective sale of Guinness Nigeria
PLC ($125 million) and loss on the sale of Guinness Ghana Breweries PLC
($114 million).
Net finance charges
In the year ended 30 June 2026, net finance costs were $816 million (fiscal 25:
$771 million), with the increase driven by lapping capitalised borrowing costs
on capital expenditure in fiscal 25 partly offset by the lower effective interest
rate of 3.9% (fiscal 25: 4.1%).
Taxation
The reported tax rate for the year ended 30 June 2026 was 25.8% compared
with 29.9% for the year ended 30 June 2025.
The tax rate before exceptional items for the year ended 30 June 2026 was
24.3% compared with 24.9% for the year ended 30 June 2025.
Share of after-tax results of associates and joint
ventures
Share of after-tax results of associates and joint ventures increased by 13.0% to
$218 million (fiscal 25: $193 million), largely due to a higher Moët Hennessy
contribution.
Profit attributable to non-controlling interest
Profit attributable to non-controlling interests was $221 million (fiscal 25: $184
million), with the increase driven by Ketel One and United Spirits Limited
(USL) partly offset by the impact from decline in Shui Jing Fang.
Basic earnings per share (eps) before exceptional items
Basic eps before exceptional items grew 0.7% from 164.2 cents to 165.3 cents,
largely due to higher organic operating profit and favourable foreign exchange
largely offset by lower fair value remeasurement, the profit impact of disposed
businesses and higher finance charges. This was calculated using a weighted
average number of shares in issue excluding own shares of 2,224 million (fiscal
25: 2,222 million).
Net cash flow from operating activities and free
cash flow
Net cash from operating activities was $4,392 million, an increase of $95
million compared to fiscal 25. Free cash flow increased by $463 million to
$3,211 million. Free cash flow increase was driven by lower capex and
maturing stock investment along with lower year-on-year tax payments, partly
offset by an adverse creditor movement and also the payment of termination
fees to Moët Hennessy. In addition, in line with guidance, fiscal 26 free cash
flow includes a one-off working capital adverse impact of c.$100 million
mainly related to inventory build ahead of the implementation of the group's
S/4HANA ERP system. Net capital expenditure was $1,181 million (fiscal 25:
$1,549 million) to support investment in the supply agility programme, supply
capacity expansion projects, including Guinness, and investment furthering
digital capability.
Return on average invested capital (ROIC)
ROIC was 13.4% (fiscal 25: 13.7%) with the positive impact of organic
operating profit growth more than offset by lower fair value remeasurement and
disposals.
Net debt
As at 30 June 2026, the group's net debt was $20,482 million (fiscal 25: $21,854
million). The decrease compared to fiscal 25 was mainly due to strong free cash
flow and the reduced interim dividend. Net debt(1) to adjusted EBITDA for at 30
June 2026 was 3.1x. The sale of EABL remains on track to complete in calendar
H2 2026 and is expected to reduce net debt to adjusted EBITDA by 0.25x. The
disposal of RCB cricket team by USL is progressing as planned.
(1)Leverage ratio is calculated using adjusted net debt which is the equivalent to adjusted
net borrowings (net borrowings plus post-employment benefit liabilities before tax).
22 | Diageo Form 20-F 2026 |
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Business review
Our global reach
Our regional profile maximises the opportunity for growth in our sector. Where our products are sold, each market is accountable for its own performance and driving
growth. The tables below shows regional performance on the fiscal 26 reporting basis. From fiscal 27, our reporting will align to the new regional operating model and
refreshed regional leadership structure, with Europe, Middle East and Africa reported as one EMEA region and India will be reported as a separate region.
% share of reported net sales by region(1)(2) |
Europe
26%
North America
37%
Great Britain | |
Türkiye | |
Ireland | |
Central and Eastern Europe | |
DACH | |
Iberia | |
France | |
MENA |
US Spirits |
Diageo Beer Company (DBC) USA |
Canada |
Other
(principally
Travel Retail)
Italy
Other (principally Travel Retail)
Africa
8%
Latin America and Caribbean
11%
Asia Pacific
17%
East Africa | |
South-West-Central Africa | |
Brazil |
CCAV (Caribbean, Central America and Venezuela) |
Mexico |
Colombia |
South LAC |
Other (principally Travel Retail) |
India |
Greater China |
Australia |
South East Asia |
North Asia |
Travel Retail Asia |
(1)The above map is intended to illustrate general geographic regions where Diageo has a presence and/or in which its products are sold. It is not intended to imply that Diageo
has a presence in and/or that its products are sold in every country or territory within a geographic region.
(2)Based on reported net sales for the year ended 30 June 2026. Does not include corporate net sales of $162 million (2025 – $135 million).
Fiscal 26 | North America | Europe | Asia Pacific | Latin America and Caribbean | Africa |
Volume (EU million) | 46.1 | 48.9 | 75.8 | 23.4 | 32.9 |
Reported net sales(1) ($ million) | 7,249 | 5,097 | 3,333 | 2,160 | 1,642 |
Reported operating profit(2) ($ million) | 2,031 | 7 | 690 | 395 | 352 |
Operating profit before exceptional items(3) ($ million) | 2,601 | 1,612 | 846 | 587 | 356 |
Water efficiency index, percentage change compared to fiscal 20 baseline | 10% | (16)% | (45)% | (6)% | (25)% |
Percentage change in absolute direct and indirect greenhouse gas emissions (market/net based) compared to fiscal 22 baseline | (26)% | 4% | (63)% | (62)% | (66)% |
Average number of employees(4) | 3,110 | 10,345 | 8,028 | 4,385 | 2,070 |
(1)Excluding corporate net sales of $162 million (2025 – $135 million).
(2)Excluding net corporate operating costs of $319 million (2025 – $392 million).
(3)Excluding exceptional operating charges of $2,527 million (2025 – $1,369 million) and net corporate operating costs of $319 million (2025 – $392 million).
(4)Employees have been allocated to the region where they live.
23 | Diageo Form 20-F 2026 |
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Production facilities
The company owns manufacturing production facilities across the globe, including distilleries, breweries, packaging plants, maturation warehouses, cooperages, and
distribution warehouses. Diageo’s brands are also produced in plants owned and operated by third parties and joint ventures at several locations around the world. We
believe that our facilities are in good condition and working order. We have adequate capacity to meet our current needs, and, in the beer and spirit categories, we have
undertaken activities to increase our production capacity to address our anticipated future demand.
The major facilities owned by Diageo with locations, principal activities, and products are presented in the table below as of 30 June 2026.
Location | Principal activities | Products | |
United Kingdom | distilling, bottling, warehousing, coopering | beer, scotch, gin, vodka, rum, ready-to-drink, non-alcoholic | |
Ireland | distilling, brewing, bottling, warehousing | beer, liqueur, Irish whiskey, non-alcoholic | |
Türkiye | distilling, bottling, warehousing | raki, vodka, gin, liqueur, wine | |
North America | distilling, bottling, warehousing | vodka, gin, rum, Canadian whisky, US whiskey, ready-to-drink | |
Brazil | distilling, bottling, warehousing | cachaça, vodka, ready-to-drink | |
Mexico | distilling, bottling, warehousing | tequila | |
East Africa | distilling, brewing, bottling, warehousing | beer, rum, vodka, gin, whisky, brandy, liqueur, ready-to-drink, bottled in East Africa (scotch) | |
South-West-Central Africa | distilling, brewing, bottling, warehousing | beer, rum, vodka, gin, ready-to-drink | |
India | distilling, bottling, warehousing | rum, vodka, Indian whisky, gin, brandy, bottled in India (scotch) | |
Australia | distilling, bottling, warehousing | rum, vodka, gin, ready-to-drink | |
Greater China | distilling, warehousing | Chinese whisky, Chinese white spirits |
For more details about our capital investments please see page 217.
Our route to consumer
We have five different routes to consumer models across our business. Most of
the regions employ four of the five high-level models defined below; however,
how each model operates in certain countries will vary, as will the percentage of
net sales delivered through the respective models in each market.
Wholesalers and distributors
Diageo sells to a wholesaler or distributor who also sells a range of other brands
and categories directly to end outlets where consumers can purchase our brands.
Where required, this model may include a government control board (or
similar), such as in certain states in the US and provinces and territories in
Canada.
Modern trade
Diageo sells directly to a customer who owns and manages retail outlets, who
then in turn sells to consumers via their outlets.
eMarketplace
Diageo sells to a third-party digital marketplace customer where that customer
sells to B2B customers and consumers.
Direct to consumer
Diageo sells directly to consumers, predominantly through portals such as
Thebar.com, which is a growing route to consumer model for our business. It
allows for direct interface with our consumers rather than through third-party
sites as in the eMarketplace model above.
Direct to store
Diageo sells and delivers directly to end outlets rather than via a central
purchasing customer as in the Modern trade model. This model is less common
than the other models. For example, it is used in Ireland for beer distribution.
24 | Diageo Form 20-F 2026 |
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Business review continued
North America
Further category pressure in tequila in a competitive and continued cautious consumer environment.
Key financials | |||||||
2025 | Exchange | Acquisitions and disposals | Organic movement | Other(1) | 2026 | Reported movement | |
$ million | $ million | $ million | $ million | $ million | $ million | % | |
Net sales | 7,973 | 2 | (67) | (659) | — | 7,249 | (9.1) |
Marketing | 1,616 | 5 | (40) | (214) | — | 1,367 | (15.4) |
Operating profit before exceptional items | 3,053 | (25) | (16) | (293) | (118) | 2,601 | (14.8) |
Exceptional operating items(2) | (831) | (570) | |||||
Operating profit | 2,222 | 2,031 | (8.6) |
Markets
Reported volume movement | Reported net sales movement | Organic volume movement | Organic net sales movement | |
% | % | % | % | |
North America(3) | (6.9) | (9.1) | (6.7) | (8.4) |
US Spirits(3) | (10.5) | (13.2) | (9.0) | (11.5) |
DBC USA(4) | 3.4 | 4.4 | 3.4 | 4.4 |
Canada(3) | 0.1 | 11.3 | (0.3) | 7.7 |
Key financials:
Reported net sales declined 9.1%, mainly driven by a decline in organic net
sales and the impact of the Cîroc transaction in the prior year.
Organic net sales declined 8.4%, driven primarily by US weakness, with US
Spirits decline only partly offset by growth in Diageo Beer Company USA
(DBC USA). Canada organic net sales grew high-single-digit mainly driven by
a one-off item in the second half. Organic volume declined 6.7%, reflecting
weakness in US Spirits, only partly offset by growth in DBC USA, while price/
mix declined 1.7%.
Organic operating profit declined 10.0%, driven by volume weakness, negative
mix and the impact of tariffs, partly mitigated by lower agave costs and
productivity savings. Marketing investment declined by 13.6% organically,
reflecting both efficiencies and targeted investment decisions. Operating margin
of 35.9%, reduced by 66bps organically.
US Spirits highlights:(5)
•Overall US Spirits net sales declined 11.5%, reflecting a 9.0% decline in
volume and negative price/mix of 2.5% in an environment with increased
competitive pressure and further category softness, particularly in tequila.
Overall shipment growth was c.2.5 percentage points behind depletions
growth, with some variation across brands. US Spirits shipments declined
ahead of depletions as distributors moderated orders in response to the softer
consumer environment as well as lapping a period of strong shipments
growth in the prior year. Distributor inventory levels at the end of fiscal 26
remain appropriate for the current consumer environment and in line with
historical levels.
•Tequila net sales declined 21.1%, driven by both Don Julio and Casamigos,
reflecting a softer category, increased competitive intensity, and tough
comparatives in the prior period and both brands lost share. Don Julio net
sales declined 19.2% with depletions down 10.1%, lapping inventory
replenishment and double-digit growth last year. Casamigos net sales
declined 27.7%, with depletions down 23.1%. Casamigos price repositioning
is now being rolled out alongside a refreshed marketing campaign to improve
brand competitiveness.
•Crown Royal whisky net sales declined 15.9%, primarily due to softness in
Crown Royal Deluxe and lapping strong comparatives for Crown Royal
Blackberry through fiscal 25.
•RTDs/Cocktails net sales grew 35.1%, mainly driven by the successful
launch of Casamigos RTS for the FIFA World Cup and growth in Casamigos
RTD, as well as strong performance from Bulleit and Ketel One Cocktails.
•Vodka net sales declined 1.0%, driven by Smirnoff, down 5.0%, with
continued pressure from RTDs and overall category weakness. Ketel One
grew 4.5%, gaining share in both the category and in total spirits.
•Scotch net sales declined 1.1%, with growth in both Johnnie Walker, up
1.0%, and single malts offset by Buchanan's, down 7.3%.
Rest of North America:
•DBC USA net sales grew 4.4%, driven by growth in Guinness, led by
Guinness Draught and Smirnoff RTD which grew mid-single-digit reflecting
continued investment and innovation, including Smirnoff Sunny Days and
Smirnoff Shorties.
•Canada net sales grew 7.7%, supported by growth in Guinness and Ketel
One vodka and a one-off item relating to a favourable resolution of
commercial terms with a customer.
(1)Fair value remeasurements. For further details see page 31.
(2)For further details on exceptional operating items see pages 30 and 153-156.
(3)Reported volume movement includes impacts from acquisitions and/or disposals. For
further details see pages 205-211.
(4)Certain spirits-based ready-to-drink products in certain states are distributed through
DBC USA and those net sales are captured within DBC USA.
(5)Spirits brands and categories exclude cocktails, which include ready-to-drink, ready-
to-serve and non-alcoholic variants, except where noted.
25 | Diageo Form 20-F 2026 |
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Europe
Good performance in Türkiye and Great Britain, with continued strong Guinness momentum.
Key financials | |||||||||
2025 | Exchange | Reclassification(1) | Acquisitions and disposals | Organic movement | Other(2) | Hyperinflation(3) | 2026 | Reported movement | |
$ million | $ million | $ million | $ million | $ million | $ million | $ million | $ million | % | |
Net sales | 4,821 | 114 | 7 | (21) | 154 | — | 22 | 5,097 | 5.7 |
Marketing | 898 | 26 | — | (1) | (151) | — | 1 | 773 | (13.9) |
Operating profit before exceptional items | 1,302 | 53 | 3 | (11) | 198 | 68 | (1) | 1,612 | 23.8 |
Exceptional operating items(4) | (479) | (1,605) | |||||||
Operating profit | 823 | 7 | (99.1) |
Markets
Reported volume movement | Reported net sales movement | Organic volume movement | Organic net sales movement | |
% | % | % | % | |
Europe(5) | — | 5.7 | — | 3.4 |
Great Britain(5) | (3.3) | 6.8 | (3.6) | 2.9 |
Ireland(5) | (0.3) | 9.5 | (0.3) | 3.2 |
Türkiye(5) | 10.3 | 10.0 | 10.2 | 25.5 |
Central and Eastern Europe(5) | (7.1) | (9.4) | (3.2) | (4.9) |
DACH(5) | 6.2 | 19.4 | 0.3 | 1.4 |
Iberia(5) | (8.4) | (0.1) | (5.7) | (7.5) |
France(5) | 10.9 | 18.2 | (2.2) | (3.5) |
Italy(5) | (1.4) | 5.5 | 2.2 | 0.7 |
MENA(5) | 20.5 | 9.1 | 20.4 | 9.5 |
Key financials:
Reported net sales grew 5.7%, driven by organic growth and favourable foreign
exchange.
Organic net sales increased 3.4%, with strong growth in Türkiye and Great
Britain, partly offset by Central and Eastern Europe and Iberia. Volume was flat
with price/mix increasing 3.4%. Beer increased double-digit, led by Guinness
growth in Great Britain and Ireland. Spirits declined slightly with RTD net sales
up low-single-digit. Favourable price/mix in Guinness and pricing adjustments in
Türkiye in response to inflation helped overall price/mix.
Organic operating profit grew 15.7%, by delivering cost efficiencies whilst at
the same time investing to establish the new market structure to unlock future
growth and executing targeted price repositioning. Marketing investment
declined 17.2%, reflecting disciplined prioritisation of spend, including targeted
investment in Türkiye and Guinness to support growth. Operating margin of
31.6%, increased 328bps organically.
Market highlights:
•Great Britain net sales grew 2.9%, driven primarily by double-digit growth in
Guinness, more than offsetting softer spirits. Guinness on-trade growth continued
to drive positive share gain and it significantly outperformed the category.
Guinness 0.0 increased both volume and net sales double-digit, reinforcing its
position as the fastest-growing and #1 non-alcoholic beer in Great Britain(6).
•Ireland net sales grew 3.2%, with continued growth in Guinness supported by
pricing, market share gains, the start of a partnership with Live Nation, and
strong contribution from Guinness 0.0.
•Türkiye net sales grew 25.5%, driven by double-digit volume and net sales growth
in spirits, led by raki, scotch and gin all up double-digit, and pricing action to
offset inflation. Johnnie Walker volume and net sales increased double-digit, as
Johnnie Walker Red Label and Black Label expanded distribution and increased
visibility.
•Central and Eastern Europe net sales declined 4.9%, improving on the
7.6% decline in the first half, reflecting a stronger second half
performance particularly in beer which increased net sales 26.9%.
(1)Reclassification of 0.2 EUm between Europe and Africa due to the transfer of the
Réunion business.
(2)Fair value remeasurements. For further details see page 31.
(3)See pages 149 and 205-207 for details on hyperinflation adjustments.
(4)For further details on exceptional items see pages 30 and 153-156.
(5)Reported volume movement includes impacts from acquisitions and/or disposals. For
further details see pages 205-211.
(6)RSV R12M Nielsen (13/06/2026)/CGA (13/06/2026).
26 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Business review continued
Asia Pacific
Strong growth in India more than offset by weakness in Chinese white spirits.
Key financials | ||||||
2025 | Exchange | Acquisitions and disposals | Organic movement | 2026 | Reported movement | |
$ million | $ million | $ million | $ million | $ million | % | |
Net sales | 3,635 | (68) | (6) | (228) | 3,333 | (8.3) |
Marketing | 630 | (3) | (1) | (102) | 524 | (16.8) |
Operating profit before exceptional items | 930 | (32) | (3) | (49) | 846 | (9.0) |
Exceptional operating items(1) | (40) | (156) | ||||
Operating profit | 890 | 690 | (22.5) |
Markets
Reported volume movement | Reported net sales movement | Organic volume movement | Organic net sales movement | |
% | % | % | % | |
Asia Pacific(2) | (2.4) | (8.3) | (2.4) | (6.3) |
India | (1.1) | 0.6 | (1.1) | 7.1 |
Greater China(2) | (22.7) | (32.8) | (22.7) | (34.9) |
Australia(2) | (6.1) | 1.9 | (5.5) | (0.7) |
South East Asia(2) | (3.5) | (2.1) | (3.3) | (2.2) |
North Asia(2) | (1.1) | (8.6) | (1.1) | (5.4) |
Travel Retail Asia(2) | (3.0) | 3.9 | (2.8) | 6.3 |
Key financials:
Reported net sales declined 8.3%, due to organic net sales decline and
unfavourable foreign exchange.
Organic net sales declined 6.3%, primarily due to the decline in CWS, partly
offset by growth in India. Spirits declined mid-single-digit given CWS. RTDs
declined low-single-digit and beer increased low-single-digit.
Organic operating profit declined 5.4%, with lower organic net sales and
adverse market and category mix driven by weaker CWS performance in
Greater China and a stronger contribution from India. Marketing investment
declined 16.3%, reflecting significantly reduced investment in CWS in response
to the challenges in the category, partly offset by increased prioritised
investment in India. Operating margin of 25.4%, increased 26bps organically,
largely supported by lower marketing spend.
Market highlights:
•India net sales grew 7.1%, driven by positive price/mix and strong scotch
performance led by Johnnie Walker and Black & White. Smirnoff delivered
strong double-digit growth with local flavour innovations. Don Julio grew
strongly, continuing to lead the emerging tequila category. Maharashtra
excise policy changes, which increased duties and introduced state-made
liquor, adversely impacted McDowell's performance.
•Greater China net sales declined 34.9%, due primarily to a 41.9% volume
decline in CWS, as market policy changes impacted consumption occasions
across the CWS category. Against this category disruption, Shui Jing Fang
robustly managed costs and inventory levels. The negative impact of CWS on
the region's organic net sales was c.8%, and c.1.5% on group net sales. Taiwan
net sales declined 21.2% in a challenging consumer environment.
•Travel Retail Asia net sales grew 6.3%, driven by underlying channel
performance showing sequential improvement despite the conflict in the
Middle East.
(1)For further details on exceptional items see pages 30 and 153-156.
(2)Reported volume movement includes impacts from acquisitions and/or disposals. For
further details see pages 205-211.
27 | Diageo Form 20-F 2026 |
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Latin America and Caribbean
Strong growth, particularly in Brazil and Colombia, fuelled by spirits and RTDs.
Key financials | |||||||||
2025 | Exchange | Reclassifi- cation(1) | Acquisitions and disposals | Organic movement | Hyperinflation(2) | Other(3) | 2026 | Reported movement | |
$ million | $ million | $ million | $ million | $ million | $ million | $ million | $ million | % | |
Net sales | 1,847 | (181) | 29 | (1) | 143 | 323 | — | 2,160 | 16.9 |
Marketing | 304 | — | — | — | 1 | 20 | — | 325 | 6.9 |
Operating profit before exceptional items | 528 | 121 | — | 1 | 82 | (96) | (49) | 587 | 11.2 |
Exceptional operating items(4) | (19) | (192) | |||||||
Operating profit | 509 | 395 | (22.4) |
Markets
Reported volume movement | Reported net sales movement | Organic volume movement | Organic net sales movement | |
% | % | % | % | |
Latin America and Caribbean | 2.2 | 16.9 | 3.1 | 7.7 |
Brazil(5) | 2.3 | 26.4 | 2.4 | 11.2 |
CCAV(5) | (2.2) | 11.7 | 1.8 | 5.7 |
Mexico(5) | 5.8 | 9.9 | 5.8 | 0.4 |
Colombia(5) | 20.5 | 33.0 | 23.3 | 21.7 |
South LAC(5) | (6.5) | 3.1 | (6.4) | 2.6 |
Key financials:
Reported net sales grew 16.9%, driven by organic net sales growth and the
impact of hyperinflation, partly offset by unfavourable foreign exchange.
Organic net sales grew 7.7%, supported by volume growth of 3.1% and 4.6%
price/mix growth. Spirits increased mid-single-digit due to growth in scotch and
vodka. RTDs and beer both increased double digit. We believe inventory levels
at the end of fiscal 26 remain at an appropriate level for the current consumer
environment.
Organic operating profit increased 15.8%, driven by positive mix, marketing
spend efficiencies, and net movement in one-off other operating items.
Marketing investment increased 0.3%, driven by focused investments in Brazil
and Colombia. Operating margin of 27.2%, increased 210bps organically.
Market highlights:
In fiscal 26, the LAC market hierarchy changed to remove Andean, which
comprised of Colombia and Venezuela. Colombia is now reported and managed
as a standalone market and Venezuela has now been consolidated with the
former market CCA into a new market, Caribbean, Central America and
Venezuela (CCAV).
•Brazil net sales grew 11.2%, supported by volume growth of 2.4%, driven
primarily by Johnnie Walker, Smirnoff RTDs and Tanqueray. Results in the
first half were impacted by counterfeit alcohol industry incidents, but
consumer confidence recovered steadily through the second half. Smirnoff
Ice delivered double‑digit growth.
•Colombia net sales grew 21.7%, with volume growth of 23.3% driven by
double-digit growth in Buchanan's, Old Parr and Smirnoff.
•Caribbean, Central America and Venezuela (CCAV) net sales grew 5.7%,
with volume growing 1.8%, driven by favourable scotch performance.
•Mexico net sales grew 0.4%, with volume growth of 5.8% partly offset
by negative price/mix of 5.4%. Scotch was the main contributor to
volume growth, reflecting the broader category strategy work to increase
portfolio competitiveness.
(1)$29 million reclassification between Excise duties and COGS in Latin America due to
an accounting treatment change.
(2)See pages 149 and 205-207 for details on hyperinflation adjustments.
(3)Fair value remeasurements. For further details see page 31.
(4)For further details on exceptional items see pages 30 and 153-156.
(5)Reported volume movement includes impacts from acquisitions and/or disposals. For
further details see pages 205-211.
28 | Diageo Form 20-F 2026 |
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Business review continued
Africa
Broad-based growth supported by route-to-market changes and innovation.
Key financials | ||||||||
2025 | Exchange | Reclassification(1) | Acquisitions and disposals | Organic movement | Hyperinflation(2) | 2026 | Reported movement | |
$ million | $ million | $ million | $ million | $ million | $ million | $ million | % | |
Net sales | 1,834 | (83) | (7) | (274) | 185 | (13) | 1,642 | (10.5) |
Marketing | 192 | (2) | — | (14) | (2) | (1) | 173 | (9.9) |
Operating profit before exceptional items | 283 | 14 | (3) | (53) | 104 | 11 | 356 | 25.8 |
Exceptional operating items(3) | — | (4) | ||||||
Operating profit | 283 | 352 | 24.4 |
Markets
Reported volume movement | Reported net sales movement | Organic volume movement | Organic net sales movement | |
% | % | % | % | |
Africa(4) | 6.8 | (10.5) | 14.0 | 13.3 |
East Africa(4) | 12.9 | 13.4 | 12.9 | 12.6 |
SWC Africa(4) | 12.0 | (33.8) | 16.2 | 15.2 |
Key financials:
Reported net sales declined 10.5%, due to the disposal of operations in Nigeria,
Ghana and the Seychelles which offset strong organic growth and favourable
exchange.
Organic net sales grew 13.3%, with organic volume growth of 14.0%, driven by
double-digit growth in spirits and RTDs, and high-single-digit beer growth.
Price/mix declined 0.7% due to portfolio mix.
Organic operating profit grew 43.5%, reflecting productivity savings, improved
fixed cost absorption and marketing efficiencies. Marketing investment declined
by 1.2%, reflecting reduced spend due to prioritisation and efficiencies
alongside increased investment behind RTDs in South Africa. Operating margin
of 21.7% increased 458bps organically.
Market highlights:
•East Africa net sales grew 12.6%, with double-digit growth in Uganda and
Tanzania, and mid-single-digit growth in Kenya. Performance was driven by
strong growth in rum and beer. Local flavour innovation on Kenya Cane
supported double-digit growth in spirits.
•SWC Africa (South, West and Central Africa) net sales grew 15.2%,
with strong double-digit growth in South Africa driven by strong RTD
growth, particularly Smirnoff Ice, due to increased focus, successful
innovation and route‑to‑market transformation completed last year.
(1)Reclassification of 0.2 EUm between Europe and Africa due to the transfer of Réunion
business.
(2)See pages 149 and 205-207 for details on hyperinflation adjustments.
(3)For further details on exceptional items see pages 30 and 153-156.
(4)Reported volume movement includes impacts from acquisitions and/or disposals. For
further details see pages 205-211.
29 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Category and brand review
For the year ended 30 June 2026
Key categories
Organic volume movement(1) % | Organic net sales movement % | Reported net sales movement % | Reported net sales by category % | |
Spirits(2) | (1) | (5) | (5) | 75 |
Scotch | 3 | 2 | 5 | 24 |
Tequila | (15) | (16) | (16) | 12 |
Vodka(3)(4) | (1) | — | (3) | 8 |
Canadian whisky | (14) | (15) | (15) | 6 |
Rum(4) | 7 | 2 | 2 | 5 |
Liqueurs | (5) | (4) | (2) | 5 |
Gin(4) | 2 | (2) | 1 | 4 |
IMFL whisky | (5) | — | (6) | 4 |
US whiskey | (6) | (8) | (8) | 2 |
Chinese white spirits | (42) | (47) | (45) | 2 |
Beer(5) | 5 | 9 | 2 | 18 |
Ready-to-drink(6) | 25 | 15 | 12 | 4 |
Key brands(7)
Organic volume movement(8) % | Organic net sales movement % | Reported net sales movement % | |
Johnnie Walker | 3 | 2 | 4 |
Guinness | 7 | 12 | 11 |
Don Julio | (14) | (14) | (13) |
Crown Royal | (14) | (15) | (15) |
Baileys | (4) | (4) | (1) |
Smirnoff | — | (1) | 1 |
Captain Morgan | (3) | (4) | (3) |
Buchanan's | 14 | 12 | 21 |
Casamigos(9) | (19) | (25) | (25) |
McDowell's | (7) | (7) | (12) |
(1)Organic equals reported volume movement except for liqueurs (4)%, rum 5%, gin 1%, beer 2% and ready-to-drink 11%.
(2)Spirits brands excluding ready-to-drink and non-alcoholic variants.
(3)Vodka includes Ketel One Botanical.
(4)Vodka, rum and gin include IMFL variants.
(5)Beer category includes flavoured malt beverage (FMB) products.
(6)Ready-to-drink category includes spirit-based ready-to-drink, ready-to-serve and non-alcoholic variants.
(7)Brands excluding ready-to-drink, non-alcoholic variants and beer except Guinness.
(8)Organic equals reported volume movement, except for Guinness 6% and Smirnoff (1)%.
(9)Casamigos trademark includes both tequila and mezcal.
F-9 | Diageo Form 20-F 2026 |
Business review (continued)
Corporate
Performance 2026
Sales and net sales
Corporate net sales principally arise from visitor centers and the global licensing of Diageo brands and trademarks. Corporate net
sales were $162 million in the year ended 30 June 2026, an increase of $27 million. Net sales were favourably impacted by an
organic increase of $19 million as well as favourable foreign exchange movement of $8 million.
Operating costs
Corporate operating costs comprise central costs, including finance, marketing, corporate relations, human resources and legal, as
well as certain information systems, facilities and employee costs that are not allocable to the geographical segments or to Supply
Chain and Procurement. Operating costs were $319 million in the year ended 30 June 2026, decreased by $73 million compared to
$392 million in the year ended 30 June 2025. The $70 million decrease in costs in the year ended 30 June 2026 was principally a
result of Corporate functions cost efficiency, as well as favourable exchange rate movement of $3 million.
Performance 2025
Sales and net sales
Corporate net sales principally arise from visitor centers and the global licensing of Diageo brands and trademarks. Corporate net
sales were $135 million in the year ended 30 June 2025, an increase of $12 million. Net sales were favourably impacted by an
organic increase of $10 million as well as by $2 million exchange rate movement gain.
Operating costs
Corporate operating costs comprise central costs, including finance, marketing, corporate relations, human resources and legal, as
well as certain information systems, facilities and employee costs that are not allocable to the geographical segments or to the Supply
Chain and Procurement. Operating costs were $392 million in the year ended 30 June 2025 increased by $26 million compared to
operating costs of $366 million in the year ended 30 June 2024. The $22 million increase in costs in the year ended 30 June 2025 was
principally a result of D&T Voyager cost increase, as well as unfavourable exchange rate movement of $4 million.
30 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Group financial review
Group financial review
Key financials - certain line items
30 June 2025 | Exceptional operating items (c) | Exchange (a) | Acquisitions and disposals (b) | Organic movement(1) | Fair value remeasurement (d) | Reclassification(2) | Hyperinflation(1) | 30 June 2026 | |
Reported | Reported | ||||||||
Year ended 30 June 2026 | $ million | $ million | $ million | $ million | $ million | $ million | $ million | $ million | $ million |
Sales | 27,964 | — | (543) | (433) | 222 | — | — | 552 | 27,762 |
Excise duties | (7,719) | — | 335 | 64 | (608) | — | 29 | (220) | (8,119) |
Net sales | 20,245 | — | (208) | (369) | (386) | — | 29 | 332 | 19,643 |
Cost of sales | (8,072) | 44 | 274 | 212 | (120) | (49) | (29) | (222) | (7,962) |
Gross profit | 12,173 | 44 | 66 | (157) | (506) | (49) | — | 110 | 11,681 |
Marketing | (3,662) | — | (24) | 56 | 467 | — | — | (20) | (3,183) |
Other operating items | (4,176) | (1,202) | 92 | 19 | 151 | (50) | — | (176) | (5,342) |
Operating profit | 4,335 | (1,158) | 134 | (82) | 112 | (99) | — | (86) | 3,156 |
Other line items: | |||||||||
Non-operating items | (220) | 6 | |||||||
Taxation (d) | (999) | (606) |
(1)For the definition of organic movement and hyperinflation, see pages 205-211.
(2)Reclassification between Excise duties and Cost of sales due to an accounting treatment change.
(ii)Reported figures in the table above have been extracted from the condensed consolidated income statement for the years ended 30 June 2025 and 30 June 2026.
(iii)Acquisitions and disposals, organic movement and hyperinflation figures have been calculated at the prior period weighted average exchange rates.
(a) Exchange
The impact of movements in exchange rates on reported figures for operating
profit was principally due to the favourable exchange impact of the Venezuelan
bolivar and the euro against the US dollar.
The effect of movements in exchange rates on profit before exceptional items
and taxation for the year ended 30 June 2026 is set out in the table below.
Gains/(losses) $ million | |
Translation impact | 160 |
Transaction impact | (26) |
Operating profit before exceptional items | 134 |
Net finance charges – translation impact | (23) |
Net finance charges – transaction impact | (10) |
Net finance charges(1) | (33) |
Associates – translation impact | 13 |
Profit before exceptional items and taxation | 114 |
(1)For more information about Finance income and charges please see page 156.
Year ended | Year ended | |
30 June 2026 | 30 June 2025 | |
Exchange rates | ||
Translation $1 = | £0.75 | £0.77 |
Transaction $1 = | £0.74 | £0.80 |
Translation $1 = | €0.86 | €0.92 |
(b) Acquisitions and disposals
The acquisitions and disposals movement in the year ended 30 June 2026 was
primarily attributable to the sales of Guinness Ghana Breweries PLC, Guinness
Nigeria PLC and Seychelles Breweries Limited, the disposal of the Sheridan's
brand and the Cîroc contractual arrangement in North America.
See pages 161-164 for further details.
(c) Exceptional items
In the year ended 30 June 2026, exceptional operating items were a charge of
$2,527 million mainly driven by impairment of brands, goodwill, tangible fixed
assets, other assets and other related charges ($1,489 million), charges in respect
of the implementation of our new operating framework and the Accelerate
programme ($908 million), the distribution model change in Japan, Singapore
and Thailand ($75 million), a one-off discretionary increase in pension benefits
to pensioners in Ireland ($38 million) and ongoing litigation matters in Europe
($17 million). In the year ended 30 June 2025, exceptional operating items were
a charge of $1,369 million, due to impairment of investments in associates
and other investments, brands, tangible fixed assets, other assets and other
related charges ($910 million), charges for the Accelerate programme,
that includes supply chain agility programme ($225 million), the
distribution model change in France ($145 million), various dispute and
litigation matters ($51 million) and the reversal of rum cover-over income ($38
million).
In the year ended 30 June 2026, exceptional non-operating items were a gain of
$6 million, mainly driven by a gain on the disposal of Seychelles Breweries
Limited ($62 million) and Sheridan's ($46 million), partly offset by a loss on the
sale of Guinness Ghana Breweries PLC ($49 million), charges in respect of the
prospective sale of East African Breweries PLC and the Kenyan spirits business
($43 million) and a charge in respect of the sale of Diageo Operations Italy
S.p.A., inclusive of the Santa Vittoria production facility ($7 million). In the
year ended 30 June 2025, exceptional non-operating items were a loss of $220
million, mainly driven by the loss on the prospective sale of Guinness Nigeria
PLC ($125 million) and loss on the sale of Guinness Ghana Breweries PLC
($114 million).
In the year ended 30 June 2025, exceptional finance income was in relation to
capitalised borrowing costs of $58 million in respect of purchases of property,
plant, equipment and computer software in the prior years.
See pages 153-156 for further details.
31 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
(d) Fair value remeasurement
In the year ended 30 June 2026, the adjustment to cost of sales of a $38 million
charge reflects the elimination of fair value changes for biological assets in
respect of growing agave plants for the production of tequila (2025 – $11
million gain). The adjustments to marketing and other operating expenses of a
$89 million gain were the elimination of fair value changes to contingent
consideration liabilities and earn-out arrangements in respect of prior year
acquisitions (2025 – $139 million gain).
(e) Taxation
The reported tax rate for the year ended 30 June 2026 was 25.8% compared
with 29.9% for the year ended 30 June 2025.
The tax rate before exceptional items for the year ended 30 June 2026 was
24.3% compared with 24.9% for the year ended 30 June 2025.
See pages 159 and 211 for further details.
Movements in net borrowings
2026 | 2025 | |
$ million | $ million | |
Net borrowings at the beginning of the year | (21,854) | (21,017) |
Free cash flow (1) | 3,211 | 2,748 |
Net movements in loans, other investments and other financial assets | (19) | (195) |
Sale of businesses and brands (2) | 288 | 143 |
Acquisitions | (23) | (35) |
Investment in associates | (47) | (84) |
Net sale of own shares for share schemes | 1 | 15 |
Net sale of treasury shares in respect of subsidiaries | — | 8 |
Dividend paid to non-controlling interests | (164) | (138) |
Net movements in bonds (3) | (1,648) | 1,527 |
Purchase of shares of non-controlling interests | — | (9) |
Net movements in other borrowings (4) | (127) | (629) |
Equity dividends paid | (1,846) | (2,298) |
Unclaimed dividends and share forfeiture | — | 30 |
Net (decrease)/increase in cash and cash equivalents | (374) | 1,083 |
Net decrease/(increase) in bonds and other borrowings | 1,775 | (898) |
Exchange differences (5) | 204 | (921) |
Other non-cash items (3) | (233) | (101) |
Net borrowings at the end of the year | (20,482) | (21,854) |
(1) See page 209 for the analysis of free cash flow.
(2) In the year ended 30 June 2026, sale of businesses and brands included: the
disposal of Diageo Operations Italy S.p.A. for a net cash consideration, net of
disposal costs, of $118 million; the disposal of Seychelles Breweries Limited
for a net cash consideration, net of disposal costs, of $85 million; the disposal of
Guinness Ghana Breweries PLC for a net cash consideration, net of disposal
costs, of $64 million; and the disposal of the Sheridan's brand for a net cash
consideration, net of disposal costs, of $47 million. In the year ended 30 June
2025, sale of businesses and brands included: the disposal of the Cacique brand
for a net cash consideration, net of disposal costs, of $67 million; the disposal of
Guinness Nigeria PLC for a net cash consideration, net of disposal costs, of $53
million; and the disposal of the Pampero brand for a net cash consideration, net
of disposal costs, of $55 million.
(3) In the year ended 30 June 2026, the group issued bonds of €1,000 million
($1,171 million – net of discount and fee) consisting of €500 million ($585
million – net of discount and fee) 3.75% fixed rate notes due 2037, €500 million
($586 million – net of discount and fee) 3.25% fixed rate notes due 2032 and
repaid bonds of $1,250 million and €1,350 million ($1,569 million). In the year
ended 30 June 2025, the group issued bonds of €2,200 million ($2,452 million –
net of discount and fee) consisting of €700 million ($780 million – net of
discount and fee) 3.125% fixed rate notes due 2031, €300 million ($346 million
– including issuance premium) 3.125% fixed rate notes due 2031, €700 million
($776 million – net of discount and fee) 3.375% fixed rate notes due 2035,
€500 million ($550 million – net of discount and fee) 3.75% fixed rate notes due
2044, $750 million ($748 million – net of discount and fee) 5.125% fixed rate
notes due 2030, $750 million ($743 million – net of discount and fee) 5.625%
fixed rate notes due 2035 and repaid bonds of $600 million and €1,600 million
($1,816 million).
(4) In the year ended 30 June 2026, the net movements in other borrowings
principally arose from the $126 million repayment of lease liabilities. In the
year ended 30 June 2025, the net movements in other borrowings principally
arose from the $479 million repayment of commercial paper and $114 million
repayment of lease liabilities.
(5) In the year ended 30 June 2026, exchange gains arising on net borrowings of
$204 million were primarily driven by favourable exchange movement on euro
and sterling denominated borrowings. In the year ended 30 June 2025, exchange
losses arising on net borrowings of $921 million were primarily driven by
unfavourable exchange movements on sterling and euro denominated
borrowings and on foreign currency swaps and forwards.
Movements in equity
2026 | 2025 | |
$ million | $ million | |
Equity at the beginning of the year | 13,178 | 12,070 |
Profit for the year | 1,958 | 2,538 |
Exchange adjustments (1) | (502) | 452 |
Remeasurement of post-employment benefit plans net of taxation | (50) | (2) |
Purchase of shares of non-controlling interests | — | (7) |
Acquisition | 2 | — |
Change in non-controlling interests from sale of business | (28) | 9 |
Hyperinflation adjustments net of taxation (2) | 334 | 264 |
Dividend declared to non-controlling interests | (147) | (140) |
Dividends | (1,846) | (2,298) |
Other reserve movements | 55 | 292 |
Equity at the end of the year | 12,954 | 13,178 |
(1) Exchange movements in the year ended 30 June 2026 primarily arose from
exchange losses on sterling, Indian rupee and Turkish lira partly offset by
exchange gains on Mexican peso. Exchange movements in the year ended 30
June 2025 primarily arose from exchange gains driven by sterling.
(2) See pages 149 and 205-207 for details on hyperinflation adjustments.
F-10 | Diageo Form 20-F 2026 |
STRATEGIC REPORT | GOVERNANCE report | FINANCIAL STATEMENTS | ADDITIONAL INFORMATION |
Operating results 2025 compared with 2024
For the discussion on our operating results for the year ended 30 June 2024, including certain comparative discussion on our
operating results for the years ended 30 June 2024 and 2025, please refer to 'Summary financial review' from page 20 in our Annual
Report on Form 20-F (File No. 001-10691) filed with the Securities and Exchange Commission on 14 August 2025.
32 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Spirit of Progress
Doing business the right way,
from grain to glass
We manage our business for the long term by focusing
on what we depend on most: the people, communities,
natural resources and supply chains that help us grow,
make and sell our products.
Our 'Spirit of Progress' plan helps us protect and
strengthen these foundations. We identify the risks and
opportunities that matter most to our business, then
focus our action where we can make the greatest
difference at scale.
Doing business the right way
What we do
•Embed integrity in everything we do
•Stand up for human rights
•Build and monitor our distinct culture
•Protect our people through a robust health
and safety strategy
Key policies
•Code of Business Conduct
•Global Human Rights Policy
•Dignity at Work Policy
•Global Health, Safety and Wellbeing Policy
Read more on pages 58-59.
Doing business the right way is core to our three 'Spirit of Progress' priorities
Promote positive
drinking
What we do
•Change the way the world drinks for the
better
•Address the harmful use of alcohol and
promote moderation
•Responsibly market our products
Key policies
•Global Employee Alcohol Policy
•Diageo Marketing Code and Digital
Marketing Standard
Targets
Education on the dangers
of alcohol misuse
•Underage drinking*,^
•Drink driving^
Champion inclusion
and diversity
What we do
•Create an environment where everyone
contributes to a better business
Key policies
•Code of Business Conduct
Targets
Increasing the diversity of our
leadership team
•Gender diversity*
•Ethnic diversity*
Promoting inclusivity through
hospitality and skills education
•Learning for Life and other hospitality
and skills programmes
Pioneer grain-to-glass
sustainability
What we do
•Preserve the natural resources we all
depend on, building the resilience of our
business and protecting our licence to
operate
Key policies
•Global Environment Policy
Targets
Water stewardship
•Water efficiency*
•Water replenishment^
•Water collective action
Responsible sourcing
•Regenerative agriculture programmes
Emission reductions
•Emissions from our direct operations*,^
•Emissions from our value chain
•Recycled content of our packaging
Read more on pages 40-41.
Read more on pages 42-43.
Read more on pages 44-56.
*Targets and ambitions which are included in our long-term incentive plans (through fiscal 27).
^Targets and ambitions which are included in our long-term incentive plans (from fiscal 26). For more details, please refer to the Remuneration Report in this document.
33 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information |
As our stakeholders' expectations and business evolve, so does our assessment
of material impacts, risks and opportunities and our strategy to address them. To
update our strategy, we regularly assess stakeholder feedback, performance
against targets and business needs. While we focus on factors we can influence,
external uncertainties remain.
Each year, we review our targets and ambitions to ensure they remain aligned
with our strategy, stakeholder expectations and evolving regulatory requirements.
In fiscal 26, we revisited the external and internal factors considered as part of
our ESG issues assessment, in preparation for the European Union's Corporate
Sustainability Reporting Directive (CSRD) in fiscal 28.
This review confirmed that our priority ESG topics remain unchanged.
How we take action and measure our performance
This section of the Annual Report sets out our progress against our priority
‘Spirit of Progress' targets. In our ESG Reporting Index, we include reporting
on other goals and other actions which support our strategy.
Governance
Both the Board and the Executive Committee oversee the ‘Spirit of Progress‘ plan.
The Board reviews our most material ESG matters, our ESG strategy and our
progress against Spirit of Progress targets used to measure our strategy in action.
The Chief Executive is ultimately accountable for the performance against ‘Spirit
of Progress' ambitions. Each target has an Executive Committee member
accountable for the delivery, with progress regularly reviewed by the Executive
Working Group (EWG). From fiscal 27, the work of the EWG will be taken on
by the full Executive Committee.
Regulatory frameworks
We continue to voluntarily report against the Global Reporting Initiative (GRI)
and Sustainability Accounting Standards Board (SASB) frameworks in our ESG
Reporting Index.
Given the interconnectivity of climate and nature, we have incorporated selected
elements of the Task Force for Nature-related Financial Disclosures (TNFD)
into our Task Force on Climate-related Financial Disclosures (TCFD) reporting.
In the United States, California's Voluntary Carbon Market Disclosures Act,
California Assembly Bill No. 1305 (AB-1305), requires companies operating in
California to make certain disclosures regarding carbon emissions reduction
claims, and voluntary carbon offsets. We provide disclosures pursuant to AB-1305
in this section of the Annual Report, our ESG Reporting Index and our responses to
CDP(1), available through CDP's website.
We continue to monitor developments in sustainability reporting requirements and
broader ESG related regulations across the markets in which we operate:
This includes preparing for compliance with the European Union's Corporate
Sustainability Reporting Directive (CSRD) and monitoring the development of UK
Sustainability Reporting Standards (UK SRS). We intend to apply these
requirements as soon as required under EU and UK law.
We are monitoring developments relating to California Senate Bill 261 and
preparing for the reporting requirements of California Senate Bill 253.
Reporting transparently
We define our performance measures carefully, along with clear reporting
boundaries and methodologies. For more details, see the ESG reporting section
of our website at diageo.com.
(1)CDP is a global environmental disclosure system through which companies report
information on climate change, water security, forests and other environmental
impacts.
In fiscal 26, we achieved our overall water
replenishment target, replenishing more
water than we used across all our sites in
water-stressed areas. Mexico was a key
contributor — we now replenish more than
twice the volume of water used in our
tequila production operations in Jalisco.
Since 2023, we have invested more than
MXN 100 million in water stewardship
initiatives across Jalisco, working with
local communities, government agencies
and partners. Projects include watershed
restoration, rainwater harvesting,
wastewater treatment, aquifer recharge,
regenerative agriculture and reforestation.
Together, these initiatives help improve
water availability, access and quality, while
supporting biodiversity, community
resilience and the long-term sustainability
of our tequila production.
34 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Business integrity and human rights
Business
integrity and
human rights
We are committed to doing business the right way.
We expect our employees and business partners to
act with integrity, live our values and uphold our
Code of Business Conduct.
For more details, see our website at diageo.com
Business integrity
A strong culture of business integrity underpins our purpose and how
we operate.
By valuing what we do and how we do it, we protect what matters most,
strengthening our culture, and supporting responsible, sustainable growth.
Code of Business Conduct (Our Code)
Our Code is a shared guide that supports our employees to make informed
decisions, act responsibly and uphold our standards in their day-to-day work. It
provides a clear framework for how we operate and interact with colleagues,
customers, suppliers and communities.
All employees are required to complete our Code of Business Conduct
training(1) annually, either as part of our annual training campaign or new joiner
onboarding. Employees are required to certify annually that they have read,
understood and complied with Our Code through the Annual Declaration of
Compliance.
Training is delivered through an interactive, scenario-based e-learning
programme, supported by in-person classroom sessions for those employees
without regular computer access.
Encouraging people to speak up
We encourage employees to report potential breaches of our Code of Business
Conduct or policies to their line manager, HR, Legal or Business Integrity.
Employees may also report their concerns through SpeakUp, our global
confidential whistleblowing service, which is managed by an independent
company. The service is available 24 hours a day, seven days a week, via
multiple channels, and supports reporting in more than 75 languages.
Managing third-party risks
We expect the same high standards of integrity from those we work with. Our
Know Your Business Partner (KYBP) standard, part of our wider third-party
risk management framework, supports the identification, assessment and
management of potential risks, such as bribery and corruption, sanctions, fraud
and other potential legal, compliance and reputational risks.
Standing up for human rights
At Diageo, we strive to create an environment where all our people feel they are
treated fairly and with respect. We remain committed to acting with integrity in
our roles, to ensure we are doing business in the right way. We act in line with
the UN Guiding Principles on Business and Human Rights (UNGPs) and are
committed to embedding respect for human rights into everyone’s working day,
in every country throughout our business and supply chain.
Our human rights governance
Our Code and Global Human Rights Policy play an integral part of ensuring that
Diageo’s culture is aligned with our purpose and values. Our human rights
strategy is reviewed on a periodic basis by the Audit Committee and by a sub-
group of the Executive Committee as part of our mitigation of our principal risk
on 'Legal and Regulatory'. Responsibility for delivery is shared between the
members of our Executive Committee that are responsible for the human rights
of our employees, suppliers and communities. Our executives, senior business
leaders and functional specialists lead the agenda via our Human Rights
Steering Group, and assess risks, emerging issues, compliance and remediation
within our enterprise risk management processes.
Providing access to grievance mechanisms
We encourage everyone, including any affected stakeholders, to report potential
breaches of Our Code or policies, including human rights, through our global
confidential grievance and whistleblowing service, SpeakUp.
Focusing on salient human rights risks
We focus on the salient risks that are most relevant to our business as specified
in the Declaration on Fundamental Principles and Rights at Work and the
UNGPs. We also consider human rights benchmarks for our industry, priority
commodities in our supply chain and the increasing interdependence between
human rights and climate impacts.
We have identified the following salient risks: health and safety, wages and
benefits, working time, harassment and bullying, discrimination, freedom of
association and collective bargaining, child labour, forced labour, water
sanitation and hygiene and land rights. Whilst we conduct ongoing due
diligence in all areas, we have prioritised health and safety, wages and benefits,
working time, harassment and bullying, and discrimination based on severity,
likelihood, attribution, leverage and breach data.
Vulnerable groups
We recognise that some groups of people are more vulnerable to human rights
breaches and we pay particular attention to these groups within our risk
assessments. Determined by human rights frameworks, our value chain and
human rights impact assessments, our vulnerable groups are women, ethnic
minorities, persons with disabilities, the LGBTQIA+ community, indigenous
peoples, migrant workers, contract and temporary workers, and children.
Assessing risk in our direct operations
We use a variety of risk assessment tools in our direct operations to identify
risks. This includes self-assessment questionnaires for all direct operations,
third-party human rights assessments for high-risk direct operations and deep
dive assessments for groups that we consider more vulnerable to our salient
risks. In fiscal 26, all direct operations completed an annual self-assessment
questionnaire and five high-risk direct operations undertook a third-party
assessment, keeping us on track to assess all high-risk direct operations by the
end of fiscal 27. We use the insights from the assessments to develop action
plans to resolve material human rights concerns and strengthen our approach.
Where needed, we involve external experts to ensure our plans are robust.
(1)For further information, please refer to the Non-Financial Reporting Boundaries and
Methodologies, and the ESG Reporting Index.
35 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information |
Assessing risk and compliance in our supply chain
Our Responsible Sourcing programme, led by our Supplier Excellence team,
follows a risk-based approach to assessing adherence to our Partnering with
Suppliers standard. Suppliers are risk-assessed against the following criteria:
location of supplier site, and category of product or service. Suppliers complete
a Human Rights Third-Party Questionnaire (TPQ) as part of our third-party risk
management process and suppliers who are assessed as high risk with a defined
spend threshold are required to undertake an independent third-party Sedex
Members Ethical Trade Audit (SMETA) or an equivalent four-pillar ethical
audit.
This year, we strengthened our approach and redesigned our responsible
sourcing programme through the introduction of risk-based due diligence
requirements, covering a broader in-scope supplier base. In line with this
enhanced approach and expanded supplier scope, we have re-set an overall
supplier compliance measure of 80% providing an appropriate baseline under
the new methodology. This reflects the broader supplier population now
included within the programme and does not represent a reduction in our
expectations of supplier performance. To further strengthen our approach, we
also introduced two further measures to enhance how we monitor remediation
and ongoing supplier compliance.
We began screening for human rights with all our potential suppliers before
onboarding. This helps us make more informed decisions on human rights risks
and gives us the chance to assess and mitigate the salient issues before we
contract with a supplier.
We have also mapped our salient risks within our priority supply chains,
allowing us to prioritise our actions and drive positive social impact where it is
needed most. Part of this assessment includes identifying the scale, scope,
remediability and likelihood of our salient risks through different parts of our
supply chain. These findings are helping us to focus our interventions on
specific human rights issues in the supply chain for greater impact.1
Taking action to mitigate human rights risks
Where we identify human rights risks, we take actions to mitigate them. Some
examples of these mitigations are:
•Refreshing our supplier risk management processes to improve visibility of
risk, across our supplier base, enabling risk-based due diligence, including
prioritised audit follow-up, corrective action plans, and supplier engagement.
•Providing training to our procurement teams on potential human rights risk
related to our purchasing categories.
•Building the capability of teams who manage contract labour to strengthen
our due diligence.
•Working with smallholder farmers in Mexico and India to understand
potential human rights risks and introduce measures to reduce risk and
increase our positive social impact.
•Our Global Brand Promoter standard and training establishes principles and
guidelines to protect brand promoters from the risk of sexual harassment.
This training is now available in 17 languages globally. To date we have
trained over 319 agencies and over 30,000 brand promoters.
•Conducting global pay equity and living wage analyses for Diageo
employees and taking action to close gaps if identified.
•Our collaboration with AIM-Progress and Oxfam aims to strengthen supplier
grievance mechanisms, improve access to remediation for workers and build
supplier capability to support long-term improvement.
Assessing the effectiveness of our approach
We measure the effectiveness of our human rights governance through our
internal assurance framework and third-party human rights assessments. We
continue to enhance our risk mitigation plans based on lessons learned.
We also externally benchmark our progress against best practice through
rankings such as the World Benchmarking Alliance (WBA) Social
Transformation Benchmark and Corporate Human Rights Benchmark.
Engaging our stakeholders
We recognise the importance of listening to and consulting stakeholders,
especially the most vulnerable ones, on issues that affect them. We do this on an
ongoing basis through different mechanisms including worker interviews,
reviewing grievance data and holding community dialogues within our
community investment programmes. We also have processes to respond to
investor and customer information requests.
This focus on due diligence and disclosure is crucial to us doing business the
right way. It enables us to have transparency in our engagements with all
stakeholders and drive continuous improvements in our approach. We will
continue to focus on this important area, embedding respect for human rights
into everyone’s working day, in every country and throughout our supply chain.
(1)For further information, please refer to the ESG Reporting Index and our Modern
Slavery Statement, available on our website.
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Our people and culture
Our people
and culture
Our talented and diverse workforce, together with
our people's passion for our brands and our focus on
development, recognition and wellbeing, helps create
a culture where people can perform at their best.
For more details, see our website at diageo.com.
We strive to foster an environment where our talented and diverse workforce
feels valued, supported to grow and empowered to perform at their best.
As stated in our fiscal 26 interim results, an immediate priority for Sir Dave
Lewis, CEO, was to redesign the Diageo operating framework through the lens
of how we can build a more competitive organisation that is focused on
shareholder value. Our employee listening this year, listed below, has fed into
this redesign as we go into fiscal 27.
Listening to our people
Listening to and engaging with our people to better understand how they
experience work at Diageo, their perspectives and priorities is an important part
of improving the employee experience. From our listening, we know we can
improve the clarity of our choices and decision-making, which has been
considered as part of our redesign of the operating framework. To ensure we
went into this redesign with as much insight from our employees as possible,
our annual colleague survey, ‘Our Voice’(1), was enhanced to deepen our insight
into Diageo’s culture, processes, and commercial understanding. This was
supported by separate AI-enabled focus group feedback sessions. We also
created more direct opportunities for connection between leaders and
colleagues, including new ‘Ask Me Anything’ sessions led by our Chief
Executive Officer, helping foster more open and transparent dialogue. These
insights continue to shape how we evolve the way we work and strengthen
engagement.
In our latest employee survey conducted in February 2026, 88% of employees
said they are proud to work at Diageo, 2 percentage points lower than last year
but 10 percentage points above the external benchmark.(2) 81% said they feel
motivated to perform at their best, a 2 percentage point increase on the previous
year and 4 percentage points above the external benchmark.
Overall engagement across the organisation is at 79%, which though slightly
higher than the external benchmark, is 4 percentage points lower than fiscal 25.
Colleagues highlighted opportunities to improve the day-to-day employee
experience, including simplifying processes and systems, strengthening clarity
of accountability and decision-making and creating more opportunities for
career growth.
Building capabilities to drive performance
Building the right skills across the organisation remains vital in order to enable
individual growth and support business performance. During fiscal 26, we
delivered targeted learning and development initiatives across the organisation.
Within Commercial, we strengthened commercial capability and customer focus
through our ‘Igniting Commercial Excellence’ programme. Focused learning
programmes in commercial judgement, analytical capability and customer
engagement are helping strengthen decision-making and customer relationships.
Alongside this, we introduced a ‘retail immersion’ learning programme across
Iberia, Ireland and Great Britain, to strengthen customer understanding through
real-world learning experiences. Using AI, we expanded learning opportunities
across the organisation, with more than 4,800 employees completing digital or
AI training and created a Supply Chain Digital Academy to support teams in
building confidence and capability in digital and data skills.
Recognising the evolving needs of the business, including building
commercially focused General Management talent with strong channel,
customer and consumer understanding, we continued targeted development
initiatives for emerging General Managers (GMs). Over the past three years,
87% of General Manager appointments have been filled internally, helping to
accelerate transitions into new roles and strengthen networks across the General
Management community.
Building commercial capability and customer focus
Recognition and wellbeing
Creating an environment where our people can thrive is central to delivering
performance and wellbeing.
Recognition plays an important role in helping our people feel valued,
connected and motivated to deliver their best work. Over the last few years, we
have focused on improving support and recognition from people managers. We
have embedded recognition across the organisation through ‘Celebrate’, our
global recognition platform, which enables employees to acknowledge
meaningful contributions and behaviours in real time. During fiscal 26, more
than 156,000 recognition moments were experienced across Diageo —
equivalent to one recognition award every three minutes.
At Diageo, we recognise the importance of supporting employee wellbeing and
resilience. Our approach is grounded in our Global Wellbeing Philosophy,
which focuses on supporting colleagues across the physical, mental, financial
and social dimensions of wellbeing. We invest in mental wellbeing through
learning initiatives and leadership capability-building through our IMPACT
development programme, which strengthens people managers’ inclusion,
wellbeing and communication capabilities, enabling them to build
psychologically safe teams.
Across our markets, locally tailored initiatives continued to support wellbeing in
ways that reflected the needs of our people and communities, including
wellbeing champion activities in Great Britain, fitness challenges in India and
psychological safety programmes in Türkiye. Employees and their families also
continued to have access to confidential support through our Employee
Assistance Programme and the ‘Balancy’ wellbeing platform.
(1)Our Voice, previously Your Voice.
(2)Based on a blend of Qualtrics and Ipsos Karian and Box data, the Global Manufacturing benchmark includes organisations with global coverage that operate within FMCG and other industry sectors.
37 | Diageo Form 20-F 2026 |
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Our 'nudge' platform now supports more than 14,000 employees across 10
countries with financial wellbeing resources that help build financial literacy,
confidence and resilience. We also expanded our ‘One World Share Incentive
Plan’ to four additional countries which included undertaking required
registrations to enable our employees in China to receive Diageo shares for the
first time. This progress was recognised externally by both the Global Equity
Organization(3) and ProShare(4), reflecting our commitment to making share
ownership more accessible and meaningful for our people.
We also understand that people thrive when they feel empowered to own how,
when and where they create their best work. Our progressive approach to
flexible working is a core part of how we support our people’s wellbeing.
(3)Global Equity Organization, a global non-profit membership organisation that
promotes and supports employee share ownership and equity compensation through
research, education, and networking.
(4)ProShare, the UK’s non-profit membership body for employee share ownership and
share plans, providing advocacy, education, and industry representation.
Average number of employees by region and gender(1)
Region(2) | Men | % | Women | % | Not declared(3) | % | Total |
North America | 1,834 | 59% | 1,267 | 41% | 9 | — | 3,110 |
Europe | 5,761 | 56% | 4,564 | 44% | 20 | — | 10,345 |
Asia Pacific | 5,156 | 64% | 2,871 | 36% | 1 | — | 8,028 |
Latin America and Caribbean | 2,627 | 60% | 1,758 | 40% | — | — | 4,385 |
Africa | 1,179 | 57% | 891 | 43% | — | — | 2,070 |
Diageo (total) | 16,557 | 59% | 11,351 | 41% | 30 | — | 27,938 |
Average number of employees by role and gender(1)
Role | Men | % | Women | % | Not declared(3) | % | Total |
Executive(4) | 9 | 69% | 4 | 31% | — | — | 13 |
Senior manager(5) | 323 | 56% | 253 | 44% | — | — | 576 |
Line manager(6) | 2,680 | 61% | 1,730 | 39% | 4 | — | 4,414 |
Supervised employee(7) | 13,545 | 59% | 9,364 | 41% | 26 | — | 22,935 |
Diageo (total) | 16,557 | 59% | 11,351 | 41% | 30 | — | 27,938 |
(1)This data has been compiled as a monthly average based on the proportion of
employees who have identified their gender as male, female or undisclosed. In some
cases assumptions have been applied where data is not available.
(2)Employees have been allocated to the region where they live.
(3)This data represents the proportion of employees who have chosen not to disclose their
gender as male or female.
(4)The number of executive positions has been calculated based on data at 30 June 2026.
(5)Top leadership positions in Diageo, excluding Executive Committee.
(6)All Diageo employees (excluding senior managers and Executive Committee)
with one or more direct reports.
(7)All Diageo employees (excluding senior managers and Executive Committee)
who have no direct reports.
38 | Diageo Form 20-F 2026 |
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Health and safety
Health
and safety
We put the health and safety of our
people first across our value chain,
so that everyone can work safely — every
day, everywhere.
3-year trend: Lost time accident frequency rate (LTAFR)
For more details, see the Non-Financial Reporting Boundaries and
Methodologies found on our website at diageo.com.
Our 'Safer Together' approach
The health and safety of our people is a core value underpinning how we
operate responsibly across our global value chain. Our Global Health, Safety
and Wellbeing Policy reflects our 'Safer Together' philosophy and commitments,
defining the standards, expectations and shared accountabilities needed to safeguard
our people and those working on our behalf.
We operationalise these commitments through our Global Health & Safety
Strategy, supported by our Global Risk Management Standards, which together
provide a structured and preventative framework for identifying, assessing and
managing health and safety risks across our operations.
Our risk‑based approach prioritises the prevention of severe and fatal incidents
and process safety events. This is delivered through our SFIP (Severe and Fatal
Incident Prevention) and PSM (Process Safety Management) programmes,
supported by site‑specific roadmaps, which embed the critical controls,
behaviours and governance required to manage high‑consequence risks
consistently and effectively.
Our governance assurance programme enables us to determine compliance with
our Global Risk Management Standards and identify continuous improvement
opportunities. We leverage digital tools and technologies to support the
consistent application of these standards and facilitate data-driven decision-
making for timely intervention.
In line with our Global Health, Safety and Wellbeing Policy, leaders at all levels
are accountable for implementing the health and safety standards and
procedures across their teams and on-site third‑party partnerships. Our Code of
Business Conduct outlines the expectation on employees to take responsibility
for their own, colleague and contractor safety. Through clear leadership
accountability and strong colleague engagement, we continue to strengthen our
safety culture and embed consistent health and safety standards across all
operations.
Governance and oversight of health and safety performance metrics and control
effectiveness is reviewed and monitored at the Board level twice yearly, Global
Leadership forums monthly and more frequently within individual business
units and locations.
Automation and technology
Fundamental to our 'Safer Together' approach is our 5-year Digital, Automation
and AI roadmap which has been designed to improve hazard identification,
provide predictive analytics for incident prevention and enhance decision-
making. The use of enhanced forklift technologies, manual handling digital
wearables and the application of artificial intelligence was a key focus area in
fiscal 26. These approaches are also extended to contractors and on-site third-
party providers.
From an automation perspective, there has been continued investment in shuttle
warehousing. During the year, Diageo completed its first automated shuttle
warehousing site, reflecting continued investment in modernising our supply
chain through a multi-year programme of more than $180 million. This has
reduced manual handling by replacing traditional cask movement with
automated systems, improving both safety and productivity. We have invested
with a long‑term focus to strengthen asset capability and drive sustainable value
creation.
Investment of more than $40 million in maturation operations and activities
deployed targeted technology to extend asset life, optimise liquid inventory
management and support improved returns on invested capital, while advancing
readiness for future automated warehousing aligned to demand signals.
Our continuing transition from forklifts to automated guided vehicles and
autonomous mobile robots remains a priority for fiscal 27.
Process safety management
We recognise that process safety events pose significant risks to the health and
safety of employees, communities and the environment, as well as potential
damage to property, reputation, and business continuity. Our process and fire
safety strategy and framework continue to provide a structured and consistent
approach to identifying, assessing and controlling hazards that pose potential
risk of causing major accidents such as fires, explosions or chemical releases.
During fiscal 26, we strengthened the systems, controls and capabilities that
underpin long‑term process safety performance, including the launch of an
electronic management of change system to enhance the consistency,
traceability and effectiveness of change management across our operations.
Process safety audits were also completed at multiple sites across several
markets, providing targeted insight into local risks and opportunities for
improvement. Findings from these audits have been consolidated into common
themes, which have informed the development of a structured programme
expected to deliver through to fiscal 29.
Our performance
We report on lost time accident frequency rate (LTAFR). This year, our rate
was 1.01 (fiscal 25:0.82) lost time accidents (LTAs) per 1,000 full-time
employees (including directly supervised contractors). Our LTAFR increased
this fiscal, driven by an increase in accidents across our commercial operations
in a number of markets but most significantly in Europe. Over the last three
fiscal years LTAFR has shown year-to-year variability reflecting the dynamic
nature of our risk environment and ongoing efforts to enhance workplace safety.
Our total recordable accident frequency rate (TRAFR) which records work-
related injuries that need more than first aid treatment increased during this
fiscal year. Our aim was to achieve a TRAFR performance of lower than 2.75.
In fiscal 26, TRAFR was 2.34 accidents per 1,000 workers, an increase from
2.16 in fiscal 25. In absolute numbers our total recordable accidents were
slightly higher than fiscal 25 (fiscal 25:89, fiscal 26: 90) however the average
total headcount used as the denominator in the calculation reduced due to
divestments, therefore impacting the rate. Within our manufacturing operations,
safety performance improved during fiscal 26, with total recordable accidents
reducing from 67 to 60 and the total recordable accident rate (TRAR) improving
from 3.08 to 2.78. This reflects continued progress in strengthening workplace
safety and reducing the overall frequency of incidents. We investigate each
recordable accident to establish the root cause, contributing factors and insights.
We share the key learnings across the organisation aiming to prevent
recurrences.
In fiscal 27, we will be changing our primary KPIs from lost time accident
frequency rate (LTAFR) and total recordable accident frequency rate (TRAFR)
to lost time injury frequency rate (LTIFR-per 1 million hours) and total
recordable injury frequency rate (TRIFR-per 1 million hours) as these are
internationally recognised safety KPI definitions and are aligned with the safety
performance reporting of our peer companies.
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Continuous improvement initiatives
In fiscal 26, we introduced and progressed several key programmes aligned to
our Global Health & Safety strategy. These initiatives will continue to be
developed further as part of our culture and technology roadmaps in fiscal 27.
Safety culture & leadership
•Safety culture assessment action plans
The safety culture assessment conducted in fiscal 25 indicated strong
overall performance, placing the organisation above the typical level
seen across the beverage industry and close to best-in-class standards. In
fiscal 26 each site translated their safety culture assessment results into
an action plan, which will continue into fiscal 27.
•World Health & Safety Day
We celebrate the ILO World Day for Safety & Health at Work on 28
April each year across all our locations. This fiscal the ILO theme was
‘psychological safety in the working environment’. We celebrated the
theme over three days and focused on the role of leadership in creating a
psychologically safe working environment through global webinars,
focused communications and toolbox talks at site level.
Digital technology
•Worker connection platform
We have enhanced our digital platforms in fiscal 26 by creating a digital
worker connection platform for those supply sites on the Manufacturing
Excellence journey. We developed safety workflows within the platform
to enable Tier 1 operators to report on hazards and unsafe conditions and
carry out peer-to-peer behavioural observations.
•Electronic Management System
We continued the rollout and implementation of a digital solution for
managing change, electronic permits and onboarding of contractors, with
an emphasis in the second half of fiscal 26 in shifting from
implementation to embedding and adoption of the modules.
Office and commercial safety
•Managing Director Health & Safety toolkits
A toolkit was developed and launched by the Global H&S Team for the
commercial offices and brand homes locations. It was designed to
support our Managing Directors in delivering against the Diageo Global
Health, Safety & Wellbeing Policy, and applicable global standards at
non-manufacturing locations.
•Office Health & Safety Playbooks
H&S playbooks were launched across our Tier 1 offices to provide
global guidance on how health and safety is managed in non-
manufacturing locations. The playbooks support teams in identifying and
managing risks more effectively, while reinforcing accountability and
expected standards. They also help build capability at a local level,
enabling a more proactive approach to safety and improving overall
performance across our office-based operations.
•Safer Driving On Roads
Diageo’s Safer Driving Programme currently supports approximately 2,500
drivers globally. In fiscal 26, the focus was on embedding the programme
into business as usual operations and improving performance through
measurement of the 'Safe Driving Score' KPI (fiscal 26 global average =
80%). The Driving Skills Builder platform further enhances driver capability
through personalised e-learning modules assigned based on individual
driving behaviours.
Transforming our health & safety strategy
As part of our ambition to achieve a world-class health and safety culture with
leading health and safety performance, we are transforming our strategy around
five key pillars, supported by strong foundations in Process Safety and Severe
and Fatal Incident Prevention (SFIP):
•ISO 45001 implementation
Standardising our health and safety management across all sites
•Leadership capability
Enhancing the safety skills and accountability of our leaders
•Human Factors
Linking human behaviour directly to safety performance
•Digital Innovation
Leveraging automation and AI to mitigate risks
•Commercial safety
Stronger integration of our safety standards in our commercial operations
This combined approach will actively strengthen our safety culture and help
generate sustained performance improvement across the organisation.
40 | Diageo Form 20-F 2026 |
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Promote positive drinking
Promote
positive
drinking
We want to change the way people drink – for the
better, by engaging, educating and empowering
consumers to make informed choices about drinking.
Key targets
Tackling underage drinking through SMASHED(1) | |||
Year | People educated | ||
Target by 2030 Scale up our SMASHED partnership and educate 10 million young people, parents and teachers on the dangers of underage drinking | 10m | ||
2026 cumulative progress | 9.87m | ||
2025 cumulative progress(2) | 8.15m | ||
2026 Performance Number of people educated on the dangers of underage drinking through a Diageo-supported education programme | 1.71m | ||
Promoting education on drink driving(3) | |||
Year | People educated | ||
Target by 2030 Deliver five million educational experiences on drink driving | 5m | ||
2026 cumulative progress | 5.11m | ||
2025 cumulative progress(2) | 3.86m | ||
2026 Performance Number of drink driving educational experiences delivered | 1.25m | ||
(1)Baseline year fiscal 18
(2)Comparative fiscal 25 target results are presented to two decimal places to
improve comparability with current year reporting.
(3)Baseline year fiscal 21
For more details, see our website at diageo.com.
For generations, our iconic drinks have been chosen for life's moments. Crafted
with pride, they bring people together and are intended to be enjoyed
responsibly.
Our Positive Drinking approach includes three pillars that address alcohol abuse
and promote responsible drinking:
•Education to tackle alcohol abuse with a focus on underage drinking, drink
driving and binge drinking.
•Promoting moderation by ensuring our brands connect with evolving
consumer behaviours and facilitate their desire to moderate.
•Advocating for alcohol policies that support consumer choice, deepen
understanding of alcohol and tackle illicit production and consumption.
We apply creative, innovative solutions to tackle alcohol abuse globally. Our
markets implement global assets and leverage local partnerships and innovation
to ensure cultural relevance.
Our people continue to play a central role in the promotion of positive drinking.
Through our new digital training programme, we seek to ensure that our
employees are equipped with the knowledge and confidence to promote positive
behaviours. It brings our strategy to life, helping employees understand their
role in shaping a positive drinking culture through informed choices, everyday
actions and meaningful conversations. Covering topics from alcohol and health
to advocacy and responsible business practices, the module reinforced shared
ownership across our organisation. In our 2026 Our Voice survey, 93% of our
employees said they were comfortable talking about Positive Drinking in both
professional and personal situations, in line with our prior year.
Education to tackle alcohol abuse
Underage drinking
We believe it is never acceptable for anyone underage to consume alcohol. That
is why we have run campaigns and education programmes to combat underage
drinking for many years.
SMASHED is a programme that educates young people aged 10-17 on the
dangers of underage drinking. It was developed by Collingwood Learning, and
we have been proud to sponsor it for the past 17 years.
SMASHED began as a live theatre production and has since been enhanced to
enable online learning. To make the programme as successful as possible, the
performance can be tailored to specific countries using local actors and cultural
references.
We continued to deliver a very strong performance on the programme this year,
with innovative delivery partner collaborations across the globe. In fiscal 26, a
projected 1.39m people have confirmed changed attitudes to the dangers of
underage drinking based on our sampling of participant surveys.
Drink driving
We are delighted to have reached our 2030 target ahead of schedule in fiscal 26,
marking a critical milestone on our ongoing commitment to help prevent drink
driving through education, awareness and partnership.
We have long championed awareness of the risks associated with drink driving,
working closely with governments, road safety experts and local authorities
around the world to implement prevention programmes, notably with our
flagship programme Wrong Side of the Road (WSOTR) launched in 2021 with
the United Nations Institute for Training and Research (UNITAR).
In India we have continued to scale WSOTR through a strong partnership
model, integrating the programme into the driving licence process in partnership
with Regional Transport Offices (RTOs) across the country. Through
technology-enabled training, new licence applicants and applicants for license
renewal engage with simulations, educational content and behavioural
assessments to better understand the risks of drink driving. The programme has
been implemented across 83 RTOs, reaching more than 800,000 people in fiscal
26.
Our focus doesn't stop with reaching our targets, and we will continue our
efforts to engage and educate consumers.
Informed choices about drinking
DRINKiQ is our one-stop destination for facts around alcohol and how your
body responds to it. It enables people to educate themselves and make informed
choices. The web-based platform actively promotes moderation and endorses a
balanced lifestyle. In fiscal 26 we introduced several innovations, including
hubs on drink driving and fake alcohol, a refreshed quiz, a travel quiz and a
drinks calculator.
In November 2025, Diageo GB launched Fancy That!, an educational campaign
aimed at improving consumer understanding of alcohol units and supporting
moderation. Delivered through DRINKiQ, the initiative challenged common
misconceptions about drink strength by highlighting that alcohol content is
determined by units rather than ABV. By providing clearer comparisons across
drink types, the campaign sought to give consumers greater confidence and
choice when moderating their alcohol consumption.
Promoting moderation: Ensuring our brands connect
with and attend to evolving consumer desire to
moderate
Creating aspiration around moderation - and positioning it as a positive and
desirable option - is critical to fostering positive drinking attitudes and
behaviours, supported by a broad range of products and strategies that respond
to evolving consumer preferences and support moderation choices. Our Diageo
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Marketing Code equips marketers with clear principles for promoting
moderation through our brands and innovation portfolio.
We launched new campaigns this year which leveraged strong consumer
insights and delivered against our goal of making moderation more aspirational
including:
•Guinness Beer Pressure: Guinness addressed the social stigma associated
with choosing non-alcoholic options by challenging 'beer pressure' and
championing Guinness 0.0 as a credible alternative. The campaign supports
our ambition to normalise moderation at scale by making the choice to not
drink alcohol feel socially accepted and culturally relevant. The campaign ran
from February 2026 to June 2026, supported by significant media investment.
•FIFA World Cup: During the 2026 FIFA World Cup, Diageo launched
'The Best Move: Celebrate Responsibly' across Latin and North
America. Built on the insight that moderation enables passion, the
campaign positioned responsible drinking as key to fully enjoying the
intensity of the game, encouraging simple actions like pacing drinks,
hydrating, eating, and planning safe journeys.
Non-alcoholic portfolio availability
We also continue to expand consumer choice through our non-alcoholic
portfolio. Non-alcoholic products are now available in 17 markets up from 15
markets in fiscal 25, representing approximately 68% of our strategic markets.
Guinness 0.0 is now available in 12 markets, representing approximately 48%
of our strategic markets.
Marketing in a responsible way
The Diageo Marketing Code (DMC) sets out our principles for responsible
marketing, and it represents a cornerstone of the way we do business. The DMC
includes our commitment to encouraging only responsible and moderate
drinking and never targeting underage audiences. We are proud to have a
proven track record of compliance, which is underpinned by appropriate checks
in every market we operate in.
We are focused on compliance at scale and embedding compliance into the flow
of work. One example is our continued exploration of AI, building on last year’s
testing to support marketing content review, with plans to evolve this into a
broader AI assistant that helps scale compliance and capability by embedding
DMC principles into everyday marketing decisions.
We regularly review reporting from advertising monitoring and industry bodies
across key markets, for breaches of self-regulatory alcohol marketing codes.
No complaints relating to Diageo marketing were upheld by key industry bodies
this fiscal year.
Complaints upheld by key industry bodies that report publicly are presented
below.
Incidents of non-compliance concerning marketing
communications (upheld published rulings) - fiscal 26(1)
Country | Body | Industry complaints upheld | Complaints about Diageo brands upheld |
United States | Distilled Spirits Council of the United States (DISCUS) | 2 | — |
Australia | ABAC Scheme | 41 | — |
United Kingdom | Advertising Standards Authority | 13 | — |
Portman Group | 22 | — | |
Republic of Ireland | Advertising Standards Authority for Ireland (ASAI) | 1 | — |
(1)United States, United Kingdom, Republic of Ireland - 1 July 2025 to 30 June 2026.
Australia - 1 July 2025 - 31 March 2026 (Reporting is based on the latest publicly
available ABAC quarterly data).
Advocating improved laws and industry standards
We believe industry-wide standards and sensible regulation provide an
important framework for responsible drinking. We support evidence-based
policies that address drinking patterns, target at-risk groups, treat all alcohol
equally, and involve relevant stakeholders. We advocate for effective measures
such as blood alcohol driving limits, responsible digital marketing, and legal
purchase age laws, alongside industry standards for responsible marketing and
consumer information. We also support programmes that help tackle alcohol
misuse.
Over the last decade, many countries have seen declines in binge drinking, drink
driving and underage drinking. As members of the International Alliance for
Responsible Drinking (IARD), we are committed to building on this progress
and supporting global efforts to reduce harmful drinking. This includes
delivering on the recommendations presented to the sector in the United Nations
2025 Political Declaration on non-communicable diseases and mental health, in
particular by taking concrete steps towards eliminating the marketing,
advertising, and sale of alcohol products to minors. As members of IARD we
participated in an economic operators’ dialogue convened this year by the
World Health Organization (WHO) in line with the Global Alcohol Action Plan
(GAAP). At the dialogue, IARD’s members and partners shared updates
regarding the actions we are taking to tackle the harmful use of alcohol as part
of the whole-of-society approach established by the WHO’s Global Strategy to
reduce the Harmful Use of Alcohol.
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Champion inclusion and diversity
Champion
inclusion
and diversity
Empowering our people and strengthening
performance.
Key Ambitions(1)(2)(3)
Current gender representation of our leadership | |||||||
2030 Ambition Champion gender diversity, with an ambition to achieve 50% representation of women in leadership roles by 2030 | 50% | ||||||
Role | Wome n | % | Men | % | Total | ||
Leadership population (3) | 256 | 44% | 325 | 56% | 581 | ||
Current ethnic representation of our leadership(4) | ||||||||||
2030 Ambition Champion ethnic diversity, with an ambition to increase representation of leaders from ethnically diverse backgrounds to 45% by 2030 | 45% | |||||||||
Ethnically diverse | % | Non- ethnically diverse | % | Decline to self identify | % | Not disclosed | % | Total | ||
257 | 46% | 271 | 48% | 15 | 3% | 18 | 3% | 561 | ||
(1)Statements on representation should be considered an ambition for Diageo,
not a target.
(2)This data is calculated as an average across the four quarters of fiscal 26.
(3)Leadership population encompasses the Executive Committee and senior
managers.
(4)20 leaders are based in countries that do not collect ethnicity data.
These leaders are not in scope
Appointments to leadership roles are made based on the candidates'
capabilities, skills and experience to meet the role's requirements. For
more details, see the Non-Financial Reporting Boundaries and
Methodologies on our website.
Building a thriving and inclusive hospitality industry (1) | |||
Year | Number of people reached | ||
2030 Ambition Provide business and hospitality skills to 200,000 people, increasing employability and improving livelihoods through Learning for Life and our other skills programmes | 200k | ||
2026 cumulative progress | 164k | ||
2025 cumulative progress | 133k | ||
(1)Baseline year fiscal 21
For more details, see our website at diageo.com.
Inclusion and diversity matter because they strengthen our performance. When
colleagues with different backgrounds, perspectives and experiences can
contribute fully, we make better decisions, encourage innovation and better
serve our customers, consumers and communities, supporting long-term
sustainable growth and shareholder value creation.
Access and opportunity
Creating an inclusive culture where everyone feels respected, supported and
able to do their best work is central to our business. Across Diageo, locally
relevant initiatives help make inclusive behaviours part of workplace life,
supported by clear policies and practical tools. This builds on more than a
decade of making inclusion and diversity part of how we operate, with clear
leadership accountability.
The theme of ‘Strengthening Access to Opportunities and Equality for All’
shaped this year’s International Women’s Day activity, highlighting the
importance of improving access to opportunities, visibility and advancement for
women, while also spotlighting the progress made across our business and
future opportunities with our customers and within our commercial teams. Since
fiscal 22, female representation across total commercial roles in Diageo has
increased by 4 percentage points, from 34% to 38%, demonstrating continued
progress in strengthening our talent pipeline. However, this has yet to translate
consistently into senior commercial leadership, where female representation
remains lower at 25%.
Markets and functions continue to create locally relevant opportunities that
broaden inclusion beyond gender, strengthening access and inclusion across
Diageo. In Mexico, the third cohort of our internship programme supported
individuals from lower socioeconomic backgrounds, while in Colombia, the
'Invincibles' programme, designed to support experienced professionals
returning to the workplace after career breaks, increased participation among
Gen X returners. Within our Zacapa Supply Chain and Procurement business,
90% of Aging Centre colleagues completed a four-month sign language
programme, strengthening inclusive communication across teams. This year
also marked a milestone for our Business Resource Groups (BRGs) in North
America, where both the Spirited Women Network and AHEAD (African
Heritage Employees at Diageo) celebrated 20 years of fostering community,
advocacy and allyship, helping shape the foundation of more than 50 Employee
Resource Groups (ERGs) globally.
Zacapa Aging Centre sign language programme participants
Gender inclusion
Female leadership representation increased by one percentage point to 44% in
fiscal 26, returning to prior year levels. While representation has been broadly
stable in recent years, it remains above our 2020 baseline of 39%. Our
performance remains strong against external benchmarks with Diageo named as
a top ten company for female leadership in the FTSE Women Leaders Review
for the third consecutive year, and 12 percentage points above the index
average. Representation remains lower in commercial, general management and
supply chain roles. However, in fiscal 26, women accounted for 49% of total
leadership appointments.
Our development programmes continue to support this progress. In Europe, we
are building middle-management commercial capability through our
'CommEdge' programme, with women representing 67% of the first cohort.
Across the Caribbean, Central America and Venezuela (CCVA) market, an
early-career accelerator is strengthening the pipeline of future female leaders,
with women making up 84% of participants.
43 | Diageo Form 20-F 2026 |
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Ethnic inclusion
We are proud to have surpassed our 'Spirit of Progress' ambition of 45%
ethnically diverse leadership representation for a third consecutive year, with
representation remaining at 46%. Representation has increased from 37% in fiscal
21, when we first reported this metric, demonstrating sustained progress. We
continue to participate in the Parker Review, where Diageo is recognised for
strong ethnic diversity at both Board and senior leadership levels in the United
Kingdom, performing ahead of the FTSE 100 average.
High levels of voluntary disclosure support our ability to transparently report. In
markets where ethnicity data collection is legally permitted, 97% of leaders and
74% of Diageo’s total employee base, have completed the ethnicity field.
Our global approach to advancing ethnic inclusion through talent planning and
leadership capability continues to deliver locally relevant impact. In Brazil, the
‘Origens’ Internship Programme entered its fourth year supporting early-career
Black talent. Despite Black and Pardo communities comprising more than half
of Brazil’s population, Diageo Brazil representation stands at just 25%.
‘Origens’ is designed to help change this by supporting career progression
through mentoring, language training and capability building.
Promoting inclusivity through our value chain
We want to make a positive impact on society by providing resources, learning,
and livelihood opportunities for the communities where we source, make, and
sell our brands. All our programmes are ‘inclusive by design’, aiming for 50%
of beneficiaries to be women, adopting inclusive recruitment practices,
providing accessible training, and including dedicated content on inclusion and
diversity.
In fiscal 26, Learning for Life, our business and hospitality skills programme for
people from under-represented groups, reached 31,000 people in 20 markets,
with women representing more than 50% of participants. This brings total
participation to date to 164,000. We continue to strengthen the programme’s
quality, impact and reporting globally, expanding partnerships with employers
and customers to support employment outcomes, and initiated pilots in 6
markets to explore new approaches to increasing impact. Early results in
Colombia showed 35% of alumni reported increased income after taking part in
the programme, while 95% of surveyed graduates perceived improvements in
their employability and career growth to their participation in Learning for Life.
In water-stressed markets where we support communities with water, sanitation
and hygiene (WASH), we partner with leading NGOs to promote equal
representation on WASH committees. These committees help address social
norms that can limit women’s access to WASH and their influence over
decisions. This year, more than 50% of committee members were women.
We also continued to expand inclusive support for smallholder farmers in
Kenya and Mexico, providing equal access to agricultural training and
resources. This helps strengthen economic and environmental resilience, while
also supporting our supply chain.
To increase social impact and make it easier for employees to get involved, we
launched ‘Spirit of Giving’, a global platform enabling colleagues to support
local and global causes through giving and volunteering. Aligned to our Spirit
of Progress agenda, the platform has already connected employees with over
400 charities worldwide, helping support collective action at scale.
Championing a diverse supply chain
In fiscal 26, we continued to strengthen our value chain by expanding fair and
equitable access for a broad range of suppliers across more than 30 countries.
This supports a more competitive and agile supply chain.
We advanced our approach to identifying and developing under-represented
suppliers through partnerships, including a sustainability- focused development
programme for small businesses and membership of Social Enterprise UK. We
were also recognised as an Impact Sourcing Top Global Champion by
WEConnect International, reflecting our inclusive sourcing commitment. For
more information, please refer to our ESG Reporting Index.
Inclusive marketing: Good for society and good for
business
We craft and market our products for everyone above legal drinking age, and
want our advertising and activations to reflect the consumers who enjoy our
brands around the world. As one of the world’s largest advertisers, we also have
a role to play in making media more inclusive.
Diageo continues to lead the wider industry in progressive portrayal in
advertising. In India, Johnnie Walker brought this to life through ‘The Walkers
List’, a collaboration with female voices across art, culture, sport, music and
ethical fashion, all reflecting the brand’s Keep Walking philosophy. The
campaign reached more than 70 million people and helped spark meaningful
cultural conversation and engagement.
In fiscal 26, we continued to advance the rollout of accessible content, alongside
programmes to drive greater inclusivity in experiential marketing. In Ireland,
Smirnoff’s ‘Sound Nation’ programme championed accessibility at festivals
through wheelchair-accessible DJ booths, sonic-vibration feedback vests, sign
language interpretation, braille menus and lowered bars, helping create more
disability-inclusive experiences where all music fans could participate fully.
For the third time, we partnered with Creative Equals in Great Britain on a
career accelerator programme, supporting disabled and neurodivergent talent in
the creative marketing industries. Alongside supporting 48 participants, the
programme also strengthened understanding of disability inclusion with Diageo
marketing colleagues and agency partners through mentoring and partnerships.
44 | Diageo Form 20-F 2026 |
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Pioneering grain-to-glass sustainability
Pioneering
grain-to-glass
sustainability
Our business depends heavily on natural resources,
particularly water and agricultural raw materials,
making us directly exposed to climate change and
nature loss, especially pressures on freshwater.
Building climate resilience and addressing nature
risk is therefore critical to maintaining our
operations, supply chains and long-term growth. We
are tackling these challenges by taking focused
action to reduce our most material risks, while also
identifying and capturing opportunities linked to a
more resilient, sustainable business model.
For more details, see our website at diageo.com.
Introduction
Over the past year, the impact of climate change has continued to intensify, with
global average temperatures remaining near-record highs and multiple regions
experiencing unprecedented heatwaves, wildfires, floods and droughts.
Scientific consensus has further strengthened around the narrowing window to
limit warming to less than 2°C, with observed climate impacts already
exceeding earlier projections in both frequency and severity. At the same time,
economic losses from climate-related events are increasingly evident,
reinforcing climate change as a material financial risk across sectors. This
evolving risk landscape has been accompanied by increasing regulatory
scrutiny, investor expectations and a growing emphasis on climate resilience
and adaptation alongside decarbonisation.
Against this backdrop, both mitigation and adaptation are critical to Diageo’s
long-term resilience and value creation. Mitigation, through reducing
greenhouse gas emissions across operations and the value chain, addresses the
root cause of climate change and aligns with tightening regulatory and investor
expectations. However, given the increasing physical impacts already locked in,
adaptation is equally essential, particularly for a business highly dependent on
water availability and agricultural raw materials.
Climate-driven shifts in precipitation patterns, water scarcity, and extreme
weather events pose direct risks to water security and crop yields, affecting both
production continuity and input costs. Strengthening water stewardship in high-
risk catchments and building more resilient, climate-smart agricultural supply
chains are therefore key to safeguarding supply, maintaining product quality,
and supporting the communities and ecosystems on which the business depends.
Although our analysis indicates that our business is resilient in the short and
medium term, we continue to monitor what is needed to sustain this resilience,
both for our operations and our communities in which we operate. We are
committed to acting responsibly to mitigate our contribution to global warming
and adapt to changing conditions, to support our licence to operate. We respond
to climate change and nature loss, mitigating the risks associated with changing
environmental and biodiversity factors through our grain-to-glass sustainability
strategy.
Our ‘Spirit of Progress’ targets focus on our most material ESG priorities and
align with the UN Sustainable Development Goals. This includes our carbon
reduction targets, which are validated by the Science Based Targets initiative
(SBTi). We are committed to tackling climate change, as reflected in our
participation in the UN’s ‘Race to Zero’ and ‘Race to Resilience’ campaigns.
We are prioritising action in the areas most critical to our business, particularly
water, agriculture and communities. However, we have identified several
critical external factors beyond our control, including the availability of energy
infrastructure, supportive policy frameworks, consumer adoption, access to
financing, and how costs are shared. Moving forward, we will continue to
evolve and refine our approach based on our progress and developments in the
external landscape.
Our targets are shown on page 51 and 53-55. Performance against supporting
targets, including some of our packaging and electricity targets, has been
separately reported in the ESG Reporting Index.
Reporting
We have made disclosures consistent with the recommendations and
recommended disclosures of the Task Force on Climate-related Financial
Disclosures (TCFD) framework for reporting. Increasingly we are incorporating
nature risks and dependencies into our strategic planning. For fiscal 26, we
completed a project to identify key dependencies, impacts, risks and
opportunities, following the guidance of the Taskforce on Nature-related
Financial Disclosures' (TNFD) LEAP (Locate, Evaluate, Assess, Prepare)
framework.
Governance
Given the importance of climate and nature risks, we have governance
processes in place to ensure that we factor the risks into our business operations
and planning processes. To supplement our Spirit of Progress governance
(summarised on pages 32-33), our sustainability performance is integrated into
our operational and strategic review processes. We track water efficiency and
greenhouse gas reduction projects and hold regular strategic business reviews
focusing on multi-year plans. Significant risks identified are escalated to
enterprise risk management forums at group level. We oversee climate and
nature risk through these governance structures and processes:
•The President, Global Supply & Procurement and Chief Sustainability
Officer is responsible for climate risk.
•The risk owner is supported by our cross-functional Climate, Water and
Nature Risk Steering Group.
•The Climate, Water and Nature Risk Steering Group provides regular updates
to the risk owner and the Board.
•See diagram below for overall Board and Audit Committee governance over the
Group's Principal Risks, which include climate, water and nature risks.
45 | Diageo Form 20-F 2026 |
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Risk Management
Identifying climate risks and opportunities
We group climate risks into two types: physical and transition risks. Physical
risks include chronic long-term changes like rising temperatures and sea levels,
as well as acute extreme events such as floods, droughts and heatwaves.
Transition risks come from the shift to a low-carbon economy, including
changes in policy, technology and consumer behaviour.
Both types of risk are already affecting our business and are expected to
increase. As global temperatures rise, we continue to assess and prepare for
these evolving risks. We also work with external experts to understand how
climate and nature-related risks may impact our operations and value chain. We
determine the importance and impact of climate-related risks by combining
results of our risk assessment and scenario analysis with an assessment of our
ability to mitigate or adapt to those risks.
Climate change resilience
Our experience in managing normal changes in climate, water availability and
crop yields has helped us become more resilient and adaptable. Over many
years, we have built strong planning into our supply chain and procurement
processes.
We manage water to strengthen the resilience of our operations and supply
chains, and support the communities and sourcing regions we depend on, with a
focus on water-stressed areas. We also work with partners to improve farming
practices, enhance crop management and seed quality, and develop more
resilient, high-yield crops that can better withstand drought and temperature
changes.
We recognise that healthy ecosystems are critical for long-term agricultural
productivity and climate resilience, and we aim to protect and restore nature
across our sourcing regions.
Climate risk has been part of our enterprise risk management since 2010, is
evaluated alongside other principal risks, and is now fully integrated into our
strategy and business continuity planning. As we continue to strengthen our
adaptation efforts, our work on water, agriculture and communities remains
central to building resilience, and is complemented by a programme of
adaptation at our most vulnerable sites.
Risk assessment results – our most important
physical risks
Our assessment identified three key findings:
1.Water stress, including drought, is our most significant physical climate
risk. It is widespread, expected to worsen, and could have a material
financial impact in the longer term. It affects our production, access to key
agricultural inputs, and ultimately our licence to operate.
2.Agricultural raw materials are at increasing risk from climate change,
with impacts expected to grow under the scenarios and timeframes we have
assessed. Most of our models indicate rising commodity costs, although the
scale of impact varies, reflecting uncertainty in projections. These risks
could affect both our operations and our suppliers. The diagram on page 47
outlines the risks to which agricultural materials are exposed by region.
3.Acute weather events such as floods, storms, heatwaves and wildfires are
expected to become more frequent and disruptive. While they may cause
operational interruptions, their overall impact is likely to be less significant
than risks related to water and agricultural materials.
For more details on our scenario analysis approach, see the Non-Financial Reporting
Boundaries and Methodologies on our website at diageo.com.
Identifying and assessing our physical risks
Since 2020, we have worked with climate resilience experts to assess
physical climate risks across our sites and key suppliers. The work is
conducted at group level but considers all of our owned sites and key third-
party operations. This includes existing operations as well as new sites under
development, so we can build resilience from the outset. For further detail
on our risk assessment and scenario analysis methodology, please see our
Non-Financial Reporting Boundaries and Methodologies, available on our
website.
We evaluate exposure and vulnerability to a range of 19 climate hazards and
consider how risks could evolve under different Intergovernmental Panel on
Climate Change (IPCC) warming scenarios (2–3°C and 4–5°C) and
timeframes (2030 and 2050). These scenarios were chosen to represent a
'worst case' (RCP8.5) and a 'medium case' (RCP4.5) under which we assess
our resilience. We also assess risks to key agricultural inputs and distribution
routes. For our most critical or higher-risk locations, we carry out more
detailed analysis, including how different parts of operations such as
production, infrastructure, water and energy could be affected.
We also review key supplier sites, warehouses and distribution networks (for
example those handling our most critical or specialised ingredients and
components, key agricultural commodities and our most critical distribution
routes) to understand where future physical risks may arise.
Water is a critical priority. We assess risks related to water availability,
quality, temperature and flooding, and conduct water stress analyses at our
sites every two years using site data and external tools such as the WRI
Aqueduct tool and the validation from independent hydrologists. In water-
stressed areas, we also carry out more detailed assessments including SVAs
(Source Vulnerability Assessments) to better understand local vulnerabilities
and identify actions, such as improving efficiency, and strengthening
adaptation plans.
The results from our most recent water risk assessment conducted in 2025,
identified three new sites located in water-stressed areas. This fiscal year,
updates were made to reflect changes in our operations following
divestments. In fiscal 26, we also completed two additional SVAs, meaning
all of our operational manufacturing sites in water-stressed areas have now
undergone an SVA. This provided us with broader insights into current and
future vulnerabilities of our water sources.
The diagram on the following page shows our operational sites located in
water-stressed areas, and priority water basins in 2026.
This work helps us understand how climate risks may impact our operations
and supply chain over time, so we can focus action where it is most needed.
For more on how we identify and manage climate risks, please refer to
pages 29-30 in our Climate Transition Plan 2026.
46 | Diageo Form 20-F 2026 |
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Pioneering grain-to-glass sustainability continued
Diageo operational sites located in water-stressed areas, and countries where we have identified priority water
basins in 2026
Mexico | |
 | El Charcon |
 | Agricultural lands |
 | La Primavera |
 | La Barca |
Guatemala | |
 | Zacapa |
Brazil | |
 | Itaitinga |
Uganda | |
 | Kampala |
Tanzania | |
 | Mwanza |
 | Moshi |
 | Dar es Salaam |
Angola | |
 | Luanda |
South Africa | |
 | Isipingo |
Kenya | |
 | Kisumu |
 | East African Maltings |
 | Tusker |
Türkiye | |
 | Alaşehir |
 | Şarköy |
 | Acipayam |
 | Nevşehir |
 | Tarsus |
 | Taşel |
India | |
 | Nashik |
 | Baramati |
 | Aurangabad |
 | Alwar |
 | Pioneer |
 | Malkajgiri |
 | Kumbalgodu |
 | Nimapara |
Indonesia | |
 | LKJ Packaging |
Key | |
| Sites in water-stressed areas |
 | Countries where we have identified priority water basins |
Three new sites were identified as being in water-stressed areas in our most recent 2025 Water Risk Assessment: La Barca, Luanda, and Nimapara. | |
47 | Diageo Form 20-F 2026 |
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Key climate risks to agricultural raw materials by region
North America | ||||
Maize |   | Barley |   | |
Sugar beet |    | American white oak |   | |
Rye |   | Hops |   | |
Europe | ||||
Barley |   | Dairy |   | |
Wheat |   | Rye | | |
Sugar beet | | Hops |  | |
Türkiye | |
Grapes |     |
Wheat |   |
Anise |   |
Sugar beet |   |
Latin America and Caribbean | |
Agave |  |
Sugar cane |   |
Africa | ||||
Barley | | Sugar beet | | |
Sorghum |   | Maize |   | |
Sugar cane | | Vanilla |  | |
Asia Pacific | |
Rice |    |
Molasses (sugar cane) |      |
Barley | |
Grapes |   |
Priority raw materials by volume
ò | Barley | ò | Sugar | |
ò | Agave | ò | Sorghum | |
ò | Maize | ò | Broken rice | |
ò | Molasses | ò | Rye | |
ò | Wheat | ò | Dairy | |
ò | Grapes & raisins | ò | Others | |
Climate risks likely to affect agricultural raw materials
 | Temperature |  | Precipitation (variability/extremes) |  | Fires |
 | Drought |  | Water stress |  | Hurricane/storm |
 | Flood |  | Disease |  | Sea level |
48 | Diageo Form 20-F 2026 |
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Pioneering grain-to-glass sustainability continued
Quantitative impact of physical risk determined by
scenario analysis
In fiscal 24, we worked with climate resilience experts to develop an automated
scenario analysis tool to support our climate adaptation strategy. This tool
allows us to run detailed analyses, test different assumptions, and assess how
climate risks may affect specific markets or product categories. It also allows us
to estimate the potential impact of the adaptation actions we have taken. This
represents a significant step forward in embedding climate risk into our strategic
planning.
This year, we updated the model with the latest data on volumes, growth
projections and changes to our operational footprint. We also reassessed key
risks, including long-term water availability, drought, climate-driven increases
in commodity prices, and acute climate events. Further detail on the risks and
opportunities included in the analysis is set out in the Non-Financial Reporting
Boundaries and Methodologies (pages 3-6), which can be found on our website
at diageo.com.
Water stress, including drought
Over a third of our sales value is exposed to high or very high water stress, and
under both scenarios and timeframes this exposure is projected to increase.
About a quarter of our sites, representing about half of our sales, could see some
increase in water stress under the most extreme scenario, in both 2030 and 2050.
If not mitigated, this could impact our operations, as well as the health and
wellbeing of employees and local communities. See our water stewardship
strategy on page 52 for actions we are taking to adapt to this risk.
Assessing the financial impact of drought is complex, given uncertainties
around how often events occur, how long disruptions may last, and how
effective mitigation measures will be. Our analysis therefore uses conservative
assumptions, including potential downtime across all affected sites combined
with our assessment of vulnerability.
Based on this analysis, whilst exposure is considered to be significant, we do
not expect drought to have a material impact on our operations (including key
third-party operations) or financial position by 2030. However, beyond 2030,
uncertainty increases. Our modelling indicates that adaptation measures will be
critical, particularly between 2030 and 2050, to avoid significant disruption to
our operations and supply chain. Without action, there is a risk of lost sales. We
outline the steps we are taking to address this in the strategy section further
below.
Agricultural raw materials
Estimating the impact of climate change on agricultural commodity prices is
complex, and our models produce a wide range of outcomes. However, most
indicate that climate risk is likely to drive price increases across many of our
key commodities.
We use scenario analysis to factor these risks into our procurement strategies,
with particular focus on crops that have unique origins (such as agave and
vanilla) or are highly sensitive to growing conditions (such as hops).
Our modelling suggests that the greatest price volatility in both 2030 and 2050
is likely to affect agave, sorghum, rice, wheat, dairy and hops. While the scale
of impact varies between models, the potential effects in both timeframes could
be significant.
Acute weather events
Acute weather events, such as flooding and storms, are among the most likely
physical risks to affect our financial performance. They can damage our sites
and disrupt the supply of key agricultural inputs. While the direct exposure of
our sites to these events is expected to increase, our global footprint and
experience in managing resilience mean we are well positioned to limit
disruption. Therefore, we do not expect flooding and storms to significantly
impact our ability to serve customers or materially affect financial performance
at a global level.
Other acute risks, including heatwaves, wildfires and landslides, have also been
identified. Although their financial impact has not been modelled in detail, we
are planning adaptation measures in areas where these risks are expected to
increase.
Identifying and assessing our transition risks and opportunities
We have carried out additional scenario analysis to estimate the financial
impact of transition risks and opportunities under a Paris-aligned pathway
(RCP2.6). This has improved our understanding of how the shift to a low-
carbon economy may affect our business and helped us refine our financial
estimates and response.
We assessed potential impacts across our operations and value chain,
including agricultural inputs, production and packaging, distribution, and
sales. From this, we identified the most significant transition risks and
opportunities to monitor:
•Decarbonisation costs: Changes to supply chain and production costs,
including carbon pricing and input cost increases, particularly
packaging materials (risk and opportunity).
•Consumer behaviour: Shifts towards more sustainable products and
packaging, such as circular or locally produced options (risk and
opportunity).
•Regulatory changes: New or evolving policies such as carbon taxes or
shifts to renewables affecting packaging, water use, agricultural inputs
or land use (risk).
•Technology changes: The need to adopt low-carbon production
methods and the risk of not doing so quickly enough (risk and
opportunity).
Of these, the most significant potential impacts are expected from changes in
consumer behaviour and the costs of decarbonisation. A summary of our key
physical and transition risks and opportunities we consider the most
important is provided on page 49.
Quantitative impact of transition risks and
opportunities
Transitioning to a low-carbon economy presents both risks and opportunities
for our business. Through our scenario analysis, we have been able to
estimate the impact on our operations and financial condition to 2030,
concluding that it is unlikely to be significant over that period, even
assuming that we absorb increases in production costs.
Packaging is the key transition risk and opportunity
Our analysis shows that, looking ahead to 2050, the main driver of transition
risk is our use of glass, which could increase production costs. Some of this
impact may be offset by lower transport and energy costs. Changing
consumer behaviour, for example towards more sustainable packaging and
containers, could have an impact if we do not innovate to meet these
opportunities. Modelling to 2050 involves significant uncertainty due to the
number of variables involved. However, it helps us understand a potential
'worst-case' scenario based on our best estimates of future cost trends.
We have used this modelling to assess the potential impact on our operations
and financial position, taking into account mitigating actions we expect to
implement. These include pricing strategies, improving energy efficiency,
sourcing and using lighter-weight packaging, reducing the carbon intensity
of glass, and increasing the use of returnable or reusable packaging.
The outcomes of our analysis of both physical and transition risks are
reflected in our assessments of viability and asset impairment (see page 68
and 148-149).
49 | Diageo Form 20-F 2026 |
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Summary of our most important climate risks and opportunities
Risks | ||
Risk description | Water scarcity Increasing water scarcity and water stress affects our ability to continue to source from and produce in water‑stressed areas. | Agricultural raw material availability Climate-related impacts on agricultural material availability cause scarcity or price increases. |
Category | Physical – chronic | Physical – chronic |
Timeframe(1) | Short term (one to five years), medium term (five to 10 years) and long term (10 to 30 years) | Medium, long term |
Impact (if not mitigated) | Moderate(2) | Moderate(2) |
Response examples | •Improvements in water-use efficiency in our operations, with more ambitious targets at water-stressed sites. •Water replenishment plans in 100% of water-stressed areas. •Collective action activities to improve water security in Diageo's ‘priority water basins’. •Nature-based solutions that support climate mitigation, adaptation and water replenishment. •Exploring alternative formats and ingredients with potential to reduce water use. •Rainwater harvesting, aquifer recharge, dam desilting. | •Regenerative agriculture adaptations. •Smallholder farmer support. •Development of drought-resistant ingredients (e.g. sorghum, anise and barley varieties). •Alternative sourcing locations. •Substitution with alternative crops. •Increased use of cover cropping. •Improved water management in agricultural practices. |
Risk description | Input costs Policy changes (carbon taxation, shift to renewables) cause increases in input costs. | Consumer behaviour Consumers prioritise purchasing more sustainable products, rejecting those perceived to have a negative environmental impact. |
Category | Transition – policy/legal | Transition – market |
Timeframe(1) | Short, medium and long term | Short, medium and long term |
Impact (if not mitigated) | Moderate(2) | Moderate(2) |
Response examples | •Supply chain decarbonisation. •Engaging suppliers in low-carbon technology options for their operations. •Reduced packaging weight. | •Increased recycled content in packaging. •Developing circular product offerings. •Purchasing more sustainably-grown raw materials. •Communicating these changes to consumers. •Reduced packaging weight. |
Opportunities | ||
Opportunity description | Supply chain decarbonisation Reducing our Scope 1, 2 and 3 emissions lowers our exposure to carbon taxes and related costs, and improves our reputation with customers and consumers. | Innovation in sustainable products and packaging Developing more sustainable products meets consumers increasing demands. |
Category | Transition – policy/legal | Transition – market |
Timeframe(1) | Short, medium and long term | Short and medium term |
Impact (if not realised) | Moderate(2) | Moderate(2) |
Response examples | •Decarbonisation programme and capital investment in our operations. •Renewable energy investments. •Regenerative agriculture programme. •Collaboration, partnerships and capability building within our supply chain. | •Innovation to deliver more sustainable products (e.g. refillable and reusable packaging, alternative packaging materials). •Everpour, an innovative new circular keg and integrated bottle dispense system. |
(1)Timeframes chosen align to those used in our scenario analyses, where short term (one to five years) reflects the typical strategic planning timeframe, medium term (5 to 10 years)
includes the timeframe to 2030 and long term (10 to 30 years) includes the timeframe to 2050.
(2)'Low' impact is defined as having a negligible impact on customer service, or an absorbable disruptive impact on one or more brands. 'Moderate' impact is defined as disruption to
production/supply chain creating an inability to service a small portion of our customer base, the impact of which is manageable; or a significant short-term impact on one or more of our
core or local priority brands that is absorbable by the business. 'High' impact is defined as inability to service a significant portion of our customer base, or major reputational damage.
50 | Diageo Form 20-F 2026 |
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Pioneering grain-to-glass sustainability continued
Integrating nature risk into our climate risk strategy
Building on the nature baseline conducted in fiscal 24, which encompassed our
agricultural upstream supply chains, our direct operations and selected
packaging supply chains, we continued in fiscal 26 to strengthen our
understanding of nature-related dependencies, impacts, risks and opportunities
(DIRO) informed by the recommendations of the Taskforce on Nature-related
Financial Disclosures (TNFD). We further assessed material pressures and the
geographic areas where these could have the greatest impacts across land, water,
biodiversity and ecosystem services. This culminated in the completion of a
TNFD-aligned DIRO assessment using the TNFD LEAP (Locate, Evaluate,
Assess and Prepare) framework.
Results of our nature dependencies, impacts, risks and
opportunities assessment
This assessment confirmed that our business is highly dependent on nature for
water- and soil-related ecosystem services which support crop growth and our
operations, as well as risk mitigation ecosystem services that help protect our
value chain from emerging climate-related risks like floods, storms, droughts
and pests.
Our agricultural raw materials have the highest dependency on nature and
ecosystem services and face a range of risks as a result of widespread nature
decline and biodiversity loss. We have identified risks relating to worsening
water stress and declines in soil condition, more intensive land use and loss of
landscape complexity which can reduce the resilience of the landscapes we rely
on and worsen exposure to natural hazards and pests. These have the potential
to impact some of our key crops including agave, broken rice and wheat.
We are making continuous progress in understanding our nature-related DIROs,
while integrating these insights into our broader approach to manage our most
material ESG risks. Our integrated approach aims to recognise the ways in
which taking holistic action on climate change, water stewardship and
regenerative agriculture can build resilience to the nature risks we face.
Our strategy for grain-to-glass sustainability
Our sustainability strategy recognises the wide-ranging environmental and
social impacts of climate change, as well as our reliance on natural resources
and people. It reflects the close links between climate, nature, water, agriculture
and communities across our value chain.
The strategy focuses on our most material impacts, risks and opportunities, in
particular water availability, quality and accessibility, agricultural raw material
availability and greenhouse gas emissions, and is supported by clear targets. It is
regularly reviewed to reflect evolving regulations and improved understanding
of complex, system-wide challenges such as decarbonisation and water
stewardship. By delivering and regularly reviewing our commitments, we aim
to strengthen business resilience and protect our licence to operate and grow.
Our greenhouse gas and water roadmaps set out the actions required to meet our
Spirit of Progress targets. These plans are supported by capital investment and
are regularly reviewed. More extensive and greater quality digital data is
helping us better track progress and refine our approach over time.
We continue to invest in the delivery of our water stewardship and carbon
emissions reduction ambitions. We continue to focus on higher impact and
return projects. To date, we have invested more than $400 million in projects
including, for example, water replenishment and water efficiency projects in
Mexico, biomass energy in Mexico and East Africa, and conversion of some
Scotch distilleries to renewable energy. This reflects our disciplined approach to
capital allocation and the practical dependencies associated with delivery,
including infrastructure availability, regulation, technology readiness and
partner capability. We remain committed to funding high-impact projects and
working with partners to accelerate progress where scalable and value-accretive
opportunities are available.
This year we published our Climate Transition Plan which outlines in more
detail how we are mitigating our carbon emissions and building adaptation to
climate change impacts.
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Key Sustainability Targets
Water efficiency(1)(4) | |||
Improvement in water use efficiency in water-stressed areas (%) | |||
Year | % | ||
Target by 2030 Reduce water use in our operations with a 40% improvement in water use efficiency | (40)% | ||
2026 cumulative progress | (23.3)% | ||
2025 cumulative progress | (25.0)% | ||
2026 performance Percentage change in water efficiency index from the prior year | 2.2% | ||
Improvement in water use efficiency across the company (%) | |||
Year | % | ||
Target by 2030 Reduce water use in our operations with a 30% improvement in water use efficiency | (30)% | ||
2026 cumulative progress | (14.9)% | ||
2025 cumulative progress | (17.0)% | ||
2026 performance Percentage change in water efficiency index from the prior year | 2.4% | ||
Water replenishment(3) | |||
Year | % | ||
Target by 2026 Replenish more water than we use for operations in water- stressed areas | 100% | ||
2026 cumulative progress | 100% | ||
2025 cumulative progress | 84% | ||
Water collective action(1) | |||
Year | |||
Target by 2030 Engage in collective action in all priority water basins to improve water accessibility, availability and quality and contribute to net positive water impact | 12 | ||
2026 cumulative progress | 10 | ||
2025 cumulative progress | 9 | ||
Emissions from our direct operations(2)(4) | |||
Year | % | ||
Target by 2030 Reduce our direct operations greenhouse gas emissions by 50% (Scope 1 and 2) | (50)% | ||
2026 cumulative progress | (25.7)% | ||
2025 cumulative progress | (20.9)% | ||
2026 performance Percentage change in absolute greenhouse gas emissions (direct and indirect greenhouse gas emissions by weight (market/net based)) from the prior year | (6.1)% | ||
Emissions from our value chain(2) | |||
Year | % | ||
Target by 2030 Reduce our value chain (Scope 3) greenhouse gas emissions by 26% | (26)% | ||
2026 cumulative progress | (18.8)% | ||
2025 cumulative progress | (13.7)% | ||
2026 performance Percentage change in absolute greenhouse gas emissions (tCO2e) from the prior year | (5.9)% | ||
Regenerative agriculture programmes(1) | |||
Year | |||
Target by 2030 Deliver a total of 10 collaborative regenerative agriculture programmes between 2020 and 2030 aiming to address key climate, water and nature risks. | 10 | ||
2026 cumulative progress | 5 | ||
2025 cumulative progress | 5 | ||
Increasing recycled content | |||
Year | % | ||
Target by 2030 Continue our work to increase recycled content in our total packaging (increasing the percentage of recycled content in our packaging to 50%) | 50% | ||
2026 cumulative progress | 47% | ||
2025 cumulative progress | 46% | ||
2026 performance Change in percentage of recycled content in fiscal 26 | 1% | ||
(1)Baseline year fiscal 20.
(2)Baseline year fiscal 22.
(3)Projects developed from fiscal 16 to fiscal 26.
(4)Data for the baseline year and for the intervening period up to the end of last financial year has been recalculated in line with our Non-Financial Reporting Boundaries and
Methodologies.
52 | Diageo Form 20-F 2026 |
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Pioneering grain-to-glass sustainability continued
Preserve Water for Life
Over the past year, the criticality of water to our business is more evident than
ever, as is the need to consider water, climate and nature holistically and adopt
an integrated approach. Water is at the centre of our climate adaptation and
resiliency planning, our impact and dependency on nature, and key to the
success of our regenerative agriculture programme, but it is facing increasing
pressure in many parts of the world due to the impacts of climate change and the
competing demands for freshwater resources. Our water strategy, which
ultimately aims to build resilience and enable growth for communities, the
environment and our business, has four interdependent pillars that are integrated
with other actions to address impacts on climate, nature and people:
•Operations: delivering best-in-class water stewardship across our own sites,
including driving improved water-use efficiency and water quality, and
strengthening water management practices.
•Supply chain: scaling water stewardship across our value chain, with a focus
on agriculture and key suppliers in priority basins, supporting improved water
efficiency, replenishment efforts, and collective action to enhance basin
resilience.
•Communities: strengthening resilience in the communities where we operate
and source, including replenishing more water than we use in water-stressed
locations, expanding access to clean water, sanitation and hygiene (WASH),
and driving effective basin-level collective action in our priority water basins.
•Advocacy: enabling systemic change (globally and locally) by leading
and contributing to campaigns for action on water, and working with
partners, governments and stakeholders to improve water policy,
investment and basin-level outcomes.
More information on our refreshed water strategy can be found on our website
at Diageo Water Stewardship Strategy.
Fiscal 26 was a milestone year for our replenishment programme as we
achieved our ambition to replenish more water than we use in our operations in
water-stressed sites. This achievement reflects our long-term commitment to
investing in nature restoration and climate resilience in our most at-risk markets.
The next phase of our replenishment programme will extend to include key
third-party suppliers in our priority water basins and therefore increase the
number of these basins. We will incorporate extended collective action and
replenishment targets in fiscal 27. To support this, in fiscal 26 we were pleased
to publish a new water stewardship guidance for our suppliers. This fiscal we
made good progress with our collective action programme, particularly where
we are basin champions. Coupled with this we were confirmed as a signatory to
the Business Supporter Programme of The Freshwater Challenge – 'a country-
led initiative to restore 300,000 km of degraded rivers and 350 million hectares
of degraded wetlands by 2030, while securing the protection of freshwater
ecosystems important for biodiversity and ecosystem services'.
Our water strategy also aims to leverage our brands to deliver our goals. As
such on World Water Day, Don Julio and Diageo Mexico announced
replenishing more than double the volume of water used in our tequila
operations in Jalisco. We have increased our water policy engagement,
completing an analysis of three key markets and partnering with WaterAid and
others to better understand how we can collaborate to engage governments to
encourage investment and progressive climate and water policy.
To drive our integrated approach, which captures total impact value, we
developed a Co-benefits Tool to help teams measure and communicate the full
value of our projects. By incorporating the tool into our process, teams can build
a fuller picture of how projects create impact across climate, nature and people.
This enables us to tell a holistic story about the impact of projects. The Co-
benefits Tool ensures consistency as it includes up-to-date, science-based
metrics so every project reports the same way – and stays future-proofed for
new reporting requirements. Understanding co-benefits also shows where
projects have the potential to strengthen surrounding, connected ecosystems and
communities.
Water efficiency
Across the company, we have improved our water efficiency by 14.9% since
our fiscal 20 baseline. In water-stressed areas, our water efficiency has
improved even further, by 23.3% against our fiscal 20 baseline. In fiscal 26,
changes in our production profile resulted in a slight decrease in our
performance compared to last year. These changes included the commencement
of operations at new sites in North America, Ireland and Mexico, as well as
reduced production volumes in certain regions. As a result, our water efficiency
declined by 2.4% across the company and by 2.2% in water-stressed areas
compared with the prior year, despite the implementation of various water
efficiency and water recovery projects.(1)
In water-stressed areas, we started the operation of a water recovery plant at our
site in El Charcon, Mexico with the capacity to recycle over 1,000 m3 per day.
We also implemented process optimisation projects and expanded the use of
recovered water across our sites in East Africa. As we continue to install or
increase the capacity of water recovery technologies, the volume of water
recovered and recycled in water-stressed areas reached nearly 770,000 m3 —
equivalent to 18.8% of the total water used in these areas. In addition to the
projects implemented in water-stressed areas, we also delivered improvement
projects across our distilleries in Scotland and North America, such as increased
reverse osmosis performance at our site in Cameronbridge and improved use of
recovered water for cooling tower operations at our USVI site. Overall, our
distilleries in Scotland have improved their water efficiency by 35% compared
to the baseline, with Cameronbridge achieving a water efficiency of less than
9L/LPA for the second consecutive year. We are also embedding water
stewardship requirements from the initial design phase of new facilities. During
fiscal 26, we started the commissioning of Littleconnell, our new brewery in Co.
Kildare, which will add over 400 m3 per day of recovered water capacity, and
which we expect to start delivering benefits from fiscal 27.
Innovation and new technologies continue to be essential for improving water
management. Through Diageo Sustainable Solutions (DSS), we actively
identify, test and integrate new technologies into our plans. This year, we
concluded a forward osmosis pilot at our BioEnergy plant at Cameronbridge
distillery, demonstrating how waste heat can be used to treat effluent, achieving
a recovery rate of over 70% and enabling water recycling with lower operating
pressures and electrical consumption than conventional reverse osmosis
technology.
The recently announced agreement to sell our shareholding in East African
Breweries plc (EABL), when completed, will materially change our operating
footprint and affect our future water efficiency performance. EABL has been a
significant contributor to our historical and planned water efficiency
improvements. Its divestment, alongside other recent portfolio changes, would
therefore alter the business footprint on which our 2030 global water efficiency
ambition was originally based. Our ambition and improvement plans for our
remaining production facilities are unchanged. However, following completion
of the transaction, we expect to rebaseline our 2030 global water efficiency
ambition to reflect our revised business footprint. We will also review our water
efficiency methodology to ensure it remains a robust and consistent measure of
performance that supports sharpened accountability across the business. We
remain committed to improving water efficiency, prioritising action in water-
stressed areas, addressing water-related risks and strengthening the resilience of
our operations.
Water replenishment
In fiscal 26, we marked the final year of the latest phase of our water
replenishment programme and were very pleased to achieve our target to
replenish more water than we use in our operations at sites located in water-
stressed areas. This year also marked a decade since initiating our replenishment
programme, during which we have implemented over 210 community water
projects across 12 countries. We are proud of this achievement but recognise
there is much more to do and therefore will be extending our replenishment
programme to include key suppliers in our priority water basins, as well as
continuing to replenish our own direct water use at sites in water-stressed
locations.
(1)In fiscal 26, the water efficiency index - across the company was 85.1 and the water
efficiency index - water-stressed areas was 76.7.
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In fiscal 26, we completed 41 projects, such as wastewater treatment,
reforestation, desilting ponds and building check dams, in 10 countries with an
annual volumetric replenishment capacity of projects developed of 1.48M m³ of
water. The annual cumulative volumetric replenishment capacity of projects
developed from fiscal 16 to fiscal 26 is 8.13M m³ of water across 12 countries,
which significantly exceeds our estimated fiscal 26 water withdrawal volume.
In India, this year’s projects included desilting ponds near our Aurangabad,
Kumbalgodu and Nimapara sites bringing improved infiltration, freshwater
ecosystems and local water availability to water-stressed communities. In
Jalisco, Mexico, we were proud to partner with the local authorities in
Atotonilco, where we have two tequila distilleries, to build a new community
wastewater treatment plant that will ensure clean water for the environment and
for local farmers.
An important part of our approach on water is that it remains people-centric. We
have committed to providing access to clean water, sanitation and hygiene
(WASH) in water-stressed communities near our sites and in water-stressed
areas that supply our raw materials. In fiscal 23, we reached our 2030 target,
meaning all markets included in our target invested in WASH projects since
2020. We maintain this commitment, investing every year to 2030. This year we
implemented our first WASH project in Guatemala in the Quetzaltenango
municipality. We also identified new solutions to increase project sustainability
for the long term, as well as developing training for our teams and delivery
partners on sustainable and climate resilient WASH systems. For more
information, please refer to our ESG Reporting Index.
Collective Action
Water collective action
We recognise that businesses need to partner with other water users, non-
governmental organisations (NGOs), civil society and governments to build
climate resilience and ensure water security for communities, the environment
and our business. We therefore continue to prioritise our collective action
programme which embraces a collaborative approach towards water
stewardship in our priority water basins across 12 countries. Our collective
action programme aims to adopt a multi-stakeholder approach including other
companies, NGOs, public sector organisations and communities. Operating as
projects where they implement on-the-ground activities or as platforms to co-
ordinate multiple collective action projects, these partnership initiatives aim to
pool knowledge, expertise and resources to identify and implement solutions
and develop integrated plans to address shared water challenges.
In fiscal 26, Diageo, in partnership with AB InBev and Quintessa as the local
implementing partner, started the Coalition Waters Project in the Pacoti Basin in
Brazil. The project aims to expand access to water in the Fortaleza metropolitan
region in the state of Ceará, where our packaging site for Ypióca is located,
targeting community kitchens and the surrounding population.
We also continued to participate in collective action projects in Ghana, India,
Scotland, Türkiye and Uganda, implementing nature-based solutions and
convening stakeholders to advocate for equitable access to water. The
percentage of priority water basins with collective action participation was 83%
at the end of fiscal 26 (10 out of 12 basins).
Where we have strong interests, we take a leading role as basin champion. This
includes the Santiago Lerma river basin in Mexico, where we supported the
shift of the Charco Bendito initiative toward better governance and a new
nature-based solution; the Upper Godavari river basin in India, where we helped
launch The Godavari Initiative; and the Upper Tana basin in Kenya, where
increased investment expanded the Upper Tana-Nairobi Water Fund into new
counties.
Overall, our collective action programme is the cornerstone of our water
strategy as it is only by driving collaboration at the basin level that we can work
together to address the shared water and climate risks in these basins. Future
water security will ultimately depend on working together.
Advocacy
Raising awareness and visibility of the global water crisis is a key part of our
holistic water strategy and we continued to use our voice to highlight the
criticality of investment in water. Through the year we were among many
businesses continuing to call for more action on water and climate adaptation at
many external meetings and events, including COP30 in Belém, the UN SDG
Summit in New York and World Water Week in Stockholm – sharing our
ambition and learnings, and advocating for more companies and partners to
scale up collaboration. We continue to actively work with others including
leading international organisations such as the Water Resilience Coalition and
Alliance for Water Stewardship, and we have strategic partnerships with
WaterAid and The Nature Conservancy that support this call to action.
Regenerative agricultural raw material sourcing
Businesses depend on natural resources and have a shared interest in helping to
restore and protect them. We are committed to supporting the economic, social
and environmental sustainability and resilience of our agricultural supply
chains.
Last year, we achieved our target to launch five regenerative agriculture
programmes across key sourcing regions. These programmes cover agave in
Mexico, broken rice in India, barley in Ireland, and wheat and barley in the
United Kingdom.
We have now extended this ambition. Between 2020 and 2030, we aim to
deliver 10 collaborative regenerative agriculture programmes in total, aiming to
address key climate, nature and water risks.
We believe that systemic change is needed to scale progress across agricultural
systems, address climate risks and help tackle nature loss. Achieving this will
require deeper collaboration across the value chain, greater standardisation,
stronger monitoring, reporting and verification of outcomes, and new blended
finance solutions to help unlock scale.
Across our programmes, we are working with farmers, academics and technical
partners to build a stronger scientific evidence base. This evidence supports our
decision-making and modelling, and helps inform the development of broader
industry programmes.
We are also partnering with multi-stakeholder platforms including One Planet
Business for Biodiversity (OP2B, co-chaired by our President, Global Supply &
Procurement and Chief Sustainability Officer), Sustainable Agricultural
Initiative Platform (SAI Platform) and the Scotch Whisky Association (SWA).
Through these partnerships, we aim to build and deploy scalable models, such
as Landscape Enterprise Networks (LENs), that support the transition to
regenerative agriculture and strengthen supply chain resilience.
Our carbon strategy
We are committed to a low-carbon future and following a science-based
approach to drive the pace and scale of change required. We published our new
and updated emission reduction targets in fiscal 25, allowing us to plan our
mitigation strategies to reach these important near-term and long-term target
milestones. These targets for our direct operations (Scope 1 and 2 GHG
emissions) and across our supply chain (Scope 3 GHG emissions) are validated
by the SBTi.
In fiscal 26, we released our Climate Transition Plan outlining a clear pathway
to reduce emissions across our operations and value chain, manage climate-
related risks, and prepare our business for a low-carbon, climate-resilient future.
It is a roadmap that will evolve as conditions change, including changes to the
structure of our business and changes to standards such as the SBTi Corporate
Net Zero Standard.
In the Climate Transition Plan, we set out our emission reduction strategies to
meet our 'Spirit of Progress' targets, setting out the relevant decarbonisation
levers for our direct operations and supply chain emissions. Internally, we
maintain detailed decarbonisation roadmaps to our 2030 targets, developing
different scenarios to support business decisions to navigate risks and
opportunities related to cost, likelihood and ease of implementation.(1)
(1)This information reflects current management estimates and expectations. It is based on assumptions available at the time of reporting, and both underlying data and future developments
may evolve. As a result, our projections and interpretations may change. See pages 45–50 for further details on how climate change may affect Diageo and the actions we are taking to
manage and mitigate related risks.
54 | Diageo Form 20-F 2026 |
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Pioneering grain-to-glass sustainability continued
Target reduction from baseline fiscal 22 | Date to achieve | Metric |
Reduce our direct operations greenhouse gas emissions by 50% (Scope 1 and 2) | 2030 | Percentage change in absolute greenhouse gas emissions (direct and indirect greenhouse gas emissions by weight (market/net based)) |
Become net zero(1) in our direct operations (Scope 1 and 2) | 2040 | |
Reduce our value chain (Scope 3) greenhouse gas emissions by 26% | 2030 | Percentage change in absolute greenhouse gas emissions (tCO2e) |
Become net zero(1) in our full value chain | 2050 |
(1)Net zero emissions are reached when anthropogenic (i.e. human-caused) emissions of greenhouse gases into the atmosphere are balanced by anthropogenic removals over a specified
period. A science-based approach to net zero covers emission scopes 1, 2 and 3 with direct abatement of approximately 90% from our emissions baseline and up to 10% of high-quality
certified carbon offsets to neutralise hard-to-abate residual emissions to close the gap to zero. Targets are based on our SBTi target boundary.
Strategic decarbonisation levers to reduce emissions and meet our targets(1) | ||
Scope 1 (4.98%)(2) | Scope 2 (0.04%)(2) | Scope 3 (94.98%)(2) |
•Reduce and recover energy - optimising operational efficiency and minimising energy demand •Implement clean energy solutions - electrifying heat sources and implementing innovative, scalable solutions •Switch fuel to renewable alternatives - adoption of renewable, bioenergy sources •Neutralise residual emissions | •Reduce electrical energy use •Continue to switch to renewable electricity •Implement solutions to move up renewable electricity sourcing hierarchy – expanding on-site generation opportunities and creating additionality | •Diageo-enabled projects and innovation that drive efficiencies by optimising resource use and minimising waste •Selective engagement to accelerate shared decarbonisation opportunities through supply chain transformation, supplier engagement and industry collaboration •Supporting carbon removal activities through insetting in our supply chain and offsetting to reach net zero |
(1)For more information please see our Climate Transition Plan.
(2)% of total fiscal 26 GHG emissions (market-based)
Streamlined Energy and Carbon Reporting (SECR)(1),(3) | |||||
2022 | 2023 | 2024 | 2025 | 2026 | |
Total global energy consumption (MWh) | 3,140,021 | 3,123,373 | 3,148,011 | 3,137,871 | 2,581,801 |
Total UK energy consumption (MWh) | 1,078,585 | 1,221,009 | 1,259,921 | 1,244,196 | 800,158 |
Direct (MWh) | 938,996 | 1,074,124 | 1,105,054 | 1,087,184 | 672,636 |
Indirect (MWh) | 139,589 | 146,885 | 154,867 | 157,012 | 127,522 |
Total UK direct and indirect greenhouse gas emissions (1,000 tonnes CO2e) | 83 | 134 | 118 | 101 | 89 |
Scope 1 | 83 | 134 | 118 | 101 | 89 |
Scope 2 | — | — | — | — | — |
Market-based (net) intensity ratio of greenhouse gas emissions (g CO2e per litre of packaged product) | 106 | 106 | 94 | 83 | 0 |
Total direct and indirect greenhouse gas emissions by region by year(1),(2),(3) | |||||
Total direct and indirect greenhouse gas emissions by weight (market/net based) (1,000 tonnes CO2e) | |||||
Region | 2022 | 2023 | 2024 | 2025 | 2026 |
North America | 100 | 83 | 86 | 77 | 74 |
Europe (including UK) | 141 | 189 | 174 | 160 | 147 |
Asia Pacific | 8 | 6 | 5 | 5 | 3 |
Latin America and Caribbean | 37 | 27 | 9 | 15 | 14 |
Africa | 64 | 28 | 21 | 20 | 22 |
Diageo (total) | 350 | 333 | 295 | 277 | 260 |
of which | |||||
direct greenhouse gas emissions | 345 | 330 | 292 | 274 | 258 |
indirect greenhouse gas emissions | 5 | 3 | 3 | 3 | 2 |
(1)2022 baseline data and data for the years ended 30 June 2023, 30 June 2024 and 30 June 2025, have been recalculated in line with our Non-Financial Reporting Boundaries and
Methodologies.
(2)The table covers our market-based direct (Scope 1) and indirect (Scope 2) greenhouse gas emissions.
(3)For the data preparation methodology, see pages 222. Further information is provided on pages 19-21 and 24 of the Non-Financial Reporting Boundaries and Methodologies.
55 | Diageo Form 20-F 2026 |
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Direct operations
In fiscal 26, we decreased greenhouse gas emissions from our direct operations
by a further 6.1% versus fiscal 25. Production volume changes across a number
of markets have contributed to a reduction in overall energy use and associated
emissions; increases in our brewed volumes with decreases in our distilling and
malting footprint. Our renewable energy use as a proportion of total energy use
has also decreased as a significant proportion of renewable energy investment
has been leveraged in our distilling operations that have used proportionately
less energy this financial year.
Our energy performance has improved across our brewing and packaging
categories, driving emission savings and enabling decoupling of emissions from
production. Littleconnell Brewery in Ireland, a new build brewery commencing
production in the second half of fiscal 26, is designed to be particularly energy
efficient and fuelled by low-carbon energy sources. Our breweries in East
Africa have continued to optimise their processes and use of bioenergy,
resulting in an overall energy efficiency improvement. This year we have also
opened La Barca distillery in Mexico which started production in its first year
using 100% renewable electricity and heat from on-site biomass boilers.
Despite our distilleries adjusting operations to meet a reduced output, a number
of distilling sites with on-site bioenergy facilities have maintained or improved
both their energy efficiency and percentage of renewable energy use. Sites
across our global footprint in Scotland, India and Mexico have all reduced
emissions and improved their proportion of renewable fuel use while optimising
energy performance. Through significant focus optimising steam use at our
grain distillery in Scotland, we improved overall energy efficiency and have
additionally increased biogas use to displace natural gas. Similarly, at one of our
Scotch malt distillery complexes we have reduced electricity consumption in
our shutdown period and optimised processes to ensure more efficient operation
on distillery start up.
At our packaging sites in the United Kingdom electrification of heat, pasteuriser
process optimisation and replacement of old equipment have also led to energy
efficiency gains. At our Leven packaging facility in Scotland the installation
and operation of industrial heat pumps have improved energy efficiency and
moved targeted heating operations away from fossil fuel sources to renewable
electricity – Leven generates approximately 16% of its annual electricity
demand from its on-site 4.1MW solar array.
Our continued reduction of greenhouse gas emissions has driven a cumulative
saving of 25.7% versus our fiscal 22 baseline. We have delivered these savings
through investment in bioenergy plants in East Africa, Scotland and Mexico,
with additional savings being delivered through electrification of heat, fuel
switching to lower emission alternatives like biofuel or renewable gas and
optimising our energy use. We source renewable electricity widely across our
portfolio, investing in on-site solutions as well, particularly across sites in
Africa, Latin America and Caribbean which has helped us reduce our indirect
greenhouse gas emissions (Scope 2) from our fiscal 22 baseline.
In Scotland in fiscal 26, we have invested in new biomass projects at three of
our Scotch distilleries to advance decarbonisation and improve energy
resilience. When complete, these projects are expected to reduce annual
emissions by around 11,000 tCO2e, improve supply resilience and help meet
evolving stakeholder expectations. We are also committed to decarbonising our
St James' Gate brewing operations in Dublin, Ireland with interventions planned
over the next few years. In order to deliver our decarbonisation roadmap
projects on time and in full, we actively engage externally to unlock
implementation challenges but some future projects are still projected to be
impacted by grid infrastructure capacity and upgrade timelines.
Value chain emissions (1)
Our overall Scope 3 emissions reduced by 5.9% in fiscal 26 when compared to
equivalent fiscal 25 emission footprint. We have observed emission reductions
across a number of the Scope 3 reporting categories, particularly in the most
material categories: purchased goods and services and capital goods. Despite the
overall decrease in Scope 3 emissions, there were small increases in upstream
transport and logistics as well as use of sold products (chilling and cooling) and
franchises. We attribute the increased emissions in these Scope 3 reporting
categories to the increase in beer and RTD production in both our direct
operations footprint and under licenced manufacturing models.
Across our manufacturing operations, lower production volumes at our
distilleries and in spirit categories contributed to the most material reduction in
our upstream Scope 3 emissions, reducing the sourced quantities of raw
materials and ingredients. The 10% reduction in raw material emissions also
contributed to a corresponding reduction in our FLAG emissions.
In our packaging material category, emissions decreased by 0.5% compared to
fiscal 25 with some notable improvement projects being delivered through our
sustainable packaging agenda. The reductions in glass and carton purchased
weights caused the biggest emission decreases in the packaging category; glass
lightweighting, increases in recycled content and switching formats to lighter
PET were also contributing factors. Increases in beer and RTD sales volumes
saw corresponding increases in can and corrugate materials and emissions when
compared to fiscal 25.
Other material variances to our fiscal 26 Scope 3 emission footprint were seen
in the capital goods category as a result of a lower spend and similar
proportional reductions were seen in investments and business travel. Reduced
distillery production output this fiscal year, in our direct operations footprint,
corresponded to less overall energy use and lower upstream energy and waste
generated in operations emissions in our Scope 3 footprint.
In fiscal 26, we also continued to refine and improve our Scope 3 emission
inventory. We updated a number of our secondary emission factors to make
them more representative and we made some important progress engaging our
most material suppliers to get primary data so as to facilitate decarbonisation
together. We aim to embed the supplier product carbon footprints that are
sufficiently high quality in our Scope 3 calculation process in the next reporting
year, while continuing to engage selectively across our supplier base.
When reviewing our performance compared to our fiscal 22 baseline, our Scope
3 greenhouse gas emissions have decreased by 18.8% against an overall 26%
absolute reduction target. Product mix, volume reductions, changes to
manufacturing and distribution models and sustainable packaging improvements
have all contributed to the progress to our 2030 target. We have partnered with a
number of suppliers to optimise our raw material sourcing and better understand
our value chain emissions, making our emission factors more representative.
Progress towards near-term Scope 3 targets remains constrained by factors
outside our direct control, including supplier decarbonisation, limited
availability of low-carbon infrastructure and evolving market conditions.
Achieving these targets depends on co-ordinated action across the value chain
with an important unlock being supplier product carbon footprints and supplier
roadmaps - we continue to engage with our key suppliers to enhance our Scope
3 data and to find solutions together.
Our Scope 3 decarbonisation roadmap outlines the path we need to take and the
interventions we have planned to reach our 2030 targets. Despite modelling
various different business growth scenarios and decarbonisation initiatives, we
estimate there to be a gap to reach the near-term target of around 5-7%. We
continue to work on solutions to close the gap but the complexity, collaboration
required and time to implement these interventions increases the difficulty in
doing so. We will continue to update our target trajectories and prioritise
decarbonisation initiatives that deliver emission reductions and value for the
business.
(1)Further information is provided in ESG Reporting Index on pages 41-45 and in the
Non-Financial Reporting Boundaries and Methodologies.
56 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Pioneering grain-to-glass sustainability continued
Reducing emissions through packaging improvements
Packaging contributes 35% of our total Scope 3 value chain greenhouse gas
(GHG) emissions. We are committed to reducing our value chain GHG emissions by
reducing packaging weight, increasing our recycled content, reducing single-use
packaging and deploying and scaling circular business models.
Glass is our primary packaging material, representing 81% of our total
packaging weight and 56% of our total packaging emissions. In fiscal 26, we
have continued to work with glass and PET experts to deliver lightweighted
versions for our spirits brands, reducing their GHG emissions impact whist
retaining their quality, brand heritage and resonance with consumers.
In Europe, we introduced new bottles for our Smirnoff and Captain Morgan
brands, delivering a 10% weight reduction and an emissions reduction of 3,200t
CO2e. We also improved the emissions footprint of our global Singleton brand,
with an average of 12% reduction in glass weight.
In India, through lightweighting initiatives in both glass and PET formats we
achieved an average 7% reduction in packaging weight for selected bottles,
delivering 2,000t CO2e benefit. In parallel, we rebalanced our use of glass and
PET containers to meet the demands of key brands and markets. Across the
targeted products, this strategic shift achieved an average 86% reduction in
packaging weight and over 44,000t CO2e saving, representing a step-change in
our packaging decarbonisation pathway.
Increasing recycled content in our packaging
In fiscal 26, we have continued to make progress towards our 2030 target of
50% recycled content in packaging. We increased delivery to 47% (up 1% from
46% in fiscal 25) through steady improvements across glass and PET packaging
formats. These incremental changes reflect deeper supplier engagement and
progress towards embedding recycled materials at scale within our value chain.
For plastic bottles, our target was to reach a global average of 35% recycled
content by the end of fiscal 25 with sequential year-on-year improvement by
2030. We were successful in delivering against this target with 43% in fiscal 25
and 44% in fiscal 26. PET remains a small portion of our total packaging
material type by weight (2%), with a full breakdown available in our ESG
Reporting Index. We have decided to retire this KPI from fiscal 27 onwards to
focus on the total recycled content target of 50% across all packaging, as this is
more representative of our portfolio.
Selecting packaging with higher recycled content has a direct impact on
reducing GHG emissions. Industry challenges are still apparent in our journey
to access more recycled materials, particularly for glass cullet.
How we have reported consistently with the recommendations of the Task Force on Climate-related Financial
Disclosures (TCFD)
In this year's disclosures, we have complied with the FCA's UK LR6.6.6R (8). Our climate-related financial disclosures are considered to be consistent with the
TCFD's recommendations and recommended disclosures, as illustrated in the index below.
TCFD recommendation | Consistency |
GOVERNANCE See page 44 | |
a.Describe the board’s oversight of climate-related risks and opportunities. | Yes. See page 44. |
b.Describe management’s role in assessing and managing climate-related risks and opportunities. | |
RISK MANAGEMENT See pages 45-50 | |
a.Describe the organisation’s processes for identifying and assessing climate- related risks. | Yes. See pages 45-50. Having completed comprehensive risk assessments, our focus is now on continuously ensuring appropriate adaptation plans are in place for all risks identified. |
b.Describe the organisation’s processes for managing climate-related risks. | |
c.Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organisation’s overall risk management. | |
STRATEGY See pages 45-50 | |
a.Describe the climate-related risks and opportunities the organisation has identified over the short-, medium-, and long-term. | Yes. We have described risks and opportunities for our business, in all of our owned operating locations and our most important third-party operations, as well as the impact of those risks and opportunities on our strategy. We have modelled the resilience of our strategy under different climate-related scenarios. We have co-developed a scenario analysis tool with climate experts to enable regular updates to our scenario analyses. The precise risks and opportunities that were modelled in our scenario analysis are outlined in the Non-Financial Reporting Boundaries and Methodologies, pages 4-7. |
b.Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning. | |
c.Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario. | |
METRICS & TARGETS See pages 51-56 | |
a.Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process. | Yes. See pages 51-56. |
b.Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas (GHG) emissions and the related risks. | Yes, for Scope 1 and 2 see page 51 and 53-55 and our ESG Reporting Index see page 41-42. For Scope 3 see our ESG Reporting Index on page 41-43. We are continually enhancing our Scope 3 GHG emissions footprint through supplier engagement and refining our data granularity in line with GHG accounting standards. |
c.Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets. | Yes. See pages 51-56. |
57 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Our ESG reporting approach
Our ESG reporting approach
Reporting transparently on the ESG issues that affect our business, and that our business contributes to, plays a vital role in delivering our strategy. It helps us to
manage ESG risks, take opportunities and promote sustainable development everywhere we live, work, source and sell.
Our ESG reporting suite aims to provide comprehensive and comparable disclosures for a broad range of stakeholders. As well as publishing our integrated Annual
Report and ESG Reporting Index each year, we also submit non-financial information to benchmarking and index organisations, including those listed on the Awards
and ranking page of our website.
The non-financial reporting space is evolving quickly. We are committed to continually evaluating and improving our approach and to actively tracking emerging ESG
reporting regulations, frameworks and good practice. Since launching our Spirit of Progress ESG action plan, we have set out to help create a more inclusive and
sustainable world, creating a positive impact in our company, and for our society.
How we report to our stakeholders – our reporting suite
 |  |  |  | ||||||
Annual Report Where we present our most material disclosures and describe how our strategy delivers value for our business and other stakeholders. Performance against our most material targets is integrated into the relevant focus area sections. | ESG Reporting Index Where we provide additional disclosures in line with the GRI (Global Reporting Initiative) Standards, our materiality assessment and our response to the Sustainability Accounting Standards Board (SASB). We also consider the United Nations Global Compact (UNGC) requirements in our ESG reporting. | Non-Financial Reporting Boundaries and Methodologies Where we provide information on the boundaries and calculations applied to derive information set out in the Annual Report and the ESG Reporting Index. | Diageo.com Where, through the Spirit of Progress section, we give more details of our approach and performance, with examples of our strategy in action. |
Who are our stakeholders? Everyone who is affected by our business, and everyone who affects it, is a stakeholder. A detailed description of our stakeholder
engagement process is on pages 80-86 of this Annual Report.
The non-financial and sustainability information statement provided on pages 58-59 provides an overview of topics and related reporting references in our external
reporting as required by Sections 414CA and 414CB of the Companies Act 2006.
58 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Our ESG reporting approach continued
Non-financial and sustainability information statement
Reporting requirement as per Companies Act 2006 414CA and 414CB | Focus area | Read more in Diageo's reports | Relevant key policies, standards or documents | Page reference | |
Environmental matters | |||||
1(a) environmental matters (including the impact of the company’s business on the environment) | Pioneering grain-to- glass sustainability | •Doing business the right way, from grain to glass •Risk Management – Identifying climate risks and opportunities •Climate change resilience •Identifying and assessing our physical risks •Identifying and assessing our transition risks and opportunities •Our strategy for grain-to-glass sustainability •How we have reported consistently with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) | •Global Environment Policy(1) •Sustainable Agriculture Guidelines(1) •Partnering with Suppliers Standard(1) •Deforestation Guidelines(4) •Water Stewardship Strategy(4) | p.32-33 p.44-56 | |
Our people | |||||
1(b) the company’s employees | Our people and culture | •Listening to our people •Building capabilities to drive performance •Recognition and wellbeing •Gender and ethnic inclusion •Access and opportunity •Promoting inclusivity through our value chain •Championing a diverse supply chain •Inclusive marketing: Good for society and good for business | •Code of Business Conduct(2) •Great Britain/Scotland and Republic of Ireland Gender Pay Gap Report 2025(4) •Global Human Rights Policy(1) •Dignity at Work Policy •Directors' Remuneration Policy(4) •Board Diversity Policy(4) | p.36-37 | |
Champion inclusion and diversity | p.42-43 | ||||
Health and safety | •Our 'Safer Together' approach •Automation and technology •Process safety management •Continuous improvement initiatives •Transforming our health & safety strategy | •Global Health, Safety and Wellbeing Policy(1) | p.38-39 | ||
1(c) social and community matters | Promote positive drinking | •Education to tackle alcohol abuse •Promoting moderation: Ensuring our brands connect with and attend to evolving consumer desire to moderate •Advocating improved laws and industry standards •Marketing in a responsible way •Our work with communities to support water stewardship, climate action and the protection of natural resources. | •Diageo Marketing Code(1) •Digital Marketing Standard •Global Employee Alcohol Policy(1) •Global Environment Policy(1) | p.40-41 | |
Pioneering grain-to- glass sustainability | |||||
Human rights | |||||
1(d) respect for human rights | Business integrity and human rights | •Standing up for human rights •Our human rights governance | •Global Human Rights Policy(1) •Modern Slavery Statement(3) •Global Brand Promoter Standard(1) •Data Privacy Policy | p.34-35 | |
Anti-bribery and corruption | |||||
1(e) anti-corruption and anti-bribery matters | Business integrity and human rights, Doing business the right way | •Business integrity •Code of Business Conduct (Our Code) •Encouraging people to speak up •Managing third-party risks | •Code of Business Conduct(2) •Data Privacy Policy •Global Information Management and Security Policy •Countering Corruption Policy •Competition and Antitrust Policy | p.34-35 | |
59 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information |
Reporting requirement as per Companies Act 2006 414CA and 414CB | Focus area | Read more in Diageo's reports | Relevant key policies, standards or documents | Page reference | |
Business model | |||||
2(a) a brief description of the company’s business model | Diageo's business model | •Strategic report •Our principal risks and risk management •Stakeholder engagement | p.2-14 p.60-67 p.80-86 | ||
Risk management | |||||
2(d) a description of the principal risks relating to the matters mentioned in subsection | Our principal risks and risk management | •Effective risk management •Our principal risks and risk management | •Risk Management Standard •Business Continuity Management Standard | p.60-67 | |
Viability statement | •Viability statement | p.68 | |||
Non-financial performance | |||||
2(e) a description of the non-financial key performance indicators relevant to the company’s business | Monitoring performance and progress | •Non-financial performance •‘Spirit of Progress’ •Key Sustainability Targets | p.18-19 p.32-57 p.51 | ||
Climate-related financial disclosures as required by Sections 414CA and 414CB of the Companies Act 2006 | |||||
(a) description of the company’s governance arrangements in relation to assessing and managing climate-related risks and opportunities; | Pioneering grain-to- glass sustainability | •Governance (Pioneering grain-to- glass sustainability) | See above, under Environmental matters | p.44 | |
(b) a description of how the company identifies, assesses, and manages climate- related risks and opportunities; | •Risk Management – Identifying climate risks and opportunities | p.45-50 | |||
(c) a description of how processes for identifying, assessing, and managing climate-related risks are integrated into the company’s overall risk management process; | •Effective risk management •Risk Management – Identifying climate risks and opportunities | p.60-67 p.45-50 | |||
(d) a description of — (i) the principal climate-related risks and opportunities arising in connection with the company’s operations, and | •Effective risk management •Risk Management – Identifying climate risks and opportunities | p.60-67 p.45-50 | |||
(d) a description of — (ii) the time periods by reference to which those risks and opportunities are assessed; | •Risk Management – Identifying climate risks and opportunities •Quantitative impact of transition risks and opportunities | p.45-50 | |||
(e) a description of the actual and potential impacts of the principal climate-related risks and opportunities on the company’s business model and strategy; | •Risk Management – Identifying climate risks and opportunities •Identifying and assessing our transitions risks and opportunities | p.45-50 | |||
(f) an analysis of the resilience of the company’s business model and strategy, taking into consideration different climate- related scenarios; | •Climate change resilience •Viability statement •Scenario analysis of physical and transition risks (in the Non- Financial Reporting Boundaries and Methodologies) | p.45-50 p.68 p.4-6 | |||
(g) a description of the targets used by the company to manage climate-related risks and to realise climate-related opportunities and of performance against those targets; and | •Our strategy for grain-to-glass sustainability •Key Sustainability Targets | p.50-56 p.51 | |||
(h) a description of the key performance indicators used to assess progress against targets used to manage climate-related risks and realise climate-related opportunities and of the calculations on which those key performance indicators are based | •Our strategy for grain-to-glass sustainability •Key Sustainability Targets | p.50-56 p.51 | |||
(1)https://www.diageo.com/en/our-business/corporate-governance/code-of-business-conduct/policies-and-standards
(2)https://www.diageo.com/en/our-business/corporate-governance/code-of-business-conduct.
(3)https://www.diageo.com/en/esg/doing-business-the-right-way/modern-slavery-statement.
(4)Externally published documents on Diageo subsites.
F-11 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information |
Risk factors
Investing in the securities of Diageo involves risk. Diageo believes the following to be the principal risks and uncertainties that are
most likely to have a material adverse impact on the Diageo group. These risks should be carefully considered together with other
information included elsewhere within this annual report. If any of these risks occur, either alone or in combination with other risks,
Diageo’s business, financial condition and performance could suffer and the trading price and liquidity of its securities could decline.
The order of presentation of the risk factors below does not necessarily indicate the likelihood of a particular risk’s occurrence or the
potential magnitude of its financial consequences.
In addition, because any global business of the kind Diageo is engaged in is inherently exposed to risks that become apparent only
with the benefit of hindsight, risks which Diageo does not currently deem to be material or of which it is not presently aware could
also materially and adversely impact Diageo’s business, financial condition and performance in future periods.
Risks related to the global economy
Diageo’s business has been and may, in the future, be adversely impacted by unfavourable economic, political, social or other
developments and risks (including those resulting from a public health threat, increases in geopolitical instability, including in
relation to Russia’s invasion of Ukraine and conflicts in the Middle East, tariffs and/or inflationary pressures) in the
countries in which it operates.
Diageo’s products are sold in nearly 180 countries and territories worldwide, and Diageo may be adversely affected by global
economic volatility or unfavourable economic developments in any of the countries or regions where it has distribution networks,
marketing companies or production facilities. In particular, Diageo’s business is dependent on general economic conditions in its
major markets, which include the United States, the United Kingdom, the countries that form the European Union, and certain
countries within the Latin American region, Türkiye, India and China, and failure to react quickly enough to changes in those
economies could have an adverse effect on financial performance.
The markets in which Diageo operates have been significantly impacted, and could be impacted in the future, by public health threats.
Similarly, Russia’s invasion of Ukraine and the ongoing conflicts in the Middle East have, among other things, resulted in elevated
geopolitical instability, economic volatility, energy supply shortages, and supply chain and logistics cost increases and disruptions.
The economic volatility attributable to these conflicts is part of, and contributing to, a larger trend of rising costs of living, which has
had and may continue to have a significant adverse effect on economic activity that could have a material adverse impact on Diageo’s
business, financial condition, results of operations and/or the price of Diageo’s securities. The supply chain constraints and
disruptions caused by these conflicts could also put significant inflationary pressures on commodity and other input prices. Supply
chain disruptions may cause delays in shipments of Diageo's products and supplies. Failure to adequately produce and timely ship
Diageo's products to customers could lead to lost revenue, failure to meet customer demand, strained relationships with customers
including wholesalers, and diminished brand loyalty.
Any future significant deterioration in economic conditions globally or in any of Diageo’s key markets, including economic
slowdowns, global, regional or local recessions or depressions, currency instability, increased unemployment levels, new or increased
custom duties, tariffs and/or other tax rates, increased inflationary pressures and/or disruptions to credit and capital markets, could
lead to eroded consumer confidence and decreased consumer spending more generally, which in turn could reduce consumer demand
for Diageo’s products. Unfavourable economic conditions could also negatively impact Diageo’s customers, distributors, suppliers,
and financial counterparties, who may experience cash flow problems, increased credit defaults, decreases in disposable income or
other financial issues, which could lead to changes to ordinary customer stocking patterns, including destocking or stocking ahead of
potential price increases as well as an increase in Diageo’s bad debt expense. In addition, volatility in the capital and credit markets
caused by unfavourable economic developments and uncertainties, including the heightened geopolitical instability caused by
Russia’s invasion of Ukraine, the conflict in the Middle East, and/or inflationary pressures, could result in a reduction in the
availability of, or a further increase in the cost of, financing to Diageo, reduced access to capital and heightened earnings volatility
leading to pressure on margins, reduced investment flexibility and slower delivery of Diageo’s strategic and financial objectives.
F-12 | Diageo Form 20-F 2026 |
STRATEGIC REPORT | GOVERNANCE report | FINANCIAL STATEMENTS | ADDITIONAL INFORMATION |
Diageo’s business could also be affected by other economic developments such as fluctuations in currency exchange rates, the
imposition of any import, investment or currency restrictions (including the potential impact of any global, regional or local trade
wars or any tariffs, customs duties or other restrictions or barriers imposed on the import or export of goods between territories,
including but not limited to, imports into and exports from the United States, China, the United Kingdom and/or the European
Union), the imposition of economic or trade sanctions, or any restrictions on the repatriation of earnings and capital. For example, the
United States has announced and/or implemented significant tariffs on imports into the United States, which has prompted retaliatory
tariffs by a number of countries. If maintained, these tariffs, and any tariffs to be announced in the future, could result in further
retaliatory measures and an escalation of trade disputes which could pose a significant risk to Diageo’s business, including an
increase to the cost of Diageo’s products and, to the extent Diageo absorbs the costs of tariffs and does not pass them through to
customers, higher cost of goods sold and decreased profit and margins. The extent and duration of the tariffs and the resulting impact
on general economic conditions and on Diageo’s business are uncertain and depend on various factors, including negotiations
between the United States and affected countries (in particular the renegotiation of the US-Mexico-Canada Agreement), the responses
of other countries or regions, deferments, exemptions or exclusions that may be granted, availability and cost of alternative sources of
supply, and demand for Diageo’s product in affected markets. Further, actions Diageo takes to adapt to new tariffs or trade
restrictions may cause Diageo to modify operations or forgo business opportunities. Tariffs and import and export regulations could
also limit the availability of Diageo’s products, prompt consumers to seek alternative products and provide an opportunity for
competitors not subject to such tariffs to establish a presence in markets where Diageo conducts business. Any of these developments
may have a material adverse effect on Diageo’s financial performance.
Diageo’s operations are also subject to a variety of other risks and uncertainties related to its global operations, including adverse
political, social or other developments. Political and/or social unrest or uncertainties, natural disasters, public health threats (including
any future epidemics or pandemics, and government responses thereto), politically-motivated violence and terrorist threats and/or
acts, including those which are specifically directed at the alcohol industry, may also occur in countries where Diageo has operations.
Many of the above risks are heightened, or occur more frequently, in emerging markets, such as Colombia, Kenya and Mexico. In
general, emerging markets are also exposed to relatively higher risks attributable to unstable governments, corruption, crime and lack
of law enforcement, undeveloped or biased legal systems, expropriation of assets, sovereign default, military conflicts, liquidity
constraints, inflation, devaluation, price volatility and currency convertibility issues, as well as other legal and regulatory risks and
uncertainties. Developments in emerging markets can affect Diageo’s ability to import or export products and to repatriate funds, as
well as impact levels of consumer demand (for example, in duty-free outlets at airports or in on-trade premises in affected regions)
and therefore Diageo’s levels of sales or profitability. Any of these factors may affect Diageo disproportionately or in a different
manner from its competitors, depending on Diageo’s specific exposure to any particular emerging market, and could have a material
adverse effect on Diageo’s business and financial results.
Climate change, or legal, regulatory or market measures to address climate change or other environmental concerns, may
negatively affect Diageo’s business or operations, and water scarcity or water quality issues could negatively impact Diageo’s
production costs and capacity.
Climate change is occurring around the world as a result of carbon dioxide and other greenhouse gases in the atmosphere having an
adverse effect on global temperatures, weather patterns and the frequency and severity of extreme weather-related events and
disasters. To the extent that weather patterns and climate change, or legal, regulatory or market measures enacted to address such
climate change or other environmental concerns, have a negative effect on agricultural productivity in the various regions from which
Diageo procures its raw materials, Diageo may be subject to decreased availability of, or increased prices for, a number of raw
materials that are necessary in the production of Diageo’s products, including wheat, maize, barley, sugar cane/molasses, vanilla,
agave, rice, grapes, sorghum, and aniseed. Severe weather events or changes in the frequency or intensity of weather events could
also pose physical risks to Diageo’s production facilities, impair Diageo’s production operations or disrupt Diageo’s supply chain,
which may affect production operations, delivery of its products to customers and insurance costs and coverage. For example,
significant snowstorms in Kentucky caused minor disruptions at Diageo’s Lebanon Distillery.
Climate change and geographic limitations related to the production may also expose Diageo to water scarcity and quality risks due
to the water required to produce its products, including water consumed in the agricultural supply chain. Water, which is the main
ingredient in virtually all of Diageo’s products and a major component within its agricultural supply chain, is also a limited resource
in many parts of the world. If climate change leads to droughts or water over-exploitation or has a negative effect on water
availability or quality in areas that are part of Diageo’s supply chain, the price of water may increase in certain areas and certain
jurisdictions may adopt regulations restricting the use of water or enact other unfavourable changes. As demand for water continues
to increase, and as water becomes scarcer and the quality of available water deteriorates, including as a result of climate change,
Diageo may be affected by increased production costs (including as a result of increases in certain water-related taxes or related
regulations), capacity constraints, or requests to cease production entirely in water-stressed areas, which in turn could adversely affect
Diageo’s business, financial results and reputation. A number of Diageo’s production sites are in water-stressed areas and may be
exposed to potential disruption if demand for water exceeds the available amount during a certain period or if the poor quality of
available water restricts its use.
F-13 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information |
In addition, a failure by Diageo to respond appropriately to increased governmental or public pressure for further reductions in
greenhouse gas emissions, water usage and/or to address any other perceived environmental issues could damage Diageo's reputation.
Increased governmental or public pressure for further reductions in greenhouse gas emissions or water usage may also cause Diageo
to incur increased costs for energy, transportation and raw materials, as well as potentially require Diageo to make additional
investments in facilities and equipment, thus adversely impacting Diageo’s business and financial results. As governments and
business take action to reduce or mitigate the effects of climate change, Diageo and its supply chain are expected to incur increased
costs, including those associated with required improvements to energy usage in agriculture and glass manufacturing, water
efficiency and usage, land practices and competition for land from food crops, the rising cost of natural gas and rising worldwide
carbon prices. It is possible these costs increase beyond what is currently expected or that other categories of costs increase
unexpectedly, either or both of which could have an adverse impact on Diageo’s financial results.
Diageo is also required to report greenhouse gas emissions, energy usage data and related environmental information to a variety of
entities, and comply with the European Union Emissions Trading System. Regulators in various jurisdictions, including the European
Union, the United States and the United Kingdom, have focused efforts on increased disclosures related to ESG matters, including
climate change and mitigation efforts. These regulations, in particular the Corporate Sustainability Reporting Directive and the ISSB
Standards, have expanded the nature, scope and complexity of matters that companies are required to control, assess and report. This
will require Diageo to make additional investments and implement new practices and reporting processes, and will entail additional
compliance risk. Disparate and evolving standards for identifying, measuring and reporting ESG metrics, including ESG-related
disclosures that may be required by the UK Financial Conduct Authority, US and European regulators and other regulatory bodies,
will likely increase compliance burdens and associated regulatory and reporting costs and complexity significantly. Furthermore,
while ESG reporting has improved, data remains of limited quality and consistency and is more uncertain than historical financial
information. ESG data, methodologies and standards may evolve over time in line with market practice, regulation, or owing to
scientific developments. The use of inconsistent or incomplete data and models could result in sub-optimal decision making. If
Diageo is unable to accurately measure and disclose required data in a timely manner, it could be subject to penalties in certain
jurisdictions.
Diageo’s operations are also subject to environmental regulations by national, regional and local agencies, including, in certain cases,
regulations that impose liability without regard to fault. These regulations can result in liability that might adversely affect Diageo’s
operations and financial condition. As regulators in Diageo’s markets continue to respond to rising concerns about the impact of
climate change and other environmental threats, regulation and enforcement is becoming stricter. There can be no assurance that
Diageo will not incur a substantial liability or that applicable laws and regulations will not change or become more stringent in the
future.
Risks related to Diageo’s industry
Demand for Diageo’s products may be adversely affected by many factors, including disruptive market forces, changes in
consumer preferences and tastes and the adverse impacts of declining economies.
Diageo’s portfolio of brands includes some of the world’s leading beverage alcohol brands, as well as a number of brands that are
prominent in certain regional and/or country-specific markets. Any inability by Diageo to respond and adapt either its products or its
processes to disruptive market forces, including e-commerce, artificial intelligence, digital, and new formats, could impact Diageo’s
ability to effectively service its customers and consumers with the required agility, thereby threatening market share, revenue,
profitability and growth ambitions. While Diageo is focused on expanding its digital platforms, monitoring data insights and
effectively using technology in its supply chains, there is no guarantee that these efforts will help Diageo gain and/or maintain a
competitive advantage over its peers.
Consumer preferences on a global, regional and/or local scale may shift due to a variety of factors, including changes in
demographics, evolving social trends (including any shifts in consumer tastes towards at-home consumption occasions,
premiumisation, small-batch craft alcohol, lower or no alcohol beverages, THC and hemp-based THC beverages or other alternative
products), increased use of GLP-1 medications (which may have the effect of reducing alcohol consumption in certain customers),
changes in travel, holiday or leisure activity patterns, weather conditions, public health regulations and/or health and wellness
concerns, any or all of which may reduce consumers’ willingness to purchase beverage alcohol products from large producers such as
Diageo or at all. There is also a risk to Diageo’s brands emerging from consumers making brand choices that reflect their increasingly
polarised socio-political views, including with respect to ESG matters. The market share, profitability and growth ambitions of
Diageo’s brands, as well as Diageo’s reputation more generally, could also be adversely affected by any failure by Diageo to service
its customers and consumers with the required agility or to provide consistent, reliable quality in its products or in its service levels to
customers.
Economic pressures in the markets Diageo serves may also reduce consumer demand for Diageo’s products. In particular, rising costs
of living have negatively impacted the spending habits of consumers in various markets which Diageo serves and have caused some
consumers to choose products which have lower price points, including those of Diageo’s competitors. This is particularly true in the
US, where income growth is lagging inflation growth and consumers are spending significantly more money on essentials such as
gasoline. Changes in consumers’ spending habits due to rising costs of living have had and may continue to have an adverse effect on
Diageo’s business and financial results, including the erosion of premium positioning and margin mix deterioration.
F-14 | Diageo Form 20-F 2026 |
STRATEGIC REPORT | GOVERNANCE report | FINANCIAL STATEMENTS | ADDITIONAL INFORMATION |
In addition, the social acceptability of Diageo’s products may decline due to regulatory action, negative publicity surrounding, and/
or public concerns about, alcohol consumption. For example, a number of jurisdictions, such as Canada and the United States, are
updating their guidance around alcohol. Such anti-alcohol publicity or sentiment could also result in regulatory action, litigation or
customer complaints against companies in the beverage alcohol industry and have an adverse effect on Diageo’s business and
financial results.
Diageo’s business has historically benefitted from the launch of new-to-world products or variants of existing brands (such as
Smirnoff Crush), and continuing product innovation and the creation of extensions to existing brands remain significant elements of
Diageo’s growth plans. The launch and ongoing success of new-to-world products or global brand extensions is inherently uncertain,
especially with respect to such products’ initial and continuing appeal to consumers. Similarly, brands or ventures that Diageo
acquires may not deliver the expected benefits and/or may not scale as expected. The failure to successfully launch a new product or
an extension of an existing brand, or to maintain the product’s initial popularity, can give rise to inventory write-offs and other costs,
as well as negatively impact the consumer perception of and thus the growth of an existing brand. There can be no assurance of
Diageo’s continuing ability to develop and launch successful new products or variants of existing products, or to ensure or extend the
profitable lifespan of its existing products.
Diageo is subject to tax uncertainties, including changes in tax obligations, tax laws, regulations and interpretations, as well
as enforcement actions by tax authorities.
Changes in the political and economic climate have resulted in an increased focus on tax collection in recent years, leading to greater
uncertainty for multinational companies such as Diageo. In recent years, tax authorities have shown an increased appetite to
challenge the methodology used by multinational enterprises, even where a company complies with international best practice
guidelines. Changes in tax law (including tax rates), tax treaties, accounting policies and accounting standards, including as a result of
the Organisation for Economic Co-operation and Development’s review of base erosion and profit shifting and the European Union’s
anti-tax abuse measures, combined with increased investments by governments in the digitisation of tax administration, could also
result in increased levels of audit activity, investigations, litigation or other actions by relevant tax authorities and increased
complexity of data requirements and compliance processes. Diageo also operates in a large number of jurisdictions with complex tax
and legislative regimes and whose related laws and regulations are open to subjective interpretation. These countries include Brazil,
India and countries in East Africa, where Diageo is currently involved in a large number of tax cases, including some cases that could
potentially create significant exposures or liability for Diageo. Diageo may be subject to further future tax assessments in these
jurisdictions based on the same or similar matters.
Assessing the potential financial exposure arising from these and other cases is particularly challenging due to the uncertain fiscal and
political environment in these jurisdictions. Any such investigations, litigation or other actions may result in damages, penalties or
fines as well as reputational damage to Diageo or its brands, and as a result, adversely impact Diageo’s business and financial results.
For additional information with respect to legal proceedings, including potential tax liabilities in Brazil and India, see note 19 to the
consolidated financial statements.
Beverage alcohol products are also subject to national excise taxes, import duties, sales or value-added taxes and other types of direct
and indirect taxes in most countries around the world, most of which are specific to individual jurisdictions. Increases in any such
taxes, or the imposition of new taxes, have had and could continue to have a material adverse impact on Diageo’s revenue from sales
or its margin, either through reducing the overall level of beverage alcohol consumption, having a disproportionate impact on certain
categories and/or by encouraging consumers to switch to lower-taxed categories of beverage alcohol.
In addition to the above, other significant changes in tax law, tax treaties, related accounting policies and accounting standards could
also increase Diageo’s cost of doing business and lead to a rise in Diageo’s effective tax rate and/or unexpected tax exposures, thus
adversely affecting Diageo’s business and financial results.
Any increases in the cost of production could affect Diageo’s profitability, including increases in the cost of commodities,
labour and/or energy due to inflation.
The components that Diageo uses for the production of its beverage alcohol products are largely commodities purchased from
suppliers which are subject to price volatility caused by factors outside of Diageo’s control, including, inflation, changes in global
and regional supply and demand, weather and/or agricultural conditions, fluctuations in relevant exchange rates and/or governmental
controls. Fluctuations in the prices of various commodities, including energy prices, may result in unexpected increases in the cost of
the raw materials Diageo uses in the production of its products, including the prices of the agricultural commodities, flavourings and
other raw materials necessary for Diageo to produce its various beverages, as well as glass bottles and other packaging materials, thus
increasing Diageo’s production costs.
Diageo may also be adversely affected by shortages of any such materials, by increases in energy costs resulting in higher
transportation, freight or other related operating costs, or by inflation in any of the jurisdictions in which it produces its products.
Diageo may not be able to increase its prices or create sufficient efficiencies to offset these increased costs without suffering reduced
volumes of products sold and/or decreased operating profit.
F-15 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information |
While Diageo continues to closely monitor its operating environment, it is possible that the ongoing volatility related to significant
cost inflation along with a potential weakening of consumer spending power may have an adverse effect on Diageo’s business
financial condition and results of operations.
Diageo is subject to litigation specifically directed at the beverage alcohol industry, as well as to other litigation.
Diageo and other companies operating in the beverage alcohol industry are, from time to time, exposed to class action or other private
or governmental litigation and claims relating to product liability, alcohol marketing, advertising or distribution practices, alcohol
abuse problems or other health consequences arising from the consumption or misuse of alcohol, including underage drinking.
Diageo may also be subject to litigation arising from legacy and discontinued activities, as well as other litigation in the ordinary
course of its operations, including in connection with commercial disputes and the acquisition or disposal of businesses or other
assets. Diageo is further subject to the risk of litigation, enforcement or other regulatory actions by tax, customs, competition,
environmental, anti-corruption and other relevant regulatory authorities, including with respect to the methodology for assessing
importation value, transfer pricing or compliance matters. Diageo’s listing in the United States may also expose it to a higher risk of
securities-related class action suits, particularly following any significant decline in the price of Diageo’s securities. Any such
litigation or other actions may be expensive to defend and result in damages, penalties or fines as well as reputational damage to
Diageo or its brands, and/or impact the ability of management to focus on other business matters, and may adversely affect Diageo’s
business and financial results. For additional information with respect to legal proceedings, see note 19 to the consolidated financial
statements.
Risks related to regulation
Regulatory decisions and changes in the legal, and regulatory environment could increase Diageo’s costs and liabilities or
limit its business activities.
Diageo’s operations are subject to extensive regulatory requirements relating to production, distribution, importation, marketing,
advertising, sales, pricing, labelling, packaging, product liability, antitrust, labour, employee health and safety, pensions, compliance
and control systems, and environmental issues. Changes in any such applicable laws, regulations or governmental or regulatory
policies and/or practices could cause Diageo to incur material additional costs or liabilities that could adversely affect its business. In
particular, governmental bodies in jurisdictions where Diageo operates may impose new product, production or labelling
requirements, limitations on the marketing, advertising and/or promotion activities used to market beverage alcohol, restrictions on
retail outlets, restrictions on importation and distribution or other restrictions on the locations or occasions where beverage alcohol is
sold which directly or indirectly limit the sales of Diageo products. For example, Ireland passed a law requiring new health warning
labels on alcohol beverage products which was supposed to come into effect in May 2026, but has been delayed until 2028.
Regulatory authorities under whose laws Diageo operates may also have enforcement power that can subject the group to actions
such as product recalls, product seizures or other sanctions which could have an adverse effect on Diageo’s sales or damage its
reputation.
Diageo is also subject to antitrust and competition laws in many of the jurisdictions in which it operates. In a number of these
jurisdictions, there has been an increase in the enforcement of these laws during recent years. For example, heightened regulatory
scrutiny due to macroeconomic volatility is impacting competition within consumer goods sectors, leading to increased dawn raids
and investigations in Europe, Africa and India, with structured collaborations posing additional risks. Should this trend continue, this
may, among other things, result in increased regulatory scrutiny of Diageo, potential reputational damage and/or increased costs
related to compliance.
Diageo is required to comply with data privacy laws and regulations in many of the markets in which it operates. For example,
Diageo is subject to the General Data Protection Regulation (“GDPR”) in the European Union, the United Kingdom General Data
Protection Regulation (“UK GDPR”), data privacy legislation in the United States and the Personal Information Protection Law
(“PIPL”) in China. Breach of any of these laws or regulations could lead to significant penalties (including, under the GDPR and the
UK GDPR, a fine of up to 4% of annual global turnover), other types of government enforcement actions, private litigation and/or
damage to Diageo’s reputation, as well as impact Diageo’s ability to deliver on its digital productivity and growth plans. Diageo is
also required to comply with applicable listing rules for any listed entity within the group. Such listing rules may prohibit selective
disclosure of information, meaning that Diageo is only able to obtain relevant information for the listed entity when it is otherwise
publicly released.
In many of the markets in which Diageo operates, the overall legal and regulatory landscape has become more complex in recent
years, with increasing regulatory scrutiny and evolving requirements in areas such as fraud prevention, human rights, data privacy
and artificial intelligence. Changes to the regulatory environment in which Diageo operates could cause Diageo to incur material
additional costs or liabilities, which could adversely affect Diageo’s business and financial performance. For additional information
on the increased complexity of the legal and regulatory landscape please see "— Climate change, or legal, regulatory or market
measures to address climate change or other environmental concerns, may negatively affect Diageo’s business or operations, and
water scarcity or water quality issues could negatively impact Diageo’s production costs and capacity" above.
F-16 | Diageo Form 20-F 2026 |
STRATEGIC REPORT | GOVERNANCE report | FINANCIAL STATEMENTS | ADDITIONAL INFORMATION |
Defective internal controls could adversely affect Diageo’s financial reporting and management processes, as well as the
accuracy of public disclosures.
Diageo has in place internal control and risk management systems in relation to its financial reporting process and its process for the
preparation of consolidated financial statements. In addition, the Board and management undertakes a review of the consolidated
financial statements in order to ensure that the financial position and results of the group are appropriately reflected therein. Diageo is
required by the laws of various jurisdictions to publicly disclose its financial results, as well as developments that could materially
affect its financial results. Accurate disclosures provide investors and other market professionals with information to understand
Diageo’s business. In addition, the reliability of financial reporting is important in ensuring that the business’ management and its
results are based on reliable data.
Regulators routinely review the financial statements of listed companies such as Diageo for compliance with existing, new or revised
accounting and regulatory requirements. Should Diageo be subject to an investigation into potential non-compliance with accounting
and disclosure requirements or be found to have breached any such requirements, this may, among other things, lead to restatements
of previously reported results, significant penalties, public censure and/or litigation. Any such regulatory action could adversely
affect Diageo’s business and financial results, reputation and the price of Diageo’s securities. In addition, defective internal controls
could result in inaccuracies or lack of clarity in public disclosures and could result in a material misstatement of financial reporting.
This could create market uncertainty regarding the reliability of the data presented and have an adverse impact on Diageo’s reputation
and the price of Diageo’s securities.
Any failure by Diageo to comply with anti-corruption laws, anti-money laundering laws, economic sanctions laws, trade
restrictions or similar laws or regulations, or any failure of Diageo’s related internal policies and procedures designed to
comply with applicable law, may have a material adverse effect on Diageo’s business and financial results, Diageo's
reputation and the price of Diageo' securities.
Diageo produces and markets its products on a global scale, including in certain countries that, as a result of political and economic
instability, a lack of well-developed legal systems and/or potentially corrupt business environments, have a higher level of corruption
risk than other countries. There is enhanced scrutiny and enforcement by regulators in many jurisdictions of anti- corruption laws,
including pursuant to the US Foreign Corrupt Practices Act of 1977, the UK Bribery Act 2010, and certain jurisdictions’ equivalent
local laws. Such enforcement has been enhanced by applicable regulations in the United States, which offer substantial financial
rewards to whistleblowers for reporting information that leads to monetary fines, and the United Kingdom, which has enacted the
Crime and Policing Act 2026 significantly expanding corporate criminal liability which came into effect in June 2026.
If Diageo or any of its associates fails to comply with anti-corruption laws (including anti-bribery laws), anti-money laundering laws
or with existing or new economic sanctions or trade restrictions imposed by the United States, the European Union or other national
or international authorities that are applicable to Diageo or its associates, including any sanctions introduced in response to Russia's
invasion of Ukraine or other conflicts, Diageo may be exposed to the costs associated with investigating potential misconduct as well
as significant financial penalties and/or reputational damage.
While Diageo has implemented and maintains internal practices, procedures and controls designed to ensure compliance with anti-
corruption laws, sanctions, trade restrictions or similar laws and regulations, and routinely conducts investigations, either at its own
initiative or in response to requests from regulators in connection with compliance with such internal controls, there is no guarantee
that such procedures will be effective in preventing compliance failures at Diageo or at third parties with whom Diageo maintains
business relationships. In addition, any lack of an embedded business integrity culture and associated control framework in any
market could increase the risk of non-compliance with relevant laws and regulations.
Any investigations and lawsuits, regardless of the ultimate outcome of the proceeding, are time consuming and expensive and can
divert the time and effort of Diageo’s personnel, including senior management, from its business. Adverse publicity, legal and
enforcement proceedings, and enhanced government scrutiny can also have a negative impact on Diageo’s reputation. To the extent
that violations of anti-corruption, sanctions and/or trade restriction laws and regulations, and/or Diageo’s internal policies and
procedures, are found, or if Diageo’s internal policies and procedures are found not to comply with applicable law, possible
regulatory sanctions, fines and other penalties or consequences, including reputational damage, may also be material. For additional
information with respect to legal proceedings, see note 19 to the consolidated financial statements.
F-17 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information |
Risks related to Diageo’s business
Diageo may incur significant cost in connection with attempting to achieve its ESG ambitions, and may be subject to
increased scrutiny and reputational risk if it is unable to make sufficient progress against or achieve its objectives.
Diageo has articulated certain ESG ambitions as part of its ‘Spirit of Progress’ targets and is undertaking a number of strategic and
operational initiatives in order to achieve those ambitions. In addition, from time to time, Diageo may introduce new initiatives in the
future to make progress against those targets, as well as to address other ESG-related issues that arise. Diageo expects to incur
significant costs and investments in connection with any such initiatives (including those related to human resources, technology,
capital projects and operations), and as a result of compliance with new laws, regulations, reporting frameworks and industry
practices. Consistent with many companies across the alcohol beverage industry, Diageo expects that future innovations and
technological improvement, and increased collaboration with governments and other businesses, including those within the alcohol
beverage industry which may compete with Diageo, will be required in order to achieve and sustain its ESG-related ambitions. In
addition, the data, methodologies and standards that Diageo has used to develop its targets will likely evolve over time. Any changes
could result in revisions to Diageo’s internal frameworks and reported data, and could mean that reported figures are not reconcilable
or comparable year on year.
Furthermore, Diageo’s own current expectations with respect to its expected pathway to achieve its Spirit of Progress ambitions
(including achieving “net zero”) are subject to change as underlying assumptions and its own operations change over time, including
as a result of new information, changed expectations and innovation. In the event that Diageo is unable to make sufficient progress in
a timely manner or achieve its ESG-related ambitions, it may be subject to additional scrutiny and criticism, and may face regulatory
censure and/or fine. In addition, stakeholders and others who disagree with Diageo’s approach may speak negatively or advocate
against Diageo or its products, with the potential to harm Diageo’s reputation or business through negative publicity, adverse
government treatment, product boycotts or other means. Diageo could suffer reputation damage and a loss of trust from consumers,
investors and other stakeholders, and/or the price of Diageo’s securities could be adversely affected, if it fails to achieve any of these
goals for any reason or is otherwise perceived to be failing to act responsibly with respect to the environment or to effectively
respond to regulatory requirements concerning climate change.
Diageo may be adversely affected by cyber-attacks and IT threats or other disruptions to core business operations including
manufacturing and supply, business service centres, artificial intelligence and/or information systems.
Diageo relies on information technology (IT) systems, networks and services, including internet sites, data hosting and processing
tools, hardware (including laptops and mobile devices), software, artificial intelligence (AI) and technical platforms and applications,
to process, store and transmit large amounts of data and to help it manage its business. Diageo uses its IT systems, networks and
services for, among other key business functions, the hosting of its primary and brand-specific websites and its internal network and
communications systems; supply and production planning, execution and shipping; the collection and storage of customer, consumer,
investor relations and employee data; processing various types of transactions, including summarising and reporting its results of
operations; the development and storage of strategic corporate plans; and ensuring compliance with various legal, regulatory and
tax requirements. As with all large systems, Diageo’s IT systems, including those managed or hosted by third parties, could be
subject to sophisticated cyber-attacks (including phishing and ransomware attacks), IT threats by external or internal parties intent on
disrupting production or other business processes or otherwise extracting or corrupting information, or other cyber incidents, such as
the CrowdStrike incident in July 2024 where computers were affected on a global basis (including at Diageo). The sophistication of
cybersecurity threat actors also continues to grow and evolve, including the risks associated with emerging technologies, such as AI
used for nefarious purposes and deepfake deception and impersonation attacks through platforms like WhatsApp aimed at gaining
access to internal information. In recent years, ransomware attacks against some of Diageo’s peers have become more frequent,
which has increased the likelihood of Diageo being targeted for a similar cyber-attack. Diageo’s vulnerability to such cyber-attacks
could also be increased due to a significant proportion of its employees working remotely. Unauthorised access to Diageo’s IT
systems could disrupt Diageo’s business, including its beverage alcohol and other production capabilities, and/or lead to theft, loss or
misappropriation of critical assets or to outside parties having access to confidential or even highly confidential information,
including privileged data, personal data or strategic information of Diageo and its current or former employees, customers and
consumers. Such information could also be made public in a manner that harms Diageo’s reputation and financial results and,
particularly in the case of personal data, could lead to regulators imposing significant fines on Diageo.
Diageo’s use of shared business services centres, located in Hungary, Colombia, the Philippines and India, to deliver transaction
processing activities for markets and operational entities also means that any sustained disruption to a centre or issue impacting the
reliability of the information systems used could impact a large portion of Diageo’s business operations. The captive shared business
services centres in Hungary and India also perform certain central finance activities, including elements of financial planning and
reporting, treasury and HR services. Any transitions of transaction processes to, from or within shared business services centres, as
well as other projects which impact Diageo’s IT systems, could lead to business disruption. In addition, if Diageo does not allocate
and properly manage the resources necessary to build, sustain and protect these centres or its wider IT systems, it could be subject to
losses attributable to processing inefficiencies, the unexpected failure of computer systems, devices and software used by its IT
platforms, production or supply chain disruptions, the unintended disclosure of sensitive business or personal data and the corruption
or loss of accounting data necessary for it to produce accurate and timely financial reports. In certain circumstances, such disruptions
or failures could also result in property damage, breaches of regulations, litigation, legal liabilities and reparation costs, thereby
having a material adverse effect on Diageo’s business and financial results.
F-18 | Diageo Form 20-F 2026 |
STRATEGIC REPORT | GOVERNANCE report | FINANCIAL STATEMENTS | ADDITIONAL INFORMATION |
Additionally, Diageo has increasingly integrated AI into its business operations, including leveraging AI in its marketing efforts and
in platforms such as the Spirits Intelligence Platform which uses cask-level data and predictive modelling to optimise yields of
Diageo's matured spirits. While these technologies are designed to improve operational efficiency and decision-making, their
deployment creates certain risks, including the potential for algorithmic errors or biases that could lead to suboptimal business
decisions; reliance on data quality and integrity, where inaccurate or incomplete data could compromise the effectiveness of AI-
driven processes; and the need for specialized talent to develop, maintain, and oversee these systems. Additionally, the technologies
underlying AI and their use cases are rapidly developing, and it is not possible to predict all of the legal, operational or technological
risks related to the use of AI. While new AI initiatives, laws and regulations are emerging and evolving, uncertainty will remain, and
Diageo's obligation to comply with the evolving regulatory landscape could entail significant costs, negatively affect Diageo's
business, or limit Diageo's ability to incorporate certain AI capabilities into its business. Any of these factors or outcomes could
damage Diageo's brands and reputation, result in the loss of valuable property and information or otherwise adversely impact
Diageo's business.
Loss, operational disruptions to or closure of a production site, office or other key facility due to unforeseen or catastrophic
events or otherwise, could have a material adverse effect on Diageo's business and financial results.
International and domestic security risks including terrorism and military conflicts, as well as natural hazards, also pose a threat to the
safety of Diageo’s employees and third parties at its offices, sites and events, as well as its property and products. Diageo operates
production facilities around the world. If there was a technical failure, or a fire, explosion, flood or other significant event, at one or
more of Diageo’s production facilities, this could result in significant damage to the facilities, plant or equipment, their surroundings
and/or the local environment and/or injury or loss of life. Such an event could also lead to a loss of production capacity, result in
regulatory action or legal liability, and/or damage Diageo’s reputation.
Diageo has a substantial inventory of aged product categories, including Scotch whisky, which may mature over periods of up to 30
years or more. The loss through contamination, fire or other natural disaster of all or a portion of the stock of any one of those aged
product categories, including as a result of climate change-related severe weather events, could result in a significant reduction in
supply of those products, and consequently, Diageo would not be able to meet consumer demand for those products as such demand
arises. There can be no assurance that insurance proceeds would cover the replacement value of Diageo’s maturing inventory or other
assets in the event that such assets were lost due to contamination, fire or natural disasters, destruction resulting from negligence or
the acts of third parties, or any failure of information systems or data infrastructure.
Contamination, counterfeiting or other events could harm the integrity of customer support for Diageo’s brands and
adversely affect the sales of those brands.
The success of Diageo’s brands depends upon the positive image that consumers have of those brands, and contamination, whether
arising accidentally, or through deliberate third party action, or other events that harm the integrity of consumer support for those
brands, could adversely affect their sales and Diageo’s corporate and brand reputation. Diageo purchases most of the raw materials
for the production and packaging of its products from third party producers or on the open market. Diageo may be subject to liability
if contaminants in those raw materials or defects in the distillation, fermentation or bottling process lead to reduced beverage quality
or illness among, or injury to Diageo’s consumers, or if the products do not otherwise comply with applicable food safety regulations.
Diageo has had to recall products in the past due to contamination or damage and may have to do so again in the future. A significant
product liability judgement or a widespread product recall may cause harm to consumers and negatively impact sales and profitability
of the affected brand or all of Diageo’s brands for a period of time depending on product availability, competitive reaction and
consumer attitudes. Even if a product liability claim is unsuccessful or is not fully pursued, any resulting negative publicity could
adversely affect Diageo’s reputation with existing and potential customers as well as its corporate and individual brand image.
Additionally, third parties sell products which are either counterfeit versions of Diageo brands or inferior brands that look like Diageo
brands, and consumers of Diageo brands could confuse Diageo products with such counterfeit products. A rise in methanol poisoning
in Brazil and Türkiye poses an increased risk to consumer safety from counterfeit spirits. A negative consumer experience with such
a product could cause them to refrain from purchasing Diageo brands in the future and impair Diageo’s brand equity, thus adversely
affecting Diageo’s business. There is also a risk of physical threats to Diageo’s people due to the illicit nature of the type of
organisations or individuals involved in counterfeit activities.
F-19 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information |
The value of Diageo’s brands and its net sales may be negatively affected by its failure to maintain its brand image and
corporate reputation or adapt to a changing media environment.
The value of Diageo’s brands and its profitability depends heavily on its ability to maintain its brand image and corporate reputation.
Adverse publicity, whether or not justified, may tarnish Diageo’s reputation and cause consumers to purchase products offered by its
competitors instead of by Diageo. Such adverse publicity could arise as a result of a perceived failure by Diageo to make adequate
positive social contributions, including in relation to the level of taxes paid by Diageo, or ESG-related performance, or by any failure
of internal controls or compliance breaches leading to violations of Diageo’s Code of Business Conduct, Code of Ethics, its other key
policies or the laws or regulations of the jurisdictions in which it operates. Diageo has also established and may continue to establish
relationships with brand founders and/or other public figures to develop and promote its brands, and to establish brand equity, history
and authenticity with consumers. If certain such individuals were to stop promoting a Diageo brand or brands contrary to their
agreements, Diageo’s business could be adversely affected. In addition, certain such individuals could engage in behaviour, make
statements or use their platforms in a manner that reflects poorly on Diageo’s brand image and corporate reputation or otherwise
adversely affects Diageo. Diageo may be unable to prevent such actions, and the actions Diageo takes to address them may not be
effective in all cases. Negative claims or publicity involving Diageo, its culture and values, brands, or any of its key employees or
brand endorsers could damage Diageo’s brands and/or reputation, regardless of whether such claims are accurate, causing Diageo to
lose existing customers or fail to attract new customers, and may have a material adverse effect on Diageo’s business and financial
results.
In addition, Diageo’s ability to maintain, extend, and expand its brand image depends on its ability to adapt to a rapidly changing
media environment. Diageo maintains an online presence as part of its business operations, and increasingly relies on social media
and online dissemination of advertising campaigns. Diageo’s reputation may suffer if it is perceived to fail to appropriately restrict
access to its online content or if it breaches any marketing regulation, code or policy. In addition, the growing use of social and
digital media increases the speed and extent that information or misinformation and opinions can be shared. Negative posts or
comments about Diageo, its brands or its products on social or digital media, whether or not valid, could seriously damage
Diageo’s brands and reputation. Any failure to maintain, extend, and expand Diageo’s brand image or adapt to a changing media
environment may have a material adverse effect on Diageo’s business and financial results and reputation, as well as the price of
Diageo’s securities.
Diageo’s operations and financial results may be adversely affected by fluctuations in exchange rates and fluctuations in
interest rates.
Diageo is engaged in an international business that operates in, and makes sales into, countries with different currencies, while its
financial results are presented in US dollars. As a result, Diageo is subject to foreign currency risk due to exchange rate movements,
which affect the US dollar value of its transactions, as well as the translation of the results and underlying net assets of its operations
to the US dollar. Movements in exchange rates used to translate foreign currencies into US dollars have had and may continue to
have a significant impact on Diageo’s reported results of operations from year to year. Exchange rate fluctuations may also expose
Diageo to increased interest expense on borrowings denominated in currencies which appreciate against the US dollar. As a result,
Diageo’s business and financial results may be adversely affected by fluctuations in exchange rates.
In addition, Diageo may be adversely impacted by fluctuations in interest rates, mainly through increased interest expense.
Accommodative monetary policy had generally made borrowings less expensive in the markets in which Diageo operates until recent
years. However, the global economy has experienced persistently high levels of inflation, while benchmark interest rates, such as the
US federal funds rate, have risen. Such inflationary pressures stem from and are compounded by ongoing disruptions in the global
supply chain due to geopolitical tensions, including the conflicts in Ukraine and the Middle East and rising energy prices (particularly
for oil and gas). As a result, the availability and prices of inputs available to Diageo from its first- and second-tier suppliers are
expected to be volatile and inflationary pressures more broadly are expected to persist. As a result, market expectations are currently
that benchmark interests rates could continue to rise and may be accompanied by other measures to reverse accommodative policy,
such as quantitative tightening. Sharp increases and/or unexpected moves in interest rates due to any of the foregoing factors could
have macroeconomic effects that materially adversely affect Diageo’s business and its financial results. In particular, rising interest
rates could lead to a material increase in Diageo’s funding costs. In addition, if there is an extended period of constraint in the capital
markets and, at the same time, cash flows from Diageo’s business are under pressure, Diageo’s ability to fund its long-term strategies
may be materially adversely impacted.
Any failure by Diageo to execute its strategic business transformation projects could adversely affect Diageo’s business and
operating processes, or its business and financial results.
Failure to execute strategic business transformation projects effectively, namely the implementation of a new operating model, the
Accelerate programme, the Supply Chain Agility programme and Diageo’s portfolio of digital capability builds including AI and
cyber-enabled capabilities, could result in delays or changes to their expected benefits or negatively affect Diageo’s ability to
continuously improve its internal control and reporting environment. Any delay or disruption in Diageo’s strategic business
transformation projects may have a negative impact on Diageo’s critical business and operating processes and/or impact the ability of
management to focus on other business matters, and may adversely affect its business and operating processes, and its business and
financial results.
F-20 | Diageo Form 20-F 2026 |
STRATEGIC REPORT | GOVERNANCE report | FINANCIAL STATEMENTS | ADDITIONAL INFORMATION |
As the external environment continues to change, including those changes driven by evolving stakeholder expectations, consumer
behaviours and preferences, and heightened regulatory requirements, the ambition and objectives of Diageo’s strategic transformation
initiatives may need to adapt, which may require new and different capabilities and skills within Diageo’s workforce and may
negatively impact Diageo’s ability to deliver the anticipated benefits in the time period expected, or at all.
Given the state of volatility and disruption in the external environment in recent years and the increased pace of change being
experienced in Diageo’s business and industry, failure to have the right strategic partnerships and talent in key positions to deliver
and sustain our strategic business transformation initiatives going forward may result in delays, unforeseen costs and other
disruptions to Diageo’s business, competitive positioning and financial performance.
Diageo may not be able to derive the expected benefits from its business strategies, including the implementation of
competitive category strategies, investments in joint ventures, productivity initiatives or inventory forecasting.
There can be no assurance that Diageo’s business strategies will result in opportunities for growth and improved margins. Part of
Diageo’s strategy includes implementing a category strategy across the business, including price repositioning across the portfolio
and additional formats such as smaller packs and RTD expressions. There is no guarantee that this strategy will be successful, and it
may be more difficult to implement in certain jurisdictions such as North America where the three-tier system adds complexity.
In the future, Diageo’s business strategies may give rise to further business combinations, acquisitions, disposals, joint ventures and/
or partnerships (including any associated financing or the assumption of actual or potential liabilities, depending on the transaction
contemplated). However, there can be no assurance that any such transaction would be completed and/or that it would deliver the
anticipated benefits, cost savings or synergies.
Diageo may from time to time hold interests and investments in joint ventures and associated companies in which it has a non-
controlling interest and may continue to do so. In these cases, Diageo may have limited influence over, and limited or no control of,
the governance, performance and cost of operations of the joint ventures and associated companies. Some of these joint ventures and
associated companies may represent significant investments, and these investee entities or other joint venture partners or equity
holders may make business, financial or investment decisions contrary to Diageo's interests (including with respect to the distribution
of profits and dividends) or may make decisions different from those that Diageo itself may have made.
Certain of Diageo’s aged product categories may mature over decades, and forecasts of demand for such products in future periods
are subject to significant uncertainty. There is an inherent risk of forecasting error in determining the quantity of maturing stock to
lay down in a given year for future consumption as a result of changes in business strategy, market demand and unplanned shifts in
consumer preferences, introductions of competing products and other changes in market conditions. Any forecasting error could lead
to Diageo being unable to meet the objectives of its business strategy, future demand or lead to a surplus of inventory and consequent
write-down in value of maturing stocks. If Diageo is unable to accurately forecast demand for its products or efficiently manage its
inventory, this may have a material adverse effect on Diageo’s business and financial results.
Any failure by Diageo to consistently deliver value, service performance, commercial execution and suitable portfolio choices
to its customers could have a material adverse effect on Diageo’s business.
Diageo’s success depends on its ability to maintain good relationships with its customers. Due to increasing customer expectations,
intensifying competition and challenges in customer insight, service capability, commercial execution and back office administration,
there is a risk that Diageo could fail to consistently deliver value to customers and maintain its position as a preferred supplier across
channels. There can be no assurance that Diageo’s customers will continue to purchase its products in the same mix or quantities or
on the same terms as in the past, particularly as increasingly powerful retailers continue to demand lower pricing and develop their
own brands. Disputes with significant customers, including disputes related to pricing or performance, could result in reduced
customer loyalty, a material reduction in sales or changes in the mix of products Diageo sells to customers, loss of negotiation power,
restricted market access, margin erosion, excess inventory and slower revenue growth.
Diageo faces competition that may reduce its market share and margins.
Diageo faces substantial competition from several international companies as well as regional and local companies (including craft
breweries and micro distilleries) in the countries in which it operates and competes with other drinks companies across a wide range
of consumer drinking occasions. Within a number of categories, the beverage alcohol industry has experienced consolidation among
major global producers, as evidenced by business combinations of substantial value carried out by significant competitors in recent
years. Consolidation is also taking place among Diageo’s customers in many countries. In addition, there has been a recent increase
in competition for distribution channels, notably e-commerce channels. These trends may lead to stronger competitors, increased
competitive pressure from customers, negative impacts on Diageo’s distribution network (including sub-optimal routes to customers
and consumers), downward pressure on prices, predatory marketing tactics by Diageo’s competitors and/or a decline in Diageo’s
market share in any of these categories. For example, expansion in the seltzer and ready to drink categories has increased competitive
pressures across product categories and in certain markets (such as in the United States). Adverse developments in economic
conditions or declines in demand or consumer spending may also result in intensified competition for market share, with potentially
adverse effects on sales volumes and prices. Any of these factors may adversely affect Diageo’s results and potential for growth.
F-21 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information |
Diageo’s business may be adversely affected by increased costs for, or shortages of, talent, or by labour strikes or disputes.
Diageo’s business could be adversely affected by labour or skill shortages or increased labour costs due to increased competition for
employees, higher employee turnover, or evolving workforce expectations. There is no guarantee that Diageo will continue to be able
to recruit, retain and develop personnel possessing the skill sets that it requires to deliver its strategy or sustain a high-performance
culture. The loss of senior management or other key personnel or the inability to identify, attract and retain qualified personnel
through succession planning and leadership development could make it difficult to manage Diageo’s operations and adversely affect
Diageo’s business and financial results. In addition, labour strikes, transport strikes, work stoppages or slowdowns within Diageo’s
operations or those of Diageo’s suppliers could adversely impact Diageo.
Diageo’s operations and financial results may be adversely affected by movements in the value of assets and liabilities related
to its pension plans.
Diageo operates a number of pension plans throughout the world, which vary in accordance with local conditions and practices. The
majority of these pension plans are defined benefit plans and are funded by payments to separately administered trusts or insurance
companies. The ability of these pension plans to meet their pension obligations may be affected by, among other things, the
performance of assets owned by these pension plans, the liabilities in connection with the pension plans, the underlying actuarial
assumptions used to calculate the surplus or deficit in the plans, in particular the discount rate and long-term inflation rates used to
calculate the liabilities of the pension funds, and any changes in applicable laws and regulations. If there are significant declines in
financial markets and/or deterioration in the value of fund assets or changes in discount rates or inflation rates, Diageo may need to
make substantial contributions to these pension funds in the future.
Furthermore, if the market values of the assets held by Diageo’s pension funds decline, the valuations of assets by the pension
trustees decline or the valuation of liabilities in connection with pension plans increase, pension expenses may increase which, as a
result, could materially adversely affect Diageo’s financial position. There is no assurance that interest rates or inflation rates will
remain constant, that pension fund assets can earn the assumed rate of return annually or that the value of liabilities will not fluctuate
significantly. Diageo’s actual experience may also be significantly more negative than the assumptions used.
Diageo’s operations may be adversely affected by failure to maintain or renegotiate distribution, supply, manufacturing or
licence agreements on favourable terms.
Diageo’s business has a number of distribution, supply, manufacturing or licence agreements for brands owned by it or by other
companies. These agreements vary depending on the particular brand, but tend to be for a fixed number of years. There can be no
assurance that Diageo will be able to renegotiate its rights on favourable terms when these agreements expire or that they will not
be terminated. Failure to renew these agreements on favourable terms, or any disputes with distributors of Diageo’s products or
suppliers of raw materials, could have an adverse impact on Diageo’s business and financial results.
Diageo may not be able to protect its intellectual property rights.
Given the importance of brand recognition to its business, Diageo has invested considerable effort in protecting its intellectual
property rights, including trademark registration and domain names. Diageo’s patents cover some of its process technology, including
some aspects of its bottle marking technology. Diageo also uses security measures and agreements to protect its confidential
information and trade secrets. However, Diageo cannot be certain that the steps it has taken will be sufficient or that third parties will
not infringe on or misappropriate its intellectual property rights in its brands or products or, indeed, that Diageo will not inadvertently
infringe a third party’s intellectual property rights. Moreover, some of the countries in which Diageo operates offer less intellectual
property protection than Europe or North America. Given the attractiveness of Diageo’s brands to consumers, it is not uncommon for
counterfeit products to be manufactured and traded in certain jurisdictions. Diageo cannot be certain that the steps it takes to assist the
authorities to prevent, detect and eliminate counterfeit products will be effective in preventing material loss of profits or erosion of
brand equity resulting from lower quality or even dangerous counterfeit product reaching the market. If Diageo is unable to protect its
intellectual property rights against infringement or misappropriation, this could materially harm its future financial results and ability
to develop its business.
Risks related to Diageo’s securities
It may be difficult to effect service of US process and enforce US legal process against Diageo and its directors.
Diageo is a public limited company incorporated under the laws of England and Wales. The majority of Diageo’s directors and
officers, and some of the experts named in this document, reside outside of the United States. A substantial portion of Diageo’s
assets, and all or a substantial portion of the assets of such persons, are located outside of the United States. Therefore, it may not be
possible to effect service of process within the United States upon Diageo or these persons in order to enforce judgments of US courts
against Diageo or these persons based on the civil liability provisions of US federal securities laws. There is also doubt as to the
enforceability in England and Wales, in original actions or in actions for enforcement of judgments of US courts, of civil liabilities
solely based on the US federal securities laws. In addition, punitive damages in actions brought in the United States or elsewhere may
be unenforceable in England and Wales.
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69 | Diageo Form 20-F 2026 |
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Governance report
Governance report
Contents | |
Chair's introduction to Governance | 70 |
Corporate governance structure and division of responsibilities | 71 |
Board of Directors | 73 |
Executive Committee | 75 |
Corporate governance report | 77 |
Audit Committee report | 89 |
Nomination Committee report | 96 |
Directors’ remuneration report | 100 |
Directors’ report | 130 |
70 | Diageo Form 20-F 2026 |
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Chair's introduction to governance
Providing leadership
and enabling strategic choices
“Through its actions this year, the Board has strengthened
the organisation's competitive position and supported
long-term sustainable shareholder value.”
Dear Shareholder
On behalf of the Board, I am pleased to present Diageo's corporate governance
report for the year ended 30 June 2026, which sets out the role played by
Diageo's Board and governance structures over the course of the year in service
of the long-term success of the company. During the year, the Board has
overseen a transition of the executive leadership and worked with the leadership
team to define changes to the portfolio and strategic orientation of the company
to align with a continuously evolving consumer landscape. The changes also
incorporate the redesign of the company's operating framework to simplify
decision-making, clarify accountability and improve end-to-end execution.
Finally, the leadership, in discussion with the Board, has refreshed the company
purpose, behaviours and culture to reinforce the changes and build
differentiating competencies in key capabilities such as brand building and
innovation, and customer and category management. We are moving at pace,
sharpening and investing in Diageo's competitive edge. While we have
continued to experience challenging headwinds in some of our key markets over
the year, we remain confident that the industry remains attractive with
significant opportunity. The Board believes that the actions which management
is taking will result in increased competitiveness and deliver sustainable
shareholder value.
Sir John Manzoni
Chair
Principal Board decisions | ||
•Changing the company's dividend policy to increase our competitiveness and support the company’s long term financial resilience. •Disposing of non-core portfolio assets to focus on core business and deliver our commitment to strengthen the balance sheet. •Investing to grow Guinness through brewing capacity expansion. | ||
Read more about our principal decisions on page 84. |
Highlights of fiscal 26 | ||
•Appointing a new Chief Executive, Sir Dave Lewis, and a new Non- Executive Director, John Rishton, to the Board. •Conducting a comprehensive review of our opportunities for growth and transforming our strategy with a new operating model. •Using insights gained from workforce engagement, listening sessions and the Our Voice survey to evolve our culture. | ||
Read more about our highlights on pages 78-79. |
Board performance review actions | ||
•Increased focus on end-to-end talent management, including identification of skillset requirements, talent development processes and succession planning. •Increased alignment of Board discussion topics to strategic priorities and key growth opportunities. •Enable more opportunities for the Board to experience external perspectives. | ||
Read more about our actions on page 85. |
Board composition(1) | |||
ò | Chair | ||
ò | Executive Director | ||
ò | Non-Executive Director | ||
Non-Executive Director tenure(1) | |||
ò | 0 – 3 years | ||
ò | 3 – 6 years | ||
ò | 6 – 9 years | ||
Board gender diversity(1) | |||
ò | Male | ||
ò | Female | ||
Board ethnic diversity(1) | |||
ò | Director of minority ethnic background | ||
ò | White European | ||
(1)Data as at 30 June 2026.
71 | Diageo Form 20-F 2026 |
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Corporate governance structure and division of responsibilities
The role
of the Board
The role of the Board is to promote Diageo’s long-
term sustainable success, generating value for our
shareholders. The Board is committed to the highest
standards of corporate governance and risk
management, which is supported by its robust
Reporting
corporate governance framework.
This includes Board Committees (Audit Committee,
Nomination Committee and Remuneration
Committee) as well as management committees which
report to the Chief Executive or Chief Financial
Officer (Executive Committee, Finance Committee,
Disclosure Committee and Filings
Assurance Committee).
Read more about our committees on pages 89-129.
Board of Directors
Chair, Non-Executive Directors, Senior Independent Director
Board Committees
Audit Committee, Nomination Committee, Remuneration Committee
Executive Leadership
Chief Executive, Chief Financial Officer, Executive Committee, Finance
Committee, Disclosure Committee, Filings Assurance Committee
Informing
Business unit risk management
Company Secretary
Roles and division of responsibilities – Board positions
Chair
•Responsible for the operation, leadership
and governance of the Board.
•Ensures all Directors are fully informed
of matters and receive precise, timely and
clear information sufficient to
make informed judgements.
•Sets Board agendas and ensures sufficient
time is allocated to ensure effective debate
to support sound decision-making.
•Ensures the effectiveness of the Board.
•Engages in discussions with shareholders.
•Meets with the Non-Executive Directors
independently of the Executive Directors.
Non-Executive Directors
•Independent, experienced and influential
individuals from diverse range of
industries, backgrounds and countries.
•Constructively challenge the Executive
Directors, develop strategy and scrutinise
performance.
•Satisfy themselves on the integrity of the
financial information, controls and systems
of risk management.
•Set the levels of remuneration
for Executive Directors and
senior management.
•Make recommendations to the Board
concerning appointments to the Board.
Senior Independent Director
•Acts as a sounding board for the Chair and
serves as an intermediary for the other
Directors when necessary.
•Responsible for managing an orderly
succession process for the Chair.
•Together with the other Non-Executive
Directors, leads the review of the
performance of the Chair, taking
into account the views of the Executive
Directors.
•Available to shareholders if they have
concerns where contact through the normal
channels has failed.
Roles and division of responsibilities – Executive leadership positions
Chief Executive
•Develops the group’s strategic direction
for consideration and approval by
the Board.
•Implements the strategy agreed by
the Board.
•Leads and is supported by the
Executive Committee.
•Manages the company and the group.
•Along with the Chief Financial Officer,
leads discussions with investors.
•Is supported by the Finance Committee,
Disclosure Committee and Filings
Assurance Committee in the
management of financial reporting of
the company.
Chief Financial Officer
•Manages all aspects of the group’s
financial affairs.
•Responsible for the management of the
capital structure of the company.
•Contributes to the management of the
group’s operations.
•Along with the Chief Executive, leads
discussions with investors.
•Is supported by the Finance Committee,
Disclosure Committee and Filings
Assurance Committee in the
management of the financial affairs and
reporting of the company.
•Is a member of the Executive
Committee.
Company Secretary
•Ensures information is made available
to Board members in a timely fashion.
•Supports the Chair in setting Board
agendas, designing and delivering Board
inductions and Board evaluations, and
co-ordinates post-evaluation action
plans, including risk review and training
requirements for the Board.
•Advises on corporate
governance matters.
•Is a member of the Executive
Committee as General Counsel.
72 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information |
Corporate governance report
Compliance with the UK Corporate Governance Code
The Board considers that, for the year ended 30 June 2026, Diageo has fully applied the Principles and complied with the Provisions of the UK Corporate Governance
Code 2024 (the Code).
The table below details where content complying with the Code's requirements can be found.
Visit diageo.com for more information.
1 | Board Leadership & Company Purpose | ||
A. | Board of Directors | Board of Directors | 73 |
Board Committee Composition | 73 | ||
Performance Evaluation | 85 | ||
B. | Purpose, Values and Culture | Our turnaround plan | 10 |
'Spirit of Progress' | 32 | ||
C. | Resources and Control Framework | Our turnaround plan | 10 |
Effective risk management | 60 | ||
Corporate Governance Structure and Division of Responsibilities | 71 & 77 | ||
D. | Stakeholder Engagement | Stakeholder Engagement | 80 |
Section 172 Statement | 5 | ||
E. | Workforce Policies and Practices | Our turnaround plan | 10 |
’Spirit of Progress’ | 32 | ||
Business integrity and Human Rights | 34 | ||
Business Integrity Programmes | 93 | ||
2 | Division of Responsibilities | ||
F. | Role of the Chair | Chair's Introduction to Governance | 70 |
Corporate Governance Structure and Division of Responsibilities | 71 | ||
Performance Evaluation | 85 | ||
G. | Division of Responsibilities | Corporate Governance Structure and Division of Responsibilities | 71 |
Composition of the Board | 73 | ||
H. | Role of the Non- Executive Director | Corporate Governance Structure and Division of Responsibilities | 71 |
Board of Directors | 73 | ||
I. | Board Policies, Process, Information, Time and Resources | How the Board Monitors Culture | 87 |
Duties of the Board | 71 | ||
Board Activities | 79 | ||
3 | Composition, Succession and Evaluation | ||
J. | Appointments to the Board | Diversity Succession Planning | 98 |
97 | |||
Recruitment and appointment procedures | 97 | ||
K. | Board Skills, Experience and Knowledge | Composition of the Board | 73 |
L. | Performance Review | Performance Review | 85 |
4 | Audit, Risk and Internal Controls | ||
M. | Independence, and Effectiveness of Internal and External Auditors | Audit Committee Report | 89 |
N. | Fair, Balanced, and Understandable Assessment | Directors' Confirmations | 88 & 93 |
O. | Risk and Internal Controls | Corporate Governance Structure and Division of Responsibilities | 71 |
Effective risk management | 60 | ||
5 | Remuneration | ||
P. | Alignment to Purpose, Values and Long-Term Success | Remuneration Committee Chair's letter | 100 |
Remuneration at a Glance | 108 | ||
Director's Remuneration Policy | 111 | ||
Q. | Remuneration Policy | Remuneration Committee Chair’s letter | 100 |
Director’s Remuneration Policy | 111 | ||
R. | Independent Judgement and Discretion | Remuneration Committee Chair’s letter | 100 |
Consideration of Wider Workforce Remuneration | 117 | ||
Fiscal 26 Board Attendance(1) | Annual General Meeting 2025 | Board (maximum 8) | Audit Committee (maximum 7) | Nomination Committee (maximum 7) | Remuneration Committee (maximum 6) |
Sir John Manzoni, KCB | ü | 8/8 | n/a | 7/7 | n/a |
Sir Dave Lewis(2) | n/a | 4/4 | n/a | n/a | n/a |
Nik Jhangiani | ü | 8/8 | n/a | n/a | n/a |
Susan Kilsby | ü | 8/8 | 7/7 | 7/7 | 6/6 |
Melissa Bethell | ü | 8/8 | 6/7 | 7/7 | 6/6 |
Karen Blackett, CBE | ü | 8/8 | n/a | 6/7 | 6/6 |
Julie Brown | ü | 8/8 | 7/7 | 7/7 | n/a |
Valérie Chapoulaud-Floquet | ü | 8/8 | n/a | 7/7 | 4/6 |
Ireena Vittal | ü | 8/8 | 6/7 | 7/7 | n/a |
John Rishton(3) | ü | 6/6 | 6/6 | 6/6 | n/a |
Former Directors | |||||
Debra Crew(4) | n/a | 0/0 | n/a | n/a | n/a |
(1)Number of scheduled meetings attended/eligible to attend as member of relevant committee or Board. The above table does not include ad hoc meetings or attendance at committees by
non-members.
(2)Sir Dave Lewis was appointed on 1 January 2026.
(3)John Rishton was appointed on 1 November 2025.
(4)Debra Crew resigned on 16 July 2025.
73 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Board of directors
Sir John Manzoni, KCB
Chair 
Nationality: British |
Appointed: Chair and Chair of the Nomination Committee: February 2025 (Appointed Non-Executive Director: October 2020) |
Board skills and competencies
Has strong commercial executive
experience as a former CEO in the
energy sector and non-executive board
level experience, including in the
alcoholic beverage industry, as well as
more recent expertise in public policy
and government affairs.
Key external appointments
Current: Chair, SSE plc; Non-
Executive Director, KBR Inc.
Previous: Chair, Atomic Weapons
Establishment; Chief Executive of the
Civil Service and Permanent Secretary
of the Cabinet Office, HM
Government; President and Chief
Executive Officer, Talisman Energy
Inc; Chief Executive, Refining &
Marketing, BP p.l.c.; Chief Executive,
Gas & Power, BP p.l.c.; Non-
Executive Director, SABMiller plc
Sir Dave Lewis
Chief Executive 
Nationality: British |
Appointed: Chief Executive Officer and Executive Director: January 2026 |
Board skills and competencies
Has extensive chief executive and
board-level experience in leading
global consumer businesses, with
particular expertise in marketing
and growing world-class brands,
alongside a proven track record in
driving operational transformations,
and financial and operational
discipline.
Key external appointments
Current: Non-Executive Director,
PepsiCo; Trustee, The Royal
Foundation of the Prince and Princess
of Wales
Previous: Chair, Haleon plc; Chair,
World Wildlife Fund; Chair, Xlinks;
Group Chief Executive Officer, Tesco
PLC; President, Personal Care,
Unilever PLC; President, Americas,
Unilever PLC; Chairman, UK and
Ireland, Unilever PLC
Nik Jhangiani
Chief Financial Officer 
Nationality: American/British |
Appointed: Chief Financial Officer and Executive Director: September 2024 |
Board skills and competencies
Has many years of finance experience
in roles in the United Kingdom,
Europe, India, Africa and
the United States, including 20 years
in various chief financial officer roles,
having spent most of his career in
consumer and beverage industries.
Key external appointments
Previous: Chief Financial Officer,
Coca-Cola Europacific Partners; Chief
Financial Officer and SVP, Coca-Cola
Enterprises;
Chief Financial Officer, Europe, Coca-
Cola European Partners; Group Chief
Financial Officer, Bharti Enterprises;
Chief Financial Officer, Coca-Cola
Hellenic Bottling Company; Group
Financial Director for Nigeria, Colgate
Palmolive
Previous Diageo roles: Interim
Chief Executive Officer
Susan Kilsby
Senior Independent Director
Nationality: American/British |
Appointed: Senior Independent Director: October 2019 (Appointed Non-Executive Director: April 2018 and Chair of the Remuneration Committee: January 2019) |
Board skills and competencies
Brings wide-ranging corporate
governance and board-level
experience across a number of
industries, including a consumer goods
sector focus, with particular expertise
in mergers and acquisitions, corporate
finance and transaction advisory work.
Key external appointments
Current: Non-Executive Chair,
Fortune Brands Innovations, Inc.;
Vice Chair and Senior Independent
Director, Unilever PLC; Non-
Executive Director and Chair of Talent
and Remuneration
Committee, COFRA Holding AG;
Member and Chair of Remuneration
Committee, the Takeover Panel
Previous: Senior Independent
Director and Chair of Remuneration
Committee, BHP Group Plc, BHP
Group Limited; Senior Independent
Director, BBA Aviation plc; Chair,
Shire plc; Chair, Mergers and
Acquisitions EMEA, Senior Advisor,
Credit Suisse; Non-Executive
Director, Goldman Sachs
International; Keurig Green Mountain;
L’Occitane International; Coca-Cola
HBC; NHS England
Julie Brown
Non-Executive Director 
Nationality: British |
Appointed: Non-Executive Director and Chair of the Audit Committee: August 2024 |
Board skills and competencies
Has extensive experience in financial,
commercial and strategic roles in
international companies operating in
highly regulated industries, in both
executive and
non-executive capacities, including in
her current role as Chief Financial
Officer of a pharmaceuticals company.
Key external appointments
Current: Chief Financial Officer and
Executive Director, GSK plc; Patron,
Oxford University Women in Business;
Member, CFO Leadership Network,
Accounting for Sustainability (part of the
King Charles III Charitable Fund Group
of Companies), Member of The Mayor’s
Business Advisory Board
Previous: Chief Operating and
Financial Officer and Executive
Director, Burberry Group plc; Non-
Executive Director and Chair of the
Audit Committee, Roche Holding AG;
Group Chief Financial Officer and
Executive Director, Smith & Nephew
plc; UK Prime Minister’s Business
Council; various senior commercial,
strategy and finance roles including
Interim Group Chief Financial Officer,
AstraZeneca PLC
Board committees | | Audit Committee | | Executive Committee | | Nomination Committee |  | Remuneration Committee |  | Chair of the committee |
74 | Diageo Form 20-F 2026 |
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Board of directors continued
Melissa Bethell
Non-Executive Director
Nationality: American/British |
Appointed: Non-Executive Director: June 2020 |
Board skills and competencies
Has extensive international corporate
and financial experience, including in
relation to private equity, financial
sectors, strategic
consultancy and advisory services, as
well as having strong non-executive
experience at board level across a
range of industries, including retail,
consumer goods and financial
services.
Key external appointments
Current: Senior Advisor and Director
of investee companies, Atairos
Europe; Non-Executive Director and
Chair of the Remuneration
Committee, Tesco PLC; Non-
Executive Director, Ocean Outdoor
plc; Non-Executive Director and Chair
of the Remuneration Committee, The
Magnum Ice Cream Company
Previous: Managing Director and
Senior Advisor, Private Equity, Bain
Capital; Non-Executive Director,
Atento S.A.; Exor N.V.; Worldpay plc,
Samsonite S.A.
Karen Blackett, CBE
Non-Executive Director
Nationality: British |
Appointed: Non-Executive Director: June 2022 |
Board skills and competencies
Brings expertise in marketing, media
and the creative industries, as well as
broad experience in public policy and
strategic initiatives through a number
of different government, industry and
public bodies.
Key external appointments
Current: Chancellor, University of
Portsmouth; Founding Trustee,
BEO (Black Equity Organisation);
Non-Executive Director, British
Fashion Council.
Previous: HM UK Government
Foreign Commonwealth and
Development Office; UK President,
WPP plc; UK Race Equality Business
Champion, HM UK Government;
Business Ambassador, Department for
International Trade;
Chairwoman, MediaCom UK &
Ireland; Chief Executive Officer,
GroupM UK, MediaCom UK; Chief
Operations Officer, MediaCom
EMEA; Marketing Director,
MediaCom; UK Country Manager,
WPP plc; Non-Executive Director,
The Pipeline, Creative UK
Valérie Chapoulaud-
Floquet
Non-Executive Director
Nationality: French |
Appointed: Non-Executive Director: January 2021 |
Board skills and competencies
Brings strong experience and expertise
in the luxury consumer goods sector,
having spent her career in the industry
working in a number of international
markets, including developed and
emerging markets, and as a former
chief executive in the premium drinks
industry.
Key external appointments
Current: Lead Independent Director
and Chair of Governance Committee,
Danone S.A.; Non-Executive Director,
Acné Studios A.B., Agrolimen S.A.,
Nextstage S.C.A., Basaltes S.A.
Previous: Vice Chair, Sofisport;
Chief Executive Officer, Rémy
Cointreau S.A.; President and CEO for
the Americas, President and CEO for
North America, President South
Europe, Luis Vuitton, LVMH Group;
President and CEO, Louis Vuitton
Taiwan, LVMH Group; President,
Luxury Product Division USA,
L’Oréal Group; Non-Executive
Director, Jacobs Holding AG
John Rishton
Non-Executive Director
Nationality: British |
Appointed: Non-Executive Director: November 2025 |
Board skills and competencies
Has over 40 years’ international
business experience across consumer
and retail sectors, including nearly 14
years as Chief
Executive or Chief Financial Officer, as
well as various finance, commercial,
non-executive and operational roles.
Key external appointments
Current: Non-Executive Director and
Chair, Informa plc; Non-Executive
Director and Chair Designate, Imperial
Brands Plc
Previous: Non-Executive Director
and Chair, Serco Group PLC; Non-
Executive Director and Chair of the
Audit Committee, then Chief
Executive Rolls Royce Group plc; Chief
Financial Officer, later Chief Executive
and President Royal Ahold NV; Chief
Financial Officer British Airways plc;
Non-Executive Director, ICA Gruppen
AB; Non-Executive Director, Allied
Domecq plc; Non-Executive Director,
Unilever plc; Non-Executive Director,
Majid Al Futtaim Holding LLC; Non-
Executive Director, ABPA Holdings
Limited (Associated British Ports)
Ireena Vittal
Non-Executive Director
Nationality: Indian |
Appointed: Non-Executive Director: October 2020 |
Board skills and competencies
Brings a wealth of FMCG experience
from a career in executive consulting
with a focus on consumer goods and
emerging markets, including
India, as well as broad experience in
non-executive board roles in the
United Kingdom and India.
Key external appointments
Current: Non-Executive Director,
Maruti Suzuki India Limited, Asian
Paints Limited; Non-Executive
Director and Advisory Board member,
Urban India Limited; Advisory Board
member, Russell Reynolds Associates
Previous: Head of Marketing and
Sales, Hutchinson Max Telecom;
Partner, McKinsey and Company;
Non-Executive and Lead Independent
Director, Godrej Consumer Products
Limited; Wipro Limited; Housing
Development Finance Corporation
Limited; Titan Company Limited;
Tata Global Beverages Limited;
GlaxoSmithKline Consumer
Healthcare; Compass Group PLC
The Executive Committee membership shown here reflects appointments as at 30 June 2026, except where otherwise indicated.
75 | Diageo Form 20-F 2026 |
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Executive Committee
 | ||
Ewan Andrew President, Global Supply and Procurement & Chief Sustainability Officer | ||
Nationality: British | ||
Appointed: September 2019 | ||
Current external appointments: Member, Scotch Whisky Association Council; Co- Chair, One Planet Business for Biodiversity (OP2B); Member, Gartner Supply Chain Executive Advisory Board Previous Diageo roles: Supply Director, International Supply Centre; Senior Vice President, Supply Chain & Procurement, Latin America and Caribbean; Senior Vice President Manufacturing & Distilling, North America; various supply chain, operational management and procurement roles | ||
 | ||
Natalie Bickford Chief People Officer | ||
Nationality: British | ||
Appointed: July 2026 | ||
Previous relevant experience: Chief People Officer, Sanofi; Group HR Director, Merlin Entertainments; Senior Vice President HR, Global Corporate Services, Sodexo; Human Resources Director, Europe, Sodexo; HR Director UK & Ireland, Sodexo; HR Director, UK Sales & Marketing Company, AstraZeneca PLC; various UK & international HR positions, Kingfisher Plc | ||
 | ||
Hannah Brooks Chief Strategy & Transformation Officer | ||
Nationality: British/American | ||
Appointed: October 2025 | ||
Previous relevant experience: Senior Vice- President, Portfolio & Commercial Transformation roles, Global eCommerce leadership role spanning Strategy, Innovation and Finance, Global Strategy roles, PepsiCo; extensive consulting experience in Consumer & Retail, McKinsey UK and North America | ||
 | ||
Alvaro Cardenas President, Latin America and Caribbean | ||
Nationality: Colombian | ||
Appointed: January 2021 | ||
Previous Diageo roles: Managing Director, Andean Region; Director, End-to-End Global Commercial Processes; Finance Director, South East Asia Region, PUB (Paraguay, Uruguay and Brazil) Region, Andean Region, Colombia | ||
 | ||
Cristina Diezhandino Chief Marketing Officer | ||
Nationality: Spanish | ||
Appointed: July 2020 | ||
Current external appointments: Non- Executive Director, Mandarin Oriental Previous Diageo roles: Global Category Director, Scotch & Managing Director, Reserve Brands; Managing Director, Caribbean and Central America; Marketing & Innovation Director, Diageo Africa; Category Director, Scotch Portfolio & Gins; Global Brand Director, Johnnie Walker Previous relevant experience: Various marketing roles, Allied Domecq Spain, Unilever HPC US, United Kingdom and Spain | ||
 | ||
Randall Ingber General Counsel and Company Secretary | ||
Nationality: Australian/American | ||
Appointed: June 2025 | ||
Previous Diageo roles: General Counsel; Global Counsel, Asia Pacific, Brands, Innovation & Commerce; General Counsel, Asia Pacific, Supply & Procurement, Global Litigation and Africa; Deputy General Counsel, Corporate; Senior Counsel, Global Corporate Relations and Antitrust; Regional Counsel, Southeast Asia and India, Australasia and Japan Previous relevant experience: General Counsel and Company Secretary, Lion Group | ||
76 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information |
Executive Committee continued
 | ||
Daniel Mobley Global Corporate Relations Director | ||
Nationality: British | ||
Appointed: June 2017 | ||
Previous Diageo roles: Corporate Relations Director, Europe Previous relevant experience: Regional Head of Corporate Affairs, India & South Asia, Regional Head of Corporate Affairs, Africa, Group Head of Government Relations, Standard Chartered; extensive government experience including in HM Treasury and Foreign & Commonwealth Office | ||
 | ||
Dayalan Nayager President, EMEA | ||
Nationality: South African/British | ||
Appointed: July 2022 | ||
Previous Diageo roles: President, Europe, Middle East and Africa; President, Africa; Managing Director, Great Britain and Justerini & Brooks, Ireland and France, Global Travel; Regional Director, Global Travel Europe; Commercial Director, South Africa; Customer Marketing Director, South Africa; Key Account Director, South Africa Previous relevant experience: Various positions, Heinz, Mars | ||
 | ||
John O’Keeffe President, North America | ||
Nationality: Irish | ||
Appointed: July 2015 | ||
Previous Diageo roles: President, Asia Pacific & Global Travel and India; President, Asia Pacific & Global Travel; President, Africa & Beer; CEO and Managing Director, Guinness Nigeria; Global Head, Innovation; Global Head, Beer and Baileys; Managing Director, Russia and Eastern Europe; various management and marketing positions | ||
 | ||
Praveen Someshwar Managing Director and CEO of Diageo India | ||
Nationality: Indian | ||
Appointed: April 2025 | ||
Current external appointments: Non- Executive Director, AVPN Limited Previous relevant experience: Managing Director and CEO, HT Media Group; Senior Vice President & General Manager, CEO India Foods, CEO South Asia Beverages, PepsiCo | ||
 | ||
Sujay Wasan President, Asia Pacific | ||
Nationality: Singaporean | ||
Appointed: August 2026 | ||
Previous relevant experience: Senior Vice President and Regional Leader Oral Care, Senior Vice President and Regional Leader Health Care, Chief Executive Office Personal Health Care International including Merck OTC, Senior Vice President Teva Joint Venture Asia, Middle East, Africa, and other senior roles at Procter & Gamble | ||
Sir Dave Lewis and Nik Jhangiani are also members
of the Executive Committee.
Their biographies can be found on page 73.
77 | Diageo Form 20-F 2026 |
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Corporate governance report
Duties of the Board
The Board is responsible for setting the company’s purpose, values and strategy,
and should satisfy itself that these and its culture are all aligned. The Board
exercises control of the company’s affairs with reference to the formal schedule
of matters reserved for the Board’s decision. The schedule is available at https://
www.diageo.com/en/our-business/corporate-governance/committees. In order to
fulfil their duties, procedures are in place for Directors to seek both independent
advice and the advice and services of the Company Secretary, who is
responsible for advising the Board on all governance matters.
Composition of the Board
The Board currently comprises the Non-Executive Chair, two Executive
Directors, the Senior Independent Director, and six independent Non-Executive
Directors. The biographies of all directors are set out in this Annual Report on
pages 73 and 74.
Board's structure and division of responsibilities
The Board is committed to the highest standards of corporate governance and risk
management and is supported by its established corporate governance framework,
illustrated on page 71. This includes the three Board Committees (Audit
Committee, Nomination Committee and Remuneration Committee), which meet
on a regular basis and a Disclosure Committee, which meets on an ad hoc basis,
as well as management committees which report to the Chief Executive or Chief
Financial Officer (Executive Committee, Finance Committee and Filings
Assurance Committee). There is a clear separation of the roles of the Chair, the
Senior Independent Director and the Chief Executive which has been clearly
established and set out in writing, and which was last approved by the Board in
July 2026. A copy of this is available at https://www.diageo.com/en/our-
business/corporate-governance. No individual or group dominates the Board’s
decision-making processes.
Executive direction and control
The Executive Committee, appointed and chaired by the Chief Executive,
supports the Chief Executive in discharging the responsibility for implementing
the strategy agreed by the Board and for managing the company and the group.
It consists of the individuals responsible for the key operational and functional
components of the business: North America, EMEA, Latin America and
Caribbean, Asia Pacific, India, Supply Chain and Procurement and Corporate
(prior to 1 July 2026, Africa and Europe were separate operational components).
The Executive Committee aligns its agenda to the company's strategy and
achieving financial and non-financial performance objectives, each underpinned
by performance metrics to measure progress. The Executive Committee reviews
monthly performance review reports, which is compiled from the previous
month's financial performance data for each market. The Chief Executive is
supported by permanently established committees including the Disclosure
Committee, Finance Committee and Filings Assurance Committee. A summary
of their remits can be found at www.diageo.com.
Board diversity
We recognise that diversity of experience and knowledge, social and ethnic
backgrounds, gender, and cognitive and personal strengths enriches the Board’s
debates and decision-making by enabling a wider range of perspectives and
thinking, and ultimately supports achieving our strategy. In line with the Code,
the Board has adopted a Board Diversity Policy, details of which are set out in
the Nomination Committee report on page 98.
Board skills and experience
Having an appropriate mix of experience, expertise, diversity and independence
is essential for Diageo's Board and its decision-making process. The Board is
comprised of individuals from a diverse range of skills, industries, backgrounds,
genders, ages, nationalities and ethnicities, which enables a broader evaluation
of all matters considered by the Board and contributes to a culture of
collaborative and constructive discussion. The Board skills matrix helps to
identify the experience and expertise of existing directors, required skill sets or
competencies, and the strategic requirements of the company, now and as we
execute our strategy. The key strengths and relevant experience of each Director
are set out on pages 73 and 74, and a matrix of the Board’s current skills and
experience for fiscal 26 is set out below.
Board skills and experience | |
Banking and corporate finance | òòòòòòòòòò |
Commercial matters | òòòòòòòòòò |
Consumer products | òòòòòòòòòò |
Corporate governance | òòòòòòòòòò |
Emerging markets | òòòòòòòòòò |
Finance | òòòòòòòòòò |
Food and beverages | òòòòòòòòòò |
Government and public policy | òòòòòòòòòò |
General management | òòòòòòòòòò |
M&A | òòòòòòòòòò |
Media | òòòòòòòòòò |
Sales and marketing | òòòòòòòòòò |
Strategy | òòòòòòòòòò |
Sustainability | òòòòòòòòòò |
Technology | òòòòòòòòòò |
Transaction advisory | òòòòòòòòòò |
Outside interests, conflicts and independence
The Board has adopted guidelines for dealing with conflicts of interest, with
directors' outside interests being regularly reviewed by the Nomination Committee
and responsibility for authorising conflicts of interest reserved for the Board. In
the case of a potential conflict, the Nomination Committee considers the
circumstances, appropriate controls and protocols, and makes a
recommendation to the Board. The Code also requires the Board to state its
reasons for concluding that a director is independent notwithstanding the
existence of certain relationships or circumstances which are likely to impair or
appear to impair a director's independence, such as existence of certain outside
interests. Following a thorough review, the Board confirmed that it was not
aware of any situations that may or did give rise to conflicts with the interests of
the company, other than those that may arise from directors’ other appointments
as disclosed in their biographies. It also concluded that all of the Non-Executive
Directors remain independent.
Corporate governance requirements
Diageo is a company listed on the London Stock Exchange in the equity shares
(commercial companies) category. The principal corporate governance rules that
apply to Diageo are the Code and the UK Financial Conduct Authority's (FCA)
Listing Rules. We describe how Diageo applied the Code's principles and
complied with its Provisions on page 72. A copy of the Code is publicly
available on the website of the UK Financial Reporting Council,
www.frc.org.uk. Diageo also complies with corporate governance rules
contained in the FCA's Disclosure Guidance and Transparency Rules and
certain related provisions in the UK Companies Act 2006 (the Act). We aim to
conduct our operations in accordance with best practice governance principles
and in compliance with corporate governance requirements applicable in the
countries in which we operate.
Diageo is also listed on the New York Stock Exchange (NYSE), and as such is
subject to the applicable rules of this exchange and jurisdiction, which include
the listing requirements of the NYSE and the rules of the US Securities and
Exchange Commission (SEC), as they apply to foreign private issuers.
Compliance with the provisions of the US Sarbanes-Oxley Act of 2002 (SOx),
as it applies to foreign private issuers, is continually monitored. A more detailed
description of how Diageo complies with US corporate governance rules is set
out on page 219.
78 | Diageo Form 20-F 2026 |
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Corporate governance report continued
Board and Committees' activities
timeline
25
London, UK
Discussion: Full year performance, external
reporting, workforce engagement activities and
business development.
Approvals: Fiscal 25 preliminary results and
annual report, final dividend, funding plan, and
business transformation programme.
Engagement events: Employee townhall.
July & August
Virtual
Discussion: Update on strategy and business
transformation programme.
September
Strategy
Meeting type
Strategy
Meeting type
London, UK
Discussion: Corporate brand perception,
investor relations, strategic reviews of
Guinness and emerging consumer trends.
Engagement events: Q1 trading update and
Annual General Meeting, presentation and
Q&A with investors and shareholders, and
voting on resolutions.
November
London, UK
Discussion: Strategic review of Europe and
MENA, ready-to-drink portfolio.
December
Strategy
Strategy
Meeting type
Meeting type
26
London, UK
Discussion: Half year performance, portfolio
strategy, return of capital and business
transformation programme, strategic review of
NAM, and industry trends.
Approvals: Interim results, capital allocation
and dividend policy.
January & February
Virtual
Discussion: Business development update,
business transformation programme, health and
safety review, and board evaluation feedback.
March
Strategy
Meeting type
Strategy
Meeting type
London, UK
Discussion: Annual Strategy Conference,
including industry, category and regional
reviews, Middle East conflict scenario plans.
Approval: Guinness capacity expansion.
April
Virtual
Discussion: Review audit status and year-end
reporting and reward processes.
Approval: 3 Year Plan and fiscal 27 targets.
June
Strategy
Meeting type
Strategy
Meeting type
Meeting type | |
ò | Board Meeting |
ò | Audit Committee |
ò | Remuneration Committee |
ò | Nomination Committee |
ò | Annual General Meeting |
Annual Strategy Conference | |
Link to strategy | |
| Brands and portfolio |
| Consumer trends |
| Operational excellence |
79 | Diageo Form 20-F 2026 |
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Board activities
Details of the main areas of focus of the Board and its Committees during the year include those summarised below:
Focus area | Fiscal 26 Strategic priority | Stakeholders | |
Strategic matters |
•Held a two-day Annual Strategy Conference (ASC) which
included a comprehensive review of Diageo's business and
operations, including its portfolio by category and by region,
its operating framework and other key strategic topics.
•Received reports on the financial performance of the group
as against the annual plan.
•Monitored progress against key strategic initiatives,
including business transformation programmes.
•Received reports on the macroeconomic environment, socio-
political matters and emerging trends.
•Carried out deep dives into key strategic topics including
Guinness, Europe and MENA, North America and ready-to-
drink products.
•Considered proposed changes to the group's operating
framework, purpose and culture.
| |
Operational matters |
•Reviewed and approved the group's three-year plan and
annual funding plan, insurance, banking and capital
expenditure requirements.
•Regularly reviewed and approved the group’s business
development activities, reorganisations and various other
projects.
•Reviewed progress in upgrading the company's internal
operating systems, ensuring readiness for go-live and
contingency planning.
•Approved capital expenditure investments, having taken into
consideration financial, operational, sustainability and other
factors.
•Reviewed the company’s capital allocation, funding and
liquidity positions, and those of its pension schemes.
•Approved a change in dividend policy, in addition to
approving interim and final dividends.
•Acting through the Nomination Committee, reviewed the
company’s executive and non-executive succession planning
and talent strategy.
•Approved the appointment of a new Chief Executive and a
new Non-Executive Director.
•Monitored the company's global health and safety
programme, operational resilience and business continuity
planning in light of geopolitical developments.
•Acting through the Remuneration Committee, proposed a
new remuneration policy including changes to executive
reward.
| |
ESG matters |
•Reviewed progress in relation to the group's Spirit of
Progress action plan and approved targets for the following
fiscal year.
•Regularly received external perception reports.
•Received reports on workforce engagement over the year.
•Regularly received investor relations reports.
•Received regular updates on ESG matters and progress
against Spirit of Progress targets.
•Carried out an internal evaluation of the Board’s
performance, reviewed results and agreed action points.
•Reviewed and updated key internal governance processes,
including the constitution of the Disclosure Committee.
| |
Assurance and risk management |
•Received reports in relation to material legal matters,
including disputes, regulatory and governance
developments, and areas of legal or regulatory risk.
•On the recommendation of the Audit Committee, approved
the company’s risk footprint, including reviewing and
updating the principal risks.
•On the recommendation of the Audit Committee, approved
the company’s filings, financial and non-financial reporting
including quarterly trading updates, interim and preliminary
results announcements, US filings and Annual Report.
•Acting through the Audit Committee, reviewed the
company's whistleblowing and breach allegation
investigation processes.
| |
Link to strategy | |
| Brands and portfolio |
| Consumer trends |
| Operational excellence |
Stakeholders | |||||
| Our people | | Suppliers | | Government and regulators |
| Consumers | | Communities | ||
| Customers | | Investors | ||
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Corporate governance report continued
Stakeholder engagement
We aim to maintain open and positive dialogue with
our stakeholders, considering their key interests in our
decision-making and maintaining communications with
them in different ways. This helps build trust, respect and
informs our decisions and the role we play in society.
With a long track record of working with stakeholders, Diageo has built its
reputation through working towards ambitious social and environmental targets
and goals. The Board and its members have engaged directly and indirectly with
a variety of its key stakeholders during fiscal 26 in order to understand and
respond to stakeholder considerations when determining the company’s strategy
and making decisions.
The Board considers the company's stakeholders to comprise not only business
partners across its value chain, such as suppliers and customers, our people and
workforce, but also wider society, including government, consumers and
communities in which we operate. As noted in the company’s statement on
Section 172 of the Companies Act 2006 set out on page 5, in making their
decisions and in discharging their duties to promote the success of the company,
the Directors must have regard to the interests of its stakeholders. We have
summarised below why our stakeholders are important to us, what we believe
their principal interests are, how the Board and company seek to engage and
respond to them, and what outcomes and impacts these considerations have had
on actions and decisions.
The stakeholders listed below are not set out in order of priority.
Our people
Why we engage
•People are at the core of our business
•We aim to build a trusting, respectful and inclusive culture
where people feel engaged and fulfilled
•We want our people to be treated with dignity at work
and their human rights respected
Key interests and concerns
•Prioritisation of health, safety and wellbeing
•Learning and development opportunities
•Purpose, culture and benefits
•Contributing to the growth of our brands and performance
•Inclusion and diversity
•Sustainability and societal credentials
How the Board engaged
•Workforce engagement programme
•Visits to offices and production and supply chain sites
across the globe
•Feedback from councils and employee and workforce
forums
•Community groups, employee surveys and townhall
meetings
Outcomes and impact on decision-making
•Enhanced communications and visibility amongst certain
leadership teams
•Improvements in existing systems to improve data quality
and reduce duplication and fragmentation.
•Roll out of new technology tools, including AI, together
with training and engagement sessions
Chief Executive engagement
with workforce
As part of his initial few months as Chief Executive, Sir Dave Lewis
visited Diageo's offices and sites in many locations across the world,
in order to meet and engage directly with a broad range of
colleagues. As part of these visits, he held townhall meetings which
included taking questions from colleagues on any topic. These
sessions were also recorded and posted through the company's global
communications channels.
The Chief Executive has continued to communicate regularly with the
workforce, through weekly video postings and through live global
online Q&A sessions. With the launch of the operating framework
review, Sir Dave has used live online sessions recently to hear
questions, comments and concerns raised by employees in relation to
the business transformation and to respond directly to them.
Read more about how stakeholders were taken into account in decision-
making on pages 80-83.
81 | Diageo Form 20-F 2026 |
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Consumers
Why we engage
•Understanding our consumers is critical for our business’s
long-term growth
•Consumer motivations, attitudes and behaviours form the
basis of our business strategy, brand marketing and
innovation
•We want consumers to enjoy our products responsibly
and for them to ‘drink better, not more’
Key interests and concerns
•Choice of brands for different occasions, including no- and
lower-alcohol
•Innovation in heritage brands and creation and nurturing of
new brands
•Responsible marketing
•Great experiences
•Product quality
•Sustainability and societal credentials
•Price
How the Board engaged
•Monitoring consumer behaviours, motivations and insights
•Responding to and anticipating emerging consumer trends
•Review of business development opportunities, the
innovation pipeline and active brand portfolio
management
Outcomes and impact on decision-making
•Ensure consumer choice is at forefront of decision-making
•More focused innovation decisions
•Ensure adequate breadth of portfolio to provide consumers
with improved choices
•Restructuring commercial and marketing teams to focus
more on categories
•Increased investment in ready-to-drink and convenience
products
Sir John Manzoni and
Dayalan Nayager, with key
customers at the opening of
the McCafferty’s Bar in
Dubai - now officially
certified by Guinness World
Records as the world’s
largest Irish pub
Customers
Why we engage
•To nurture mutually beneficial relationships to deliver joint
value and great customer experiences
•To understand and respond to the needs of our
customers who comprise a range of businesses, large
and small, on-trade and off-trade, retailers, wholesalers
and distributors, digital and e-commerce
Key interests and concerns
•A portfolio of leading brands and formats that meet
evolving consumer preferences
•Identification of opportunities that offer profitable growth
•Insights into consumer behaviour and shopper trends
•Trusted product quality
•Innovation, promotional support and merchandising
•Availability and reliable supply of stock
•Joint risk assessment and mitigation
•Sustainability and societal credentials
How the Board engaged
•Review of innovation pipeline and inorganic opportunities
to ensure a broad portfolio at multiple price points
•Review of supply chain footprint to ensure efficient
delivery to customers
•Market visits
Outcomes and impact on decision-making
•Improve Diageo's capabilities in managing and working
with customers
•Increase focus on execution and delivery of end-to-end
customer service satisfaction
•Structure organisation with regional supply chain and
market level customer service and commercial teams,
integrated within supply chain function
•Invest in core strategic planning systems and processes in
support of operational excellence
82 | Diageo Form 20-F 2026 |
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Corporate governance report continued
Suppliers
Why we engage
•Our suppliers, service providers and agencies are experts in
their fields and we rely on them to deliver high-quality
products and market responsibly
•We collaborate with them to improve our collective
impact, ensure sustainable and resilient supply chains,
and make positive contributions to society
Key interests and concerns
•Strong, mutually beneficial partnerships
•Strategic alignment and growth opportunities.
•Fair contract and payment terms
•Collaboration through the innovation lifecycle
•Consistent performance measures
•Joint risk assessment and mitigation
•Sustainability and societal credentials
How the Board engaged
•Review of our supply chain footprint to ensure resilience
and flexibility and to monitor environmental impacts and
efficiencies
•Review and approval of material supply and procurement
contracts
•Improving supplier relationships through fair contract
and payment terms and compliance with our 'Partnering
with Suppliers Standard'
Outcomes and impact on decision-making
•Maintain focus on improving compliance to payment terms
•Improve efficiencies through increased standardisation and
automation of onboarding, invoicing and payment
processes
An oyster count brought
together Seawilding, the
Talisker Distillery team and
Skye community groups for
the first in a series of
proposed community
initiatives to inspire and
empower local people with
the knowledge and
opportunity to help drive
effective change for
Scotland’s ecosystems
Communities
Why we engage
•To create long-term value for the communities in which we
live, work, source and sell
•To help build thriving communities and strengthen our
business through empowering people, increasing access
to opportunities and championing inclusion and
diversity
Key interests and concerns
•The impact of our operations on the local economy
•Access to skills development, employment and supplier
opportunities
•Inclusion, diversity and tackling inequality in all forms
•Responsible use of natural resources, biodiversity and
sustainability
•Transparency and engagement
How the Board engaged
•Monitoring progress on broader societal matters, including
promoting positive drinking
•Considering the environmental and social consequences of
its key decisions
•Encouraging inclusion and diversity, equal employment
opportunities, skills development and support for
communities
Outcomes and impact on decision-making
•Improve capabilities in monitoring and managing external
perception of Diageo through use of technology
•Retain focus on ensuring skills and talent development
within the business
•Continue to support sustainable and responsible use of
natural resources, including investment in restoring and
maintaining peatlands in Scotland
83 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Governments
and
regulators
Why we engage
•The regulatory environment is critical to the success of our
business
•To influence policy makers and regulators to understand
our views on areas that can impact public health and our
business
Key interests and concerns
•Compliance with applicable laws and regulations
•Contribution to national and local economic development
and public health priorities
•International trade, excise, regulation and tackling illicit
trade
•Tackling harmful drinking and the impact of responsible
drinking initiatives
•Climate change and water sustainability agendas, including
greenhouse gas emissions reduction, human rights,
environmental impacts, sustainable agriculture, biodiversity
and support for communities
How the Board engaged
•Updates from the Chief Executive and corporate relations
executives
•Review of macroeconomic and geopolitical developments
at strategy sessions
•Updates on regulatory developments, including in
relation to non-financial reporting, corporate
governance and public policy
Outcomes and impact on decision-making
•Continue engagement with government and regulatory
authorities in relation to public policy relating to alcoholic
drinks
•Partnering with government and enforcement authorities in
addressing illicit and counterfeit alcohol
•Maintain our leadership role in industry bodies, advocating
for positive policy adoption in international trade and
regulatory affairs
Taoiseach Micheál Martin TD
and Diageo's CEO, Sir Dave
Lewis, officially open
Littleconnell Brewery in Co.
Kildare
Investors
Why we engage
•To provide investors with an in-depth understanding of our
strategy, our operational, financial and holistic performance
•To enable investors to more accurately assess the value
of our business and the opportunities and risks of
investing in it
Key interests and concerns
•Strategic priorities, opportunities and risks
•Financial performance
•Corporate governance
•Leadership credentials, experience and succession
•Executive remuneration policy
•Shareholder returns
•Environmental, inclusion and diversity and social
commitments and progress
How the Board engaged
•Investor events attended by the Chief Executive and Chief
Financial Officer, including quarterly trading updates,
presentations, roadshows and conferences
•Maintaining regular and frequent engagement with
investors, directly and indirectly through corporate brokers
•Engaging with shareholders in consultation on
remuneration policy
•Annual General Meeting attendance and answering
questions from shareholders
Outcomes and impact on decision-making
•Increase commitment to reduce leverage and reinvest in the
business by rebasing our dividend policy
•Hold a capital markets day in August 2026 in order to share
strategy update and redesign of internal operating
framework with shareholders and investors
84 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information |
Corporate governance report continued
Principal Board decisions
Below are some examples of the principal decisions taken by the Board during fiscal 26 as well as summaries of some of the matters referred to in Section 172 of the
Companies Act 2006 which were taken into consideration by the Board.
Change to the dividend
policy
Decision: The Board has maintained a clear focus on ensuring the
company’s long-term financial resilience and success, while also
investing to support future growth opportunities for the business.
Alongside reducing leverage and increasing financial flexibility, the
Board has revisited its dividend policy. In making the decision, the
Directors considered the long-term sustainable growth of the company,
the need to invest in making the business more competitive through
investing in capability improvement and increasing capacity in growth
areas, such as Guinness, balanced by the impact the decision would
have on our stakeholders, and in particular our shareholders and
investors. The Board reviewed its policy based on an analysis of
various financial metrics, including forecast growth and leverage over
the long term, as well as feedback from investors, advice from its
corporate brokers, forecasts and views published by analysts. The
Board devoted time to understanding the views of investors and other
stakeholders when discussing a potential change in dividend policy,
aiming to balance the importance of generating attractive shareholder
returns, both now and in the long term, with a need to strengthen the
company's balance sheet and invest in the business.
Stakeholders: |  |
Outcomes: | On 25 February 2026, the company declared an interim dividend of 20 cents per share and announced a change in its dividend policy, moving to a payout ratio of 30-50%, with a minimum floor for dividends of 50 cents per annum. This decision was not taken lightly, recognising the importance of driving shareholder value over the long term, while also strengthening the balance sheet and investing in the business. Conscious of the importance of dividend income to its shareholders, the Board has also stated its aim to grow shareholder distributions over time. |
Links to fiscal 26 strategic priorities: | |
East African Breweries
disposal
Decision: During the year, the Board approved an agreement to sell the
group's shareholding in East African Breweries plc (EABL) and a
related Kenyan spirits business. Following a thorough portfolio review
conducted earlier in the year, EABL had been identified as being non-
core to the group's business and therefore suitable for disposal,
consistent with the Board's strategy of appropriate and selective
disposals of non-core assets and moving towards a more flexible, asset-
light beer operating model. Consideration was given to the implications
of such a transaction not only on internal stakeholders such as EABL
employees and the wider workforce, but also external stakeholders. As
one of the best known companies in the region with a strong identity
through its local beer brands, EABL plays a significant role in regional
capital markets with listings on the Nairobi Securities Exchange and
other exchanges in Uganda and Tanzania. In contemplating a disposal,
the Board was aware of the importance of considering and addressing
potential impacts on and views of local communities, government and
regulatory authorities in the region, including EABL's importance to
local investors and capital markets. As a result, the transaction was
structured to be conditional on requisite regulatory approvals.
Appropriate engagement activities were planned to ensure that
potential concerns of local stakeholders could be identified and
addressed.
Stakeholders: |    |
Outcomes: | In December 2025, the Board announced that it had agreed to dispose of Diageo’s shareholding in EABL and its Kenyan local spirits business to Asahi for approximately $2.3 billion, subject to regulatory approval. Asahi confirmed that it expects EABL to remain listed on the regional stock exchanges post- completion, thereby continuing to be an important constituent of regional equity indices and enabling ongoing participation by local and regional investors. |
Links to fiscal 26 strategic priorities: | |
Investing in Guinness
Decision: In May 2026, at the same time as the official opening of the
company's new Littleconnell brewery in County Kildare, Ireland, Diageo
announced its plans to invest approximately €400 million in a second
brewery at the Littleconnell site over the next three years to increase
production of Guinness and Guinness 0.0. This announcement followed the
Board's decision to approximately double the total site capacity at
Littleconnell in support of Guinness, which has been one of the fastest
growing brands in the portfolio in recent years and whose growth is
forecast to continue. Multiple stakeholder implications were considered,
including long-term forecast demand from consumers and customers under
different growth scenarios as compared to capacity utilisation, the impact of
further development at Littleconnell on the local community, including
environmental and infrastructure impacts as well as employment creation,
and the importance of ensuring efficiency and sustainability in use of
resources in constructing and operating the new facility, in particular its use
of energy and water.
Stakeholders: | |
Outcomes: | The Board concluded that additional capacity was required to meet forecast consumer demand and that the site at Littleconnell was optimal for expansion given existing infrastructure and utilities, including use of renewable energy and water efficiency. The development is expected to provide additional employment opportunities for local suppliers and the community. |
Links to fiscal 26 strategic priorities: | |
85 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information |
Performance review
The Directors consider the performance review of the Board, its Committees
and themselves to be an important aspect of corporate governance, and reviews
are undertaken annually, with external reviews being undertaken at least once
every three years. The performance review to be undertaken in fiscal 27 is
expected to be managed and facilitated externally.
With the support of the Company Secretary, a review of the Board's
effectiveness, including that of its Committees and Directors, was conducted
internally between January and February 2026. It aimed to assess the
effectiveness of the Board and its Committees and identify any areas for
improvement.
The Directors completed a tailored questionnaire designed to assess specific
areas and allow Directors to express their views. In line with the Code
recommendation, the Senior Independent Director also held a meeting with
Directors, excluding the Chair. The review focused on Directors' views on the
following areas: Board performance and effectiveness, Board composition and
diversity, individual Director contribution, Committees' performance and
effectiveness and Board support and provision of information.
The Committee Chairs considered feedback on the effectiveness of their
respective Committees, whilst the Chair, Senior Independent Director and the
Company Secretary discussed the results of the review and feedback from all
Board members. Paired with a review of the ways of working and the
composition of the Board and its Committees, they drew up a plan with
proposed next steps and actions for further discussion by the Board at its
meeting in March 2026.
The Board discussed the results and agreed on various actions, some of which
are outlined below.
The results of the performance review indicated that the Board and its
Committees continue to work well and that each Director continued to perform
effectively and demonstrates commitment to her or his role. The Nomination
Committee has recommended to the Board that all Directors who wish to do so
stand for election or re-election at this year’s AGM.
The following table sets out a summary of key observations and actions taken
following the previous year's review as well as those identified to be focused on
in the coming year, based on feedback and the results of the performance review
carried out in fiscal 26.
Observations and actions taken following last year's review | Observations and actions to focus on in 2026/27 |
General feedback |
•The Chair, with the Company Secretary’s assistance, remained focused on
supporting high-quality discussions and where appropriate, expanded the
time allocated for presentations and deep dives during meetings.
•Discussions at the Board remained open and transparent.
•There has been continued evolution of ways of working for the Board
following changes in key Board roles in recent years.
•The Board's annual cycle should be reviewed and streamlined to ensure
efficiency and effectiveness.
•Ways of working should also be reviewed to ensure that adequate focus and
time is allocated to key strategic topics.
•More opportunities and time should be allocated to insights into how Diageo
is perceived and recognised externally.
Board composition and succession |
•An additional Non-Executive Director appointment was made during the first
half of fiscal 26.
•The first half of the fiscal saw significant time and focus on the successful
search for a new Chief Executive, as well as longer-term succession planning.
•The Board will maintain focus on ensuring adequate succession planning for
non-executive roles.
•The Board's skills matrix would be reviewed to identify suitable candidates
for non-executive roles.
People and culture |
•The Board is very committed to the workforce engagement programme
which provides excellent opportunities for direct engagement between
Directors and the workforce.
•The Board spent additional time exploring the results of employee surveys to
develop a deeper, more granular understanding of what matters to colleagues.
•The Board and the Nomination Committee continued to focus on succession
planning and pipeline at executive and senior management level.
•The Board will increase opportunities for engagement with top internal talent.
•The Board should continue to evolve its way of understanding and evaluating
Diageo's culture, especially given operating framework changes.
•The Board will continue to focus on embedding key cultural shifts in light of
changes in the company's operating framework, especially to reinforce a
culture of competitiveness.
•Processes relating to end-to-end talent management should be reviewed to
ensure high quality pipeline of internal talent for key executive roles.
Strategy and risk |
•The Board has strengthened its focus on delivery of business transformation
programmes, including Accelerate.
•The Board has continued to review key strategic topics, engaging with the
Executive in a collaborative and constructive manner.
•There has been improved focus on enabling external perspectives to be
shared in Board discussions, through regular reporting and analyses.
•Board discussions should be closely aligned to strategic priorities, with more
focus on areas of most significance, aligned to the new strategy.
•Increased focus is required on mechanisms to support performance
monitoring, tracking and reporting to the Board.
•Further opportunities will be scheduled for the Board to engage directly with
certain categories of external stakeholders.
86 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information |
Corporate governance report continued
Workforce Engagement statement
At Diageo, our people are central to how we perform and how we build the
business for the future. We want colleagues to understand the direction of the
business, feel able to share their views and see how their feedback is being
heard and considered. As we continue to evolve the business, this matters even
more. Colleagues need clear context on the choices we are making, the role they
play and the ways they can contribute to our strategy.
Our approach to Workforce Engagement
We use a range of formal and informal channels to understand our colleagues’
experiences. Diageo’s Workforce Engagement programme is an important way
for the Diageo plc Board to hear directly from colleagues on key topics,
including culture, strategy and ways of working. It is also a valued opportunity
for colleagues to have direct access to Board members.
In fiscal 26, Karen Blackett CBE, our designated Non-Executive Director for
Workforce Engagement continued to lead the programme. In this role, Karen
provides a consistent connection point between colleagues and the Board. She
helps shape the sessions, so they are valuable for both colleagues and Board
members, and ensures themes raised are discussed at Board level.
Across the year, Karen, alongside other Non-Executive Directors, engaged 239
colleagues through 12 virtual, hybrid and in-person sessions. The colleagues
who took part were below leadership level and represented all regions and
functions. Diageo Chair, Sir John Manzoni, also visited several markets during
the year, engaging a further 1,390 colleagues through informal townhall
conversations.
Colleagues welcomed the opportunity to share their views with the Board, and
Board members valued the openness of conversations and the insights they
provided into colleagues’ experience of Diageo’s culture and ways of working.
In fiscal 26, we further strengthened our approach to Workforce Engagement by
introducing a post-session feedback loop with local leadership teams. Colleague
feedback was shared anonymously, enabling local leadership to consider the
themes raised alongside broader business priorities and market action planning.
Themes surfaced through Workforce Engagement
This year, colleagues’ feedback has been distilled into four broad themes,
covering both strengths and areas of opportunity.
1.Diageo’s culture: When discussing culture, colleagues consistently refer to
Diageo’s ‘inclusive culture’ with a focus on inclusion and diversity
commitments, specific people policies, and the relational aspects of
working at Diageo. These areas continue to be a significant source of pride
for colleagues, who often say they feel supported, listened to, and respected
to truly be themselves at work.
2.Strategy and prioritisation: While colleagues are proud of Diageo’s brands
and believe we have the right portfolio to support future success, through
the first half of fiscal 26 they highlighted an urgent need for greater
strategic clarity to address performance challenges. Since the appointment
of Sir Dave Lewis as Chief Executive in January 2026, colleagues are
experiencing greater clarity and have expressed optimism and belief in the
future, in response to his open and transparent leadership approach.
3.Ways of working and collaboration: Collaboration at Diageo is consistently
recognised as a strength. Colleagues said they feel supported by teams
across regions and functions, however they also identified opportunities to
improve speed and agility by clarifying decision rights and accountability.
This feedback is informing work on Diageo’s new operating framework,
which is designed to make the business simpler, faster and more
competitive, with clearer accountabilities.
4.Digital and technology: Colleagues are optimistic about the potential of
new digital tools and AI to improve efficiency and create better ways of
working. They also highlighted the need to continue improving existing
systems and processes, reducing complexity and helping colleagues make
informed decisions at pace. We are making progress on this through large-
scale digital initiatives like our recent move to SAP S/4HANA which is
helping to address outdated technology and create a stronger foundation for
simpler, more effective ways of working.
Insights from Workforce Engagement sessions, alongside broader listening tools
such as Our Voice and other listening channels, help the Board and management
teams understand colleague sentiment, monitor Diageo’s culture and identify
opportunities to improve the employee experience as the business continues to
evolve its operating framework for the future.
Purpose, values and culture
The Board is responsible for setting the company’s purpose, values and culture
and for monitoring how these are embedded within our business, informed by
employee listening activities, including workforce engagement sessions with the
Board and employee surveys. We are very conscious that we must operate with
the highest standards of governance, doing business the right way, from grain to
glass. This principle is embedded in our Code of Business Conduct and global
policies, aligned with our 'Spirit of Progress' goals and reflected in our ways of
working. We are pleased that we have a strong reputation for inclusion and
diversity which reflects our values, attracts the best talent and enables our
people to succeed.
There are a number of ways in which the Board monitors and assesses culture,
including:
Site visits
Directors are encouraged to visit the group’s offices, production facilities and
sites in different markets and regions to further their understanding of the
business and increase interactions with employees and the wider workforce.
While during fiscal 26 Board meetings have generally been held in the
company's headquarters in London, there have been other opportunities for
Directors to visit and engage with employees in other locations. As part of the
Board's workforce engagement programme, Non-Executive Directors regularly
hold in-person and virtual meetings, townhalls, focus groups and question and
answer sessions with employees in different locations over the course of the year.
Employee surveys
Each year, the Board receives the results of the company’s global annual
survey, renamed this year 'Our Voice', which includes levels of employee
engagement, employee perceptions of the company's purpose and of their
people managers (including net promoter scores) and any themes raised. The
survey results also give visibility of areas on which management must continue
to focus.
Results of this year's Our Voice survey are described on page 36.
SpeakUp allegation reporting
Regular reports are provided by the business integrity team to the Audit
Committee with information and data on reported allegations of breaches of the
Code of Business Conduct and other group policies, including those received
through our confidential and independent whistleblowing service SpeakUp.
These reports also include analyses of emerging trends, investigation status
reports and closure rates, and summaries of actions taken. These reports enable
Directors to gain an understanding of common issues and action planning, as
well as providing insights into how well established the company's purpose,
values and culture are across its markets and functions.
For more details of the SpeakUp service, see page 93.
Workforce engagement programme
Insights drawn from the Board’s annual programme of workforce engagement
are used by the Board to monitor and assess the culture of the company.
Recommendations are fed back to management regularly with workforce
engagement being discussed at Board meeting sessions twice a year. The
engagement programme, which is led by Karen Blackett CBE, has enabled all
Non-Executive Directors to participate by directly engaging with employees
from a variety of regions, functions and levels in the business.
87 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information |
How the Board monitors culture
Employee resource groups
We have a network of employee resource groups (ERGs) which
create connections and community within our employee and
workforce population, both in regions and globally. For example, the
Spirited Women Network and our Rainbow Network operate in
several markets internationally. The ERGs provide communities of
support and enable management to better understand concerns of
diverse groups within our workforce. Feedback from the ERGs is
used to assist the Board in monitoring the culture.
Remuneration engagement
The Chair of the Remuneration Committee meets with a focus group
of employees to discuss the approach to executive pay annually. The
focus group is comprised of cross-market and functional employee
representatives. Through this engagement, we aim to both deepen
employees' understanding of the ways in which executive pay
decisions are made and receive feedback and views from employees
on the company's approach to executive remuneration in the context
of broader reward and pay policy within the group.
Our voice surveys
Our annual global employee engagement survey, Our Voice, provides
employees with an opportunity to provide feedback on their
experience of working at the company, including areas which are
working well and those that could be improved. The survey, which
takes the form of a questionnaire with the ability to provide
commentary, is conducted and managed by a third-party provider in
multiple languages. All responses are treated confidentially with the
results being reported back to management, enabling them to create
action plans per team. Key themes and feedback are also reported to
the Board.
Workforce engagement
sessions
All Non-Executive Directors participate in the Board's workforce
engagement programme, meeting and engaging directly with groups
of employees. We aim to provide the Board with a greater
understanding of the views of colleagues on the company's strategy,
performance, values, governance, culture, working environment or
any other topic of importance to workers, and to inform the Board on
related decision-making. For further information on the workforce
engagement programme, see page 86.
Townhall and focus groups
Non-Executive Directors participate in both virtual and physical
townhall sessions and smaller focus group sessions during the year,
as part of the Board's workforce engagement programme. Attendees
are invited from particular markets and functions, including
contractors, temporary and remote workers, often in non-leadership
roles. The scope of topics discussed is relatively broad, covering
culture and aspects of working at the company.
Site visits
Directors regularly visit Diageo's offices and production sites as part
of the Board's annual cycle of meetings, which ordinarily includes at
least one multi-day meeting held at an overseas location hosted by
the local or regional management team. In addition to the head office
in London, Directors have opportunities to visit other Diageo
locations, offices and sites during the course of the year for meetings
and for familiarisation visits. As part of Diageo's induction
programme, new Directors will be invited to visit a number of our
production facilities including in Scotland, the US and Mexico.
88 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information |
Corporate governance report continued
Directors' responsibilities in respect of the Annual Report,
Form 20-F and financial statements
The Directors are responsible for preparing the Annual Report, the information
filed with the SEC on Form 20-F and the group and parent company financial
statements in accordance with applicable law and regulation. Company law
requires the Directors to prepare financial statements for each financial year.
Under company law, the Directors have prepared the group consolidated
financial statements in accordance with UK-adopted international accounting
standards and the parent company financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 101 ‘Reduced Disclosure Framework’,
and applicable law). In preparing the group consolidated financial statements,
the Directors have also elected to comply with International Financial Reporting
Standards issued by the International Accounting Standards Board (IFRS as
issued by IASB).
Under company law, the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of affairs
of the group and parent company and of the profit or loss of the group and
parent company for that period. In preparing the financial statements, the
Directors are required to:
•select suitable accounting policies and then apply them consistently;
•state whether applicable UK-adopted international accounting standards,
IFRS issued by IASB have been followed for the group financial statements
and United Kingdom Accounting Standards, comprising FRS 101 ‘Reduced
Disclosure Framework’ and applicable law have been followed for the parent
company financial statements, subject to any material departures disclosed
and explained in the financial statements;
•make judgements and accounting estimates that are reasonable and prudent;
and
•prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the group and company will continue in
business.
The Directors are responsible for safeguarding the assets of the group and
parent company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities. The Directors are also responsible for
keeping adequate accounting records that are sufficient to show and explain the
group’s and parent company’s transactions and disclose with reasonable
accuracy at any time the financial position of the group and parent company and
enable them to ensure that the financial statements and the Directors’
Remuneration Report comply with the Companies Act 2006. The Directors are
responsible for the maintenance and integrity of the corporate and financial
information included on the company’s website. Legislation in the United
Kingdom governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Directors’ confirmations
The Directors consider that the Annual Report and financial statements, taken as
a whole, are fair, balanced and understandable and provide the information
necessary for shareholders to assess the group’s and parent company’s position
and performance, business model and strategy. Each of the Directors, whose
names and functions are listed on pages 73-74 confirm that, to the best of their
knowledge:
•the group consolidated financial statements, which have been prepared in
accordance with UK-adopted international accounting standards, IFRSs
issued by IASB, give a true and fair view of the assets, liabilities, financial
position and profit of the group;
•the parent company financial statements, which have been prepared in
accordance with United Kingdom Accounting Standards, comprising FRS
101 ‘Reduced Disclosure Framework’ and applicable law, give a true and fair
view of the assets, liabilities, financial position and profit of the parent
company; and
•the Strategic Report includes a fair review of the development and
performance of the business and the position of the group and parent
company, together with a description of the principal risks and
uncertainties that it faces.
In accordance with Section 418 of the Companies Act 2006, each of the
Directors who held office at the date of the approval of the Directors’ report
confirm that, so far as the Director is aware, there is no relevant audit
information of which the group’s and parent company’s auditors are unaware,
and each Director has taken all the steps that they ought to have taken as a
Director in order to make themselves aware of any relevant audit information
and to establish that the group's and parent company’s auditors are aware of that
information.
The responsibility statement was approved by a duly appointed and authorised
committee of the Board of Directors on 17 August 2026.
89 | Diageo Form 20-F 2026 |
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Audit Committee report
Providing
oversight of
financial
and reported
information
Dear Shareholder
I am pleased to present the Audit Committee’s report for
the year ended 30 June 2026, which describes how the
Committee has carried out its responsibilities over the
year.
It is the responsibility of the Audit Committee to monitor and review the integrity of
financial information and external reporting, and to provide assurance to the Board
that the company's internal controls and risk management processes, including its
internal audit, controls, business integrity and compliance processes, are appropriate
and regularly reviewed. The Audit Committee oversees the work of the external
auditor, monitors its independence, approves its remuneration and recommends its
appointment. The Committee is also responsible for reviewing the company's
principal and emerging risks, including through periodic reviews and deep dives into
areas of risk over the course of the year.
During fiscal 26, the Committee has continued to monitor the company’s
internal audit, controls assurance, risk and business integrity processes with the
heads of these functions issuing regular reports to the Committee. These reports
enable the Committee to monitor progress against annual plans and targets,
whistleblowing processes and breach allegation investigation rates, internal
audit findings, and work on controls assessment. This year, the Committee has
continued to review the company’s allegation investigation processes and its
approach to its global compliance training programme. The Committee has also
focused on regulatory change, including changes in sustainability and non-
financial reporting requirements and in corporate governance reform. It has
considered the new reporting requirement under Provision 29 of the Code,
which requires the Board to make a declaration on the effectiveness of the
company’s material internal controls from next year. Further details on the work
undertaken to date to prepare for this new reporting requirement are on page 92.
The Committee aims to continue to serve the interests of our shareholders and
other stakeholders through its independent oversight and recognises that,
through its ongoing engagement with the Board, senior management and the
internal and external audit, controls and business integrity teams, it plays an
important role in supporting a high-quality audit.
Julie Brown
Chair of the Audit Committee
Role of the committee
•Monitors the integrity of the company's
financial statements and other external
reporting statements relating to the
company's financial performance.
•Considers whether the Annual Report and
accounts, taken as a whole, is fair,
balanced and understandable, and provides
information necessary to assess the
company's position and performance.
•Reviews the company's risk management
and internal control framework, including
the effectiveness of internal audit.
Read more on pages 90-95.
Committee members
•Julie Brown (Committee Chair)
•Melissa Bethell
•Susan Kilsby
•John Rishton
•Ireena Vittal
As at the end of fiscal 26, the above
directors were members of the Committee.
Read more on page 90.
Principal areas of focus
•Review of financial and
non‑financial reporting.
•Supervising the group's internal audit, risk
and controls functions and processes,
including in respect of viability.
•Oversight of external auditors, and review
of audit quality.
•Review of the group's systems of financial
reporting and accounting issues.
•Oversight of the group's regulatory
compliance, including preparedness for
Provision 29 compliance, business
integrity and whistleblowing mechanisms.
Read more on page 90.
90 | Diageo Form 20-F 2026 |
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Composition of the Audit Committee
As part of the review of the Board's ways of working carried out in February
2025, the Nomination Committee reviewed Diageo's practice of having all its
Non-Executive Directors as members of all Board committees. It was concluded
that, while this practice had positive benefits, on balance it was preferable to
refresh membership of the Board committees by changing to a more
conventional structure whereby each Board committee was comprised of a
smaller group of Non-Executive Directors. As a result, with effect from fiscal
26, the composition of the Audit Committee changed to comprise Julie Brown
(Chair), Melissa Bethell, Susan Kilsby and Ireena Vittal. On his appointment to
the Board on 1 November 2025, John Rishton also joined the Audit Committee.
The Chair of the Board, the Chief Executive, the Chief Financial Officer, the
General Counsel and Company Secretary, the Group Controller, the Head of
Controls, Assurance and Risk Excellence (CARE), the Chief Business Integrity
Officer, the General Counsel Corporate and Deputy Company Secretary, the
Group Reporting Director and the external auditor regularly attend meetings of
the Committee. During fiscal 26, the Committee met seven times.
Details of attendance of all Board and Committee meetings by Directors are set
out on page 72. The terms of reference of the Committee are available at https://
www.diageo.com/en/our-business/corporate-governance.
The Board has satisfied itself that the membership of the Audit Committee
includes at least one Director with recent and relevant financial experience and
has competence in accounting and/or auditing and in the sector which the
company operates, and that all members are financially literate and have
experience of corporate financial matters. For the purposes of the Code and the
relevant rule under SOx, Section 407, the Board has determined that Julie
Brown is independent and may be regarded as an Audit Committee financial
expert, having recent and relevant financial experience, and that all members of
the Audit Committee are independent Non-Executive Directors with relevant
financial competence and sector knowledge. See pages 73-74 for details of
relevant experience of Directors.
Committee activities
Details of the main areas of focus of the Audit Committee during the year include those summarised below:
Areas of focus | |
Corporate reporting | •Half and full year external reporting updates •Interim and preliminary results review and approval •Annual Report and consolidated financial statements, Form 20-F review and approval •Quarterly trading updates |
Internal controls | •Internal audit updates •Business Integrity updates including breach investigation and reporting update •Internal training and compliance programme •Controls testing update and Section 404 assessment •Implications on controls environment of systems and process changes •Inventory and stock in trade monitoring controls review and enhancements •Preparations for compliance with Provision 29 of the Code |
External audit and assurance | •Report on external audit at half and full year periods •Insights and observations on reporting review •Auditor independence and non-audit work reviews •Auditor independence policy review •Review of management representation letters •Appointment of auditor and review of terms of engagement and fees •Auditor performance and effectiveness review and assessment |
Risk management | •Principal and emerging risk reviews and tracking •Risk updates, including group risk footprint and risk appetite review and approvals •Business ethics and integrity, human rights, supply chain disruption, geopolitical volatility and business interruption, business transformation, stock in trade, cyber security and IT resilience, climate change and sustainability, and international taxation risk reviews |
Key areas of focus
During the year, the Audit Committee reviewed the quarterly trading updates,
the interim results announcement, including the interim financial statements, the
Annual Report and associated preliminary results announcement and Form 20-
F, focusing on key areas of judgement and complexity, critical accounting
policies, disclosures (including those relating to impairment, restructuring
provisions, contingent liabilities, climate change and principal risks), viability
and going concern assessments, provisioning and any changes required in these
areas or policies. The Audit Committee has also focused on the effectiveness of
the company's internal financial governance processes. Under the supervision of
the Audit Committee, management has again sought to refine non-financial
reporting in order to emphasise the most material goals and actions taken
against our 'Spirit of Progress' action plan, while also complying with the
recommendations of the Task Force on Climate-related Financial Disclosures.
The Committee also reviewed the approach to internal compliance training and
management’s proposal to enhance the programme in fiscal 27 to strengthen
risk awareness, accountability and compliance across the organisation. This year
the Committee has received regular progress reports in relation to management's
proposed approach towards and preparations for compliance with new Provision
29 of the Code, in respect of which the company will report from fiscal 27
onwards.
91 | Diageo Form 20-F 2026 |
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Significant issues and judgements
Significant issues and judgements that were considered in respect of the fiscal 26 financial statements are set out below. Our consideration of issues included
discussion of the critical audit matters as outlined in the Report of Independent Registered Public Accounting Firm.
Matter considered | How the Audit Committee addressed the matter |
The nature and size of any one-off items impacting the quality of the earnings and cash flows. | The Audit Committee assessed whether the related presentation and disclosure of those items in the financial statements were appropriate based on management’s analysis, and concluded that they were. |
Items that were to be presented as exceptional. Refer to note 3 of the Financial Statements. | The Audit Committee assessed whether the reporting of those items as exceptional was in line with the group’s accounting policy and that sufficient disclosure was provided in the financial statements, and concluded that they were. |
Whether the carrying value of brands, goodwill, tangible assets and investment in associates and joint ventures was supportable. Refer to notes 6, 9 and 10 of the Financial Statements. | The Audit Committee reviewed the methodology applied in conducting impairment reviews and the result of management's impairment assessments that were performed during the year. The Committee was provided with information on the carrying amounts and the key assumptions and valuation inputs used in management’s impairment assessments, including estimates of value in use and fair value less costs of disposal. These included forecast cash flows, discount rates and long-term growth rates, as well as relevant market-based valuation evidence, including quoted share prices, market capitalisations and valuation multiples for comparable companies. The Committee reviewed the key assumptions used in the impairment reviews and agreed they were appropriate. The Committee agreed with management’s judgements and conclusions, whereby Türkiye goodwill and brands, Don Papa and other various smaller brands have been impaired by $1,274 million and reported as an exceptional operating charge. The Committee also reviewed management’s impairment assessments of property, plant and equipment and other assets arising from restructuring activities. The Committee considered the carrying amounts of the relevant assets and the key judgements and assumptions applied in determining the impairment charges and agreed with management’s conclusions. |
The group’s more significant tax exposures and the appropriateness of any related provisions and financial statement disclosures. Refer to note 7 and note 19 of the Financial Statements. | The Audit Committee agreed that the disclosure of tax risk appropriately addresses the significant change in the international tax environment, and that appropriate provisions and other disclosure with respect to uncertain tax positions were reflected in the financial statements. |
The appropriateness of the valuation of post- employment liabilities, and the recognition of any surplus. Refer to note 14 of the Financial Statements. | The measurement of post-employment liabilities is sensitive to changes in long-term interest rates, inflation and mortality assumptions. Having reviewed management’s papers setting out key changes to actuarial assumptions, the Audit Committee agreed that the assumptions used in the valuation are appropriate. The Committee reviewed management’s assessment of the economic benefit available as a refund of the surplus or as a reduction of contribution and the key judgements made in respect of the surplus restriction and concluded that those judgements were appropriate. The Committee reviewed and concluded that sufficient disclosures were provided in the financial statements. |
Significant legal matters impacting the group. Refer to note 19 of the Financial Statements. | The Committee agreed that adequate provision and/or disclosure have been made for all material litigation and disputes, based on the current most likely outcomes, including the litigation summarised in note 19 of the Financial Statements. |
Whether the Annual Report is fair, balanced and understandable. | The Audit Committee concluded that the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the company’s performance, business model and strategy and that there is an appropriate balance between statutory (GAAP) and adjusted (non-GAAP) measures. |
The impact of climate change on the group’s financial reporting and financial statements. Refer to pages 44-56 and note 1 and note 9 of the Financial Statements. | The Audit Committee agreed that the disclosures on pages 44-56 made in response to the recommendations of the Task Force on Climate-related Financial Disclosures are appropriate and that the assumptions used in the financial statements are consistent with these disclosures. |
Challenge of significant judgments
In reaching the conclusions set out above, the Audit Committee reviewed and
constructively challenged the accounting methodologies, judgements and
disclosures proposed by management, including the rationale supporting key
judgements and assumptions and the consideration of alternatives. Areas of
focus included:
•Valuation methodologies used in impairment testing: The Committee
challenged the approaches adopted by management to determine fair value,
including the consideration of alternative approaches, techniques and models
in accordance with accounting standards.
•Brand, fixed asset and inventory impairment testing: The Committee
challenged management’s plans, marketing and distribution strategies for
certain brands in the context of recent performance, inventory levels and
forecasts, and considered the impact of these plans on associated distillation
assets. The Committee also challenged the key assumptions underpinning
management’s impairment models.
•Restructuring provisions: The Committee challenged management’s
assumptions and estimates relating to severance provisions, including
severance periods and other statutory obligations.
•Other areas of judgement: The Committee challenged the assumptions used
in the valuation of pension liabilities and the basis for the disclosure of
uncertain tax positions in Brazil.
Having considered the matters presented and management’s responses to its
challenge, the Audit Committee concluded that the judgements adopted were
reasonable and appropriately disclosed.
Viability statement
In accordance with the Code, the Board has considered the company’s longer-
term viability, based on a robust assessment of its principal and emerging risks.
This was done through the work of the Audit Committee which recommended
the Viability statement to the Board. For further information about how the
Board has reviewed the long-term prospects of the group, see page 68.
92 | Diageo Form 20-F 2026 |
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Going concern
Management prepared 18-month cash flow forecasts which reflect severe but
plausible downside scenarios taking into consideration the group's principal
risks. In the base case scenario, management included assumptions to deliver
low-single-digit organic net sales growth and mid-single-digit organic operating
profit growth. In light of the ongoing geopolitical volatility, the base case
outlook and severe but plausible downside scenarios incorporated
considerations for heightened geopolitical tensions, business disruptions and
changes in consumer preferences. Even under these scenarios, the group’s
liquidity is still expected to remain strong. Mitigating actions, should they be
required, are all within management’s control and could include reductions in
discretionary spending such as acquisitions and capital expenditure, a lower
level of marketing spend and investment in maturing stock, as well as a
temporary suspension or reduction in dividend to shareholders in the next 12
months, or drawdowns on committed facilities. Having considered the outcome
of these assessments, the Directors are comfortable that the group (and
company) is a going concern for at least 12 months from the date of signing the
group's consolidated financial statements.
Risk management
An ongoing process has been established for identifying, evaluating and
managing risks faced by the group. This process, which complies with the
requirements of the Code, has been in place for the full financial year and up to
the date the consolidated financial statements were approved, in line with
Financial Reporting Council’s (FRC) guidance. The Board, through the
activities of the Audit Committee described below, has completed a robust
assessment of the principal and emerging risks facing the company, including
those that would threaten its business model, future performance, solvency or
liquidity.
Review process
The Audit Committee considered the nature and extent of the risks that the
Board is willing to accept in pursuing the company's strategic objectives and
reviewed the existing risk appetite statement. In accordance with the annual
review schedule, the Committee regularly reviews the company's principal risks,
with each risk first assessed and updated by management before being
considered by the Committee. Changes to principal risk descriptions and risk
assessments are reviewed by the Audit Committee and recommended to the
Board for approval.
In addition to its regular review of principal risks, the Audit Committee
undertakes in-depth reviews of selected risk areas throughout the year. The
Board also considers emerging and disruptive risks on an ongoing basis,
including at its Annual Strategy Conference, which helps identify matters
requiring more detailed consideration by the Board or the Audit Committee over
the following 12 months.
Principal and emerging risks are set on pages 61-67.
Internal Controls
The Board is responsible for the company’s systems of internal control and risk
management and through the activities of the Audit Committee, has reviewed
the effectiveness of the company’s systems of internal control and risk
management.
The company operates a global controls assurance programme for financial
reporting controls in each market and function, which monitors compliance
with, and effective operation of, the company’s controls framework. The Audit
Committee receives regular reports on the status of the controls assurance plan,
actions taken to enhance controls design and effectiveness, employee awareness
training, testing results and trends analysis derived from the company’s
integrated risk management system.
Internal audit
The company’s internal audit team undertakes an annual audit and risk plan by
delivering a series of internal assurance and audit assignments across a variety
of markets, processes, business units and functions. On the conclusion of each
assignment, the internal audit team issues a report on its findings which may
also include an overall rating of the status of the market, process or function
being audited, detailed reasons for the rating and actions to be taken within a
specific timetable. The Audit Committee receives regular reports from the Head
of CARE on the latest reports issued.
This year a number of internal audits have been undertaken including both
market and functional audits as well as certain group end-to-end processes and
procedures. The Audit Committee assesses the effectiveness of the company's
internal audit processes by reviewing its annual audit plan at the start of the
financial year, monitoring its ongoing quality throughout the year and assessing
completion rates and feedback following completion of the annual audit plan.
Having carried out this assessment, the Audit Committee is of the view that the
quality, experience and expertise of the internal audit team is appropriate for the
business.
Provision 29
Preparation activities have taken place for an amended Provision 29 of the
Code, which applies to the company from financial year beginning 1st July
2026. The Code requires that, in addition to monitoring and reviewing the
company’s risk management and internal controls framework, more detail is
provided on how the Board has reviewed the effectiveness of the framework
and a declaration by the Directors is made on effectiveness of the material
controls. Situations where the material controls have not operated effectively,
and corresponding remediation plans are required to be disclosed, where
relevant. To prepare for these new requirements, the Committee reviewed the
existing risk management and internal controls framework. With the support
and input from management, the review involved the following steps and
outcomes:
•review of the company’s principal risks in the context of the strategic
objectives, in line with traditional reporting cycles;
•examination of the existing internal controls covering financial, operational,
compliance and reporting processes. The Committee agreed that material
controls are the most significant controls to manage the risks for the company
to achieve its strategic objectives and to ensure the accuracy of financial and
non-financial reporting;
•mapping of the assurance provided over the effectiveness of the material
controls to manage the related risks, and review of whether additional
assurance over the effectiveness is required;
•piloting the proposed approach to assurance and reporting to the Committee
ahead of the introduction of the requirements, to establish if the assurance
and reporting detail requires amendments; and
•including the declaration of the effectiveness of material controls that
operated during the year to the Committee’s and the Board’s existing
formal review for fiscal 27.
Management’s report on internal controls over financial
reporting
The Company has in place internal control and risk management systems in
relation to the company’s financial and non-financial reporting process
including the group’s process for the preparation of the consolidated financial
statements.
Management, under the supervision of the Chief Executive and Chief Financial
Officer, is responsible for establishing and maintaining adequate internal control
over the group’s financial reporting. The Filings Assurance Committee (FAC)
supports the Chief Executive and Chief Financial Officer in reviewing draft
financial statements for publication at the half and full year. The FAC is also
responsible for examining the company’s financial and non-financial
information and disclosures, the effectiveness of internal controls relating to
financial and non-financial reporting and disclosures, legal and compliance issues
and determining whether the company’s disclosures are accurate and adequate.
The FAC comprises senior executives such as the Chief Financial Officer, the
General Counsel and Company Secretary, the Group Controller, the Group
Chief Accountant, the Head of Investor Relations and the Head of Risk and
Controls. The company’s external auditor is also involved in the FAC process.
93 | Diageo Form 20-F 2026 |
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Management has assessed the effectiveness of Diageo’s internal control over
financial reporting (as defined in Exchange Act Rules 13a-13(f) and 15d-15(f)
under the United States Securities Exchange Act of 1934) based on the criteria
established in ‘Internal Control – Integrated Framework’, issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO)
in 2013. Based on this assessment, management concluded that, as at 30 June
2026, internal control over financial reporting was effective. During the period
covered by this report, there were no changes in internal control over financial
reporting that have materially affected or are reasonably likely to materially
affect the effectiveness of internal control over financial reporting. The same
independent registered public accounting firm which audits the group’s
consolidated financial statements has audited the effectiveness of the group’s
internal control over financial reporting, and has issued an unqualified report
thereon, which is included in the integrated audit report which is included in the
company’s Form 20-F to be filed with the SEC.
The Audit Committee reviewed the work of the FAC and a report on the
conclusions of the FAC process was provided to the Audit Committee by the
Chief Financial Officer. Diageo has carried out an evaluation, under the
supervision and with the participation of management, including the Chief
Executive and Chief Financial Officer, of the effectiveness of the design and
operation of Diageo's disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period
covered by this Annual Report. Based upon that evaluation, Diageo's Chief
Executive and Chief Financial Officer concluded that, as of 30 June 2026,
Diageo's disclosure controls and procedures were effective.
Fair, balanced and understandable
As part of its review of the company's Annual Report and associated
disclosures, the Audit Committee considered whether the report, taken as a
whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the company's position, performance,
business model and strategy. The Committee advised the Board accordingly, in
support of the Board's statement in line with the 2024 UK Corporate
Governance Code. In doing so, the Committee has noted the guidance issued by
the FRC on this subject as well as best practice recommendations from external
advisors. The Committee has considered factors such as whether the report
includes clear and sufficiently detailed descriptions of the business model,
strategy and principal risks, whether the report is consistent throughout, whether
the narrative accurately reflects the financial statements, that information is
presented fairly, without omission of material information and not in a manner
which might mislead users.
The Committee has also considered the presentation of GAAP and non-GAAP
measures to ensure appropriate prominence is given to GAAP measures and that
non-GAAP measures are presented consistently and can be clearly reconciled.
The Audit Committee has also considered the governance and processes
undertaken by management in drafting, developing and reviewing the contents
of the Annual Report, which have been designed to ensure the robustness and
adequacy of the information contained in it, including review by and input from
senior executives, the company's advisors and through the work of the FAC. On
this basis, the Audit Committee recommended to the Board that it could make
the required statement that the Annual Report is 'fair, balanced and
understandable'.
Business Integrity programmes
Diageo is committed to doing business the right way, in accordance with
applicable laws and regulations and our internal standards. A strong culture of
business integrity underpins how we operate and supports the long-term success
of the business. Employees are expected to act with integrity, uphold our values
and comply with our Code of Business Conduct and supporting global policies.
The Chief Business Integrity Officer provides regular updates to the Audit
Committee on the effectiveness of the business integrity programme, including
Code training and certification rates, the implementation of policies and
programmes, and SpeakUp activity, investigations and outcomes.
Our Code of Business Conduct sets out the standards we expect and provides a
clear framework to support responsible decision-making and conduct across our
operations. The Code is available in 18 languages and is supported by
mandatory annual training for employees. In fiscal 26, over 22,300 employees
completed Code training globally. The Code of Business Conduct is available at
https://www.diageo.com/en/our-business/corporate-governance/code-of-
business-conduct.
We expect the same high standards of integrity from those we work with. Third-
party risks are managed through our Know Your Business Partner (KYBP)
standard, which forms part of our wider third-party risk management
framework. KYBP supports the identification, assessment and management of
potential risks, such as bribery and corruption, sanctions, fraud, money
laundering, tax evasion, data privacy and other legal, compliance and
reputational risks.
Employees and stakeholders are encouraged to raise concerns about potential
breaches of the Code of Business Conduct or policies. SpeakUp, our global
confidential whistleblowing service, is independently administered and
accessible through multiple channels. Where legally permitted, reports can be
made anonymously. All concerns are reviewed and, where appropriate,
investigated. Where allegations are substantiated, appropriate disciplinary and
corrective actions are taken. On behalf of the Board, the Audit Committee
receives regular reports on SpeakUp activity, including the volume and nature
of allegations, substantiation rates and investigation closure timelines. During
fiscal 26, the Audit Committee reviewed the findings of the company’s
whistleblowing processes, in line with the expectations of the UK Corporate
Governance Code.
During fiscal 26, 787 allegations of potential breaches were reported. Of those
reported allegations 200 were substantiated and 67 employees left the business
as a result of breaches of our Code of Business Conduct.(1)
(1)For more details, see Non-Financial Reporting Boundaries and Methodologies,
available on our website.
94 | Diageo Form 20-F 2026 |
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Senior financial officers’ code of ethics and
dealing code
For the purposes of the requirements of SOx and related SEC rules, Diageo has
adopted a code of ethics covering its Chief Executive, Chief Financial Officer,
and other senior financial officers. During the year, no waivers were granted in
respect of this code of ethics.
The full text of the code of ethics is available at https://www.diageo.com/en/
our-business/corporate-governance/compliance.
The company has also adopted a dealing code setting out requirements in
relation to dealings in Diageo securities by Directors, Executive Committee
members and certain other employees, which is designed to ensure compliance
with applicable insider dealing and market abuse laws regulations, in particular
the UK Market Abuse Regulation (UK MAR).
External auditor
During the year, the Audit Committee reviewed the external audit strategy and
the findings of the external auditor from its review of the interim results and its
audit of the consolidated financial statements. The Audit Committee reviews the
appointment of the auditor, taking into account the auditor’s effectiveness and
independence and all appropriate guidelines, and makes a recommendation to
the Board accordingly. More detail on this year’s assessments undertaken by the
Committee and their results are on page 94-95.
Assessment of the external auditor independence and objectivity
Consideration | Assessment | Outcome |
Non-audit services & independence •The group has a policy on auditor independence and on the use of the external auditor for non-audit services and reviews it every year. •Under the policy, only permissible services can be provided by any member of the PwC global network to the company, its subsidiaries or any related entity. •The policy sets out permissible services, being those required to be provided by an external auditor or which are services closely linked to audit work and where the auditor's understanding of the group is relevant. | •Any permissible service is evaluated, including an assessment of any threats to independence and the safeguards applied in accordance with the FRC Ethical Standard, SEC auditor independence rules and US Public Company Accounting Oversight Board rules. •Any permissible service, regardless of the size of the engagement, should be approved by the Audit Committee or its nominated delegate, the Chair of the Audit Committee, based on a defined scope of pre-approved services. •Any permissible engagement above $125,000 automatically triggers a review of the auditor independence and requires an additional approval by the Audit Committee. | All audit and non-audit services provided in fiscal 26 went through the correct approval process. Audit and non-audit services fees can be found on page 155 in note 4(b) to the consolidated financial statements. |
Auditor rotation Every year, the Audit Committee reviews the appointment of the auditor taking into account the auditor’s effectiveness and independence and all appropriate guidelines. The Statutory Auditors and Third Country Auditors Regulations 2016 require the company to undertake an audit tender at least every 10 years and change the external auditor every 20 years. There are no contractual obligations that restrict the company’s current choice of external auditor and the recommendation as to appointment of the auditor was free from any influence by a third party. | •PwC was first appointed in fiscal 16 and the last tender was carried out during fiscal 24. •Since the conclusion of the audit for the year ended 30 June 2023, Scott Berryman has been lead audit partner with responsibility for signing the Diageo plc audit opinion on behalf of PwC. Scott continued in that role for the year ended 30 June 2026. | The Audit Committee considers the relationship with the auditors to be working well and remains satisfied with their effectiveness and the quality of their audit work, the Audit Committee does not currently anticipate that it will conduct an audit tender before it is required to do so. Nevertheless, its recommendation continues to be evaluated every year. The company has complied with the provisions of The Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014 for the year ended 30 June 2026. |
95 | Diageo Form 20-F 2026 |
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Audit fees
Fees paid to the auditor for audit, audit-related and other services are analysed
in note 4(b) to the consolidated financial statements. The nature and level of
fees of all services provided by the external auditor are factors taken into
account by the Audit Committee when it reviews annually the independence of
the external auditor.
External auditor effectiveness and quality
The Audit Committee assesses the ongoing effectiveness and quality of the
external auditor and audit process throughout the year. The Audit Committee
first reviews the audit plan at the start of the audit cycle, which includes the
auditor's view of the key risks to the company and its reporting. The Committee
reviews these risks throughout the audit, and considers the results of the
auditor's work in challenging and testing management’s significant assumptions
and estimates relating to those risks. As the audit progresses, the Audit
Committee considers the effectiveness of the audit process through the reports
presented by the auditor and, following completion of the audit process, the
Committee seeks detailed feedback from management, who also completed
questionnaires on their experience with the audit. Both management and the
auditor provided their assessments of auditor effectiveness and quality to the
Audit Committee for consideration at its meeting in December. The Committee
confirms that its auditor assessment is undertaken based on the requirements of
the Code and in compliance with the recommendations of the Minimum
Standard for Audit Committees, as well as the NYSE listing rule 303A.07. It
also includes consideration of the findings of the FRC's Audit Quality Review
team, which routinely monitors the quality of the audit work of certain UK audit
firms through inspections of sample audits and related quality processes. This
year, the Audit Committee’s review was informed by the 2025 Audit Quality
Inspection and Supervision report on PwC published in July 2025. The
assessment also takes into consideration PwC's own annually published
Transparency Report which sets out how the firm upholds its professional
responsibilities and seeks to ensure delivery of quality in its services. The results
of the survey conducted in October 2025 indicated that overall satisfaction with
PwC's performance remained broadly consistent with the prior year, albeit that
there was a slight decline in scores from those who interacted more frequently
with the auditor. Management provided consistently strong feedback on PwC's
quality control processes, independence, professional expertise, business
knowledge and communication with management. Management also recognised
the appropriate level of auditor challenge, particularly in relation to goodwill
and brand impairments, restructuring provisions, uncertain tax positions and the
valuation of pension liabilities. Feedback from management suggested that
areas where continued focus was required included provision of insights into
best practices and regulatory developments, knowledge transfer to new team
members, better alignment of internal communications and planning within
PwC, timely review and feedback on audit matters, and consistency of approach
to subsidiary statutory audit work. The relationship between the auditor and
management continued to be open and strong. The external audit team
communicated openly and clearly those areas which they considered significant
and their views on such matters. Senior members of the PwC team had been
very visible throughout the business and strengthened relationships with
management. Overall, performance was considered to be effective. The Board
will propose the reappointment of PwC at the AGM to be held in November
2026.
Cyber Security Risk Management
maintaining robust cyber security and operational resilience capabilities is
essential to safeguard our operations, brands and stakeholders. Cyber security is
aligned to our group risk framework and is central to our principal risk area of
‘Technology and Cyber'’.
We continue to strengthen how we protect our systems, data and brands through
governance, employee awareness and regular assessments. Our approach
includes working to keep pace with global regulatory changes, such as the EU’s
Network and Information Security Directive 2 (NIS2), where we are enhancing
our incident response, supplier oversight and risk reporting processes to meet
evolving expectations. We have also enhanced employee awareness and
preparedness against increasingly sophisticated phishing and voice-based social
engineering attacks.
Cyber security remains key to safeguarding our most valuable assets and
ensuring trust in our products, services and operations worldwide.
We align our cyber security practices with recognised industry standards to help
us respond effectively to threats and incidents across our global operations. In
today’s environment, we are seeing increased risks from phishing, ransomware,
credential theft and AI-enabled impersonation and deepfake attacks targeting
employees and business operations. A key area of focus is strengthening third-
suppliers to ensure they meet our security expectations, including safeguards for
systems, data and recovery capabilities, helping to build greater resilience
across our end-to-end supply chain.
functions, enabling us to assess risks, respond quickly to threats and implement
appropriate countermeasures. We continue to enhance existing protocols for
escalating material cyber incidents to senior management and the Board.
In line with evolving regulatory requirements, we are progressing a structured
programme to align with NIS2, focusing on governance, cyber resilience and
operational security across factories and business-critical operations.
We regularly engage independent cyber security experts to benchmark our
capabilities and test the resilience of our systems. Alongside this, all employees
and certain contractors are required to complete cyber training, with additional
targeted education to address specific roles, risks and evolving threat scenarios.
We also conduct desktop cyber crisis response exercises to strengthen incident
security, with oversight delegated to the Audit Committee. The Audit
Committee reviews management's actions with the aim of ensuring that robust
processes are in place to identify, assess and manage cyber risks, and that
appropriate measures are taken to mitigate potential incidents across the
business.
Our cyber programmes are led by our Chief Information Security Officer
they oversee the continuous monitoring of emerging cyber trends and
vulnerabilities, actions taken to prevent, respond to and mitigate potential cyber
reports cover key developments, programme assessments, risk trends and
mitigation strategies aligned to our risk appetite.
incidents remain a possibility.
F-22 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Governance
Management’s report on internal control over financial reporting
Management, under the supervision of the Chief Executive and Chief Financial Officer, is responsible for establishing and
maintaining adequate internal control over the group’s financial reporting.
Diageo’s internal control over financial reporting includes policies and procedures that: pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurance that transactions
are recorded as necessary to permit the preparation of financial statements in accordance with IFRS® Accounting Standards (IFRSs)
adopted by the UK (UK-adopted International Accounting Standards) and IFRSs, as issued by the International Accounting
Standards Board (IASB), including interpretations issued by the IFRS Interpretations Committee; provide reasonable assurance that
receipts and expenditures are made only in accordance with authorisation of management and the directors of the company; and
provide reasonable assurance regarding prevention or timely detection of any unauthorised acquisition, use or disposition of assets
that could have a material effect on the consolidated financial statements.
Management has assessed the effectiveness of Diageo’s internal control over financial reporting (as defined in Rules 13(a)-13(f) and
15(d)-15(f) under the United States Securities Exchange Act of 1934) based on the framework in the document ‘Internal Control –
Integrated Framework’, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. Based
on this assessment, management concluded that, as at 30 June 2026, internal control over financial reporting was effective.
Any internal control framework, no matter how well designed, has inherent limitations, including the possibility of human error and
the circumvention or overriding of controls and procedures and may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions or because the degree of compliance with the policies or procedures may deteriorate.
PricewaterhouseCoopers LLP, an independent registered public accounting firm, who also audit the group’s consolidated financial
statements, has audited the effectiveness of the group’s internal control over financial reporting as of June 30, 2026, and has issued an
unqualified report thereon, which is included on pages 135 to 137 of this document.
Changes in internal control over financial reporting
During the period covered by this report, there were no changes in internal control over financial reporting that have materially
affected or are reasonably likely to materially affect the effectiveness of internal control over financial reporting.
Directors’ responsibilities in respect of the Annual Report and financial statements
The Directors are responsible for preparing the Annual Report, the information filed with the SEC on Form 20-F and the group and
parent company financial statements in accordance with applicable law and regulations.
96 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Nomination Committee report
Enabling
transformational
leadership
Dear Shareholder
I am pleased to present the report of the Nomination
Committee for the year ended 30 June 2026.
The Nomination Committee plays an important role in ensuring adequate
succession planning for key executive and Board appointments, and the
maintenance of high-quality pipelines for key roles.
We aim to ensure that the Board is comprised of independent, experienced and
influential individuals from a broad range of backgrounds, with appropriate
skills and capabilities to contribute to the continued success of the company in
an increasingly volatile world.
During the year under review, we conducted a rigorous formal search process
for a new Chief Executive. We were pleased to recommend to the Board the
appointment of Sir Dave Lewis effective 1 January 2026. Sir Dave has
extensive CEO and Board experience and significant expertise in leading global
consumer businesses. We are confident he has the right blend of vision, skills
and experience to transform the company and set it up for sustainable growth
into the future. We thank Nik Jhangiani for the excellent leadership he provided
as Interim Chief Executive, and the ongoing leadership he provides as CFO.
Additionally, we were pleased to welcome John Rishton to the Board as an
Independent Non-Executive Director on 1 November 2025. John has extensive
experience of senior non-executive roles in complex, highly regulated,
international businesses. We have also recently announced that R. Alexandra
Keith will join the Board as Independent Non-Executive Director, effective 5
November 2026. She brings expertise in global brand-building and category
transformation from her 35-year career in consumer goods across many
markets, including the US. We look forward to her contribution to the Board.
Over the year, we have continued to oversee the company's talent planning and
succession for senior executives, with a number of changes announced during
the year. In March 2026, it was announced that Sally Grimes was leaving the
company and that John O’Keeffe would succeed her as President, Diageo North
America. In May 2026, we announced that Hina Nagarajan and Louise Prashad
were stepping down as President Africa and Chief HR Officer respectively, with
effect from the end of the fiscal year. In July 2026, Natalie Bickford joined
Diageo as Chief People Officer and in August 2026 Sujay Wasan joined as
President, Asia Pacific. We are grateful to Sally, Hina and Louise for their
achievements and contributions to Diageo over the years and look forward to
working with Natalie, Sujay and John in their new roles, along with the rest of
the Executive Committee.
The recent changes at Board and Executive levels will enhance and accelerate
the transformation of our business to deliver long-term, sustainable value for
Diageo's shareholders and other stakeholders.
Sir John Manzoni
Chair of the Nomination Committee
Board and Committee attendance
Directors’ attendance record at the last Annual General Meeting (AGM),
scheduled Board meetings and Board Committee meetings, for fiscal 26 is set
out in the table shown on page 72. Each Director is expected to attend all
meetings of the Board and those Committees of which he or she is a member
and the AGM, but if unable to do so may give his or her views to the Chair of
the meeting in advance.
The 2025 AGM was held as a combined physical and electronic meeting via
a live webcast with all directors attending physically.
For further details on the Board Committees see pages 89-129; Executive
Committee see pages 75-76.
Role of the committee
•Leads process for appointments to the
Board.
•Ensures adequate succession plans in
place for Board and senior management
positions.
•Oversees development of a diverse
pipeline for succession.
•Comprised of independent Non-
Executive Directors.
Read more on pages 97-98.
Committee members
•Sir John Manzoni (Committee Chair)
•Melissa Bethell
•Karen Blackett CBE
•Julie Brown
•Susan Kilsby
•Valérie Chapoulaud-Floquet
•John Rishton
•Ireena Vittal
Read more on page 97.
Principal areas of focus
•Appointment of a new Chief Executive
following an extensive and thorough
global search.
•Appointment of a new Non-Executive
Director.
•Succession planning and ensuring a
strong pipeline of talent for non-
executive and executive roles.
•Supervising Executive Committee
membership changes.
Read more on pages 97-98.
97 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Role of the Nomination Committee
The Nomination Committee is responsible for keeping under review
the composition of the Board and succession to it, reviewing succession
planning for key Executive Committee roles and overall talent strategy for
senior leadership positions, including in relation to encouraging diversity in
leadership positions. It makes recommendations to the Board concerning
appointments to the Board. More details on the role of the Nomination
Committee are set out in its terms of reference which are available at
https://www.diageo.com/en/our-business/corporate-governance.
Activities of the Nomination Committee
The principal activities of the Nomination Committee during the year were:
•the consideration of the talent pipeline for potential new Executive and Non-
Executive Directors and other appointments to the Board, including the
appointment of Sir Dave Lewis as new Chief Executive Officer and of John
Rishton as new Non-Executive Director;
•the design and conduct of the annual review of Board, Committee and
individual director effectiveness and performance, review of the findings of
the review and recommended actions;
•consideration and approval of the report of the Committee in the company’s
Annual Report and consolidated financial statements;
•consideration and recommendation to the Board of proposed changes in
Directors’ outside interests, status as to independence and any potential
conflicts of interest;
•the approval of the adoption of guidelines in relation to Diageo's procedures
for appointing employees to boards of its listed subsidiaries; and
•a review of the succession plans for Executive Committee roles,
including potential candidates for such roles, their backgrounds
and experience.
Succession planning
The Committee reviews the effectiveness and adequacy of succession planning
processes and the succession plans for both the Board and Executive
Committee. Succession plans are tailored for key roles, based on merit and
objective criteria. Consideration is given to the length of tenure of each
incumbent with the aim to anticipate potential changes to the Board or
Executive Committee prospectively and address vacancies proactively enabling
smooth succession. The Board should comprise a majority of independent Non-
Executive Directors, free of conflicts of interest, and with sufficient time to
discharge their duties as Board members. The Board has a long-standing belief
that it benefits from having a broad and diverse range of views expressed
amongst its members, which enhances decision-making for the benefit of the
long-term interests of the company and its stakeholders. The composition and
capabilities of the Board should be appropriate and reflective of Diageo’s global
scale, business and operations, its strategy, portfolio, consumer base, culture and
status as a listed company. Directors should have sufficient understanding of the
company and its operations, the markets and industry in which it participates, to
understand the key trends and developments which are relevant for Diageo.
Recruitment
The Committee follows a formal and comprehensive process for recruiting Non-
Executive Directors, which includes the development of a candidate profile and the
engagement of a professional search agency specialising in the recruitment of
high-calibre candidates. During the year, we engaged executive search company
Russell Reynolds Associates to assist with our recruitment and pipelining
requirements. Russell Reynolds Associates has no other connection with the
company except that Ireena Vittal, a Non-Executive Director, is a member of
the advisory board of Russell Reynolds Associates. In the case of Executive
Director or Executive Committee appointments, an executive leadership
assessment may be carried out by an external professional agency, the results of
which are reported to the Committee. In determining its recommendations to the
Board, the Committee has regard to a broad range of factors including the
candidate's background, skill set and experience, their ability to express
independent judgement and participate across a broad range of topics, including
on sustainability and societal matters, their ability to devote sufficient time to
the company and whether their appointment would contribute towards the
Board’s diversity objectives which are set out in the Board Diversity Policy.
This policy, which applies to the Board and its Committees, reflects the Board's
belief that it is critical that Board membership includes a diverse range of skills,
professional and industry backgrounds, geographical experience and expertise,
gender, tenure, ethnicity and diversity of thought.
Chief Executive appointment and induction
Following the announcement in July 2025 that Debra Crew had stepped down
as Chief Executive, Nik Jhangiani assumed the role of Interim Chief Executive
while the Committee carried out a comprehensive global search process for a
permanent successor. In doing so, the Committee used clear criteria for
identifying the right candidate which included key requirements and priorities,
including in respect of background and experience, attributes and behaviour,
within the context of the culture, strategy and leadership needed for the
business. In accordance with its Executive Director succession planning
processes, the Nomination Committee conducted a review of potential
candidates, including both internal and external, against the assessment criteria.
The review included candidates who had different backgrounds and experience.
Following this review, the Nomination Committee made a recommendation to
the Board that Sir Dave Lewis was the most suitable candidate as a proven CEO
with extensive marketing and brand-building experience, and an outstanding
track record leading global consumer businesses, growing world-class brands,
and providing operational and financial rigour. Acting on the recommendation
of the Nomination Committee, the Board approved his appointment and issued
an announcement on 10 November 2025.
A timeline and highlights of Sir Dave's initial
period as Chief Executive are below:
January 2026
Functional team inductions at Diageo's head office in London.
Visits to offices and sites in North America and Latin America
& Caribbean, including New York, Miami and Bogota.
Visits to offices in Dubai and Istanbul.
Board induction and meetings in London.
February 2026
Visits to Diageo's operations in India, including Bangalore and
Delhi.
Investor roadshows in London.
March 2026
Executive Committee strategy workshop in the UK.
Visits to Paris, France and Johannesburg, South Africa.
Investor roadshows in New York.
April 2026
Annual Strategy Conference, Board and Committee meetings in
London.
Visits to Asia, including China and Singapore.
Visit to Ireland, including opening the new Littleconnell brewery
in Co. Kildare and visits to St James' Gate brewery in Dublin.
May 2026
Leading senior leadership event in Edinburgh and visits to
supply operations and sites in Scotland.
On joining Diageo on 1 January 2026, Sir Dave undertook a thorough and
comprehensive induction programme designed to provide him with a detailed
understanding of Diageo’s operations, strategy, performance and culture. This
included:
•A review of a wide range of materials and data, including historical Board
and Committee papers, performance data and analyses, externally reported
and investor relations materials, historical internal employee survey results
and action planning information, and internal strategy and brand documents.
98 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Nomination Committee report continued
•One-to-one meetings with key individuals, including the Chair, Chief Financial
Officer, Non-Executive Directors and members of the Executive Committee, to
gain a detailed understanding of the company’s strategic priorities, operational
and financial performance, key opportunities and challenges.
•Multi-day deep dive sessions with senior leaders from across the business,
covering areas such as people and culture, supply chain and operations,
corporate relations and finance.
•A series of visits to key sites and operational locations, allowing Sir Dave to
meet key stakeholders, experience the business across its diverse markets and
engage directly with the group’s workforce, holding townhalls and Q&As.
Appointment and re-appointment at the AGM
Any new Directors are appointed by the Board and, in accordance with the
company’s articles of association, they must be elected at the next Annual
General Meeting (AGM) to continue in office. All existing Directors retire and,
if they wish to do so, stand for re-election every year.
The Committee has confirmed that the Non-Executive Directors standing for re-
appointment at this year’s AGM continue to perform effectively, both
individually and collectively as a Board, and that each Non-Executive Director
demonstrates commitment to their role and continues to provide constructive
challenge, strategic guidance and offer specialist advice, as well as holding
management to account.
As can be seen from the attendance records set out on page 72, Directors’
attendance levels have been consistently high throughout the year ended 30 June
2026. The Company’s policy is for all Directors to attend the AGM, either
physically or by video conference as permitted by the company's articles of
association. The 2026 AGM is scheduled to be held on 5 November 2026.
Further details, including biographies, are set out in the Notice of Meeting for
this year's AGM.
External appointments
While the Board does not have a written policy with regards to the maximum
number of other appointments that Directors should have, before recommending
new appointments to the Board, the Nomination Committee considers other
demands on candidates’ time. As a general principle, the Committee takes the
view that Non-Executive Directors should have no more than four, and
Executive Directors no more than one, listed mandates in addition to their role
as a Director of the company. However, each Director's situation is considered
individually. Once appointed, any proposed additional external appointments
are reviewed by the Nomination Committee to ensure that the additional
demands on a Director’s time will not impact on the Director’s ability to
perform his or her role as a Director of the company before the additional
appointment is recommended for approval by the Board. Directors’ interests are
reviewed and updated at each Board meeting. The Board has concluded that
each Non-Executive Director has sufficient time to discharge their duties as a
Director of the company, taking into consideration their external appointments
and commitments.
Board performance review
As part of the annual Board performance review, all members of the
Nomination Committee participated in an internal review of the Committee.
Feedback indicated that the Committee was effective and that Directors were
satisfied with its performance, and that it had been efficient in managing key
executive and non-executive role succession during the year. Feedback
indicated broad satisfaction with the composition of the Board, comprising a
range of diverse and complementary backgrounds including good consumer
products experience, and improved processes to ensure an appropriate mix of
skills, knowledge and expertise. Further details of the evaluation can be found
on pages 85-86.
Induction and training
Our customary induction processes for newly appointed Directors include
individual meetings with Executive Committee members and other senior
executives, visits to the company’s production facilities and offices including the
company's head office in London and the group's spirits production facilities,
scotch brand homes, visitor centres and archives in Scotland. This is
supplemented by documents, materials and information, including corporate
governance guidance materials, the Code of Business Conduct and other relevant
policy documents, historical Board and Committee papers, recent results
announcements and materials, investor relations reports, performance data and a wide
range of other internal and external reports, presentations and analyses.
Induction programmes for new Directors are tailored to suit the particular
background and experience of the individual Director, with the Committee
advising on priorities for that individual and tracking induction activity. These
induction processes supplement existing practices whereby a continuing
understanding of the business is developed through appropriate business
engagements for Non-Executive Directors such as visits to customers,
engagements with employees and brand events worked into the annual cycle of
Board meetings.
For example, in September 2025 it was announced that John Rishton would be
appointed to the Board with effect from 1 November. His induction programme
commenced with a series of meetings with other Board members and senior
executives, as well as a tour of Diageo's headquarters in London. As part of his
induction, he was provided with a broad range of materials and information,
including summaries of his responsibilities and duties as Director, and received
briefings from the company's corporate brokers and external legal advisors. In
late October 2025, John visited a number of the company's distilleries,
packaging facilities and other sites in Scotland. In early November 2025, he
joined his first Board and committee meetings prior to attending the AGM, at
which his appointment was approved by shareholders. Since then, he has visited
the company's tequila operations in Mexico and will shortly be visiting sites in
China and India.
Directors are informed and trained on specific areas of risk by Executive
Committee members, other internal senior leaders and external guest speakers
and specialists through presentations, roundtable discussions and other sessions
during the year as part of Board meetings and dinners. For example, during
fiscal 26 the Board held a training session on changing regulatory requirements
in relation to cyber security which was facilitated by the Chief Information
Security Officer with assistance from internal legal and security specialists, as
well as external legal advisors. In addition, Executive Committee members and
other senior executives are invited, as appropriate, to Board and strategy
meetings to give presentations on their areas of responsibility, especially during
the multi-day Annual Strategy Conference. All Directors are also provided with
regular briefings to ensure they are kept up to date on relevant legal and
governance developments or changes, best practice developments and changing
commercial and other risks.
Diversity
The Board has a long-standing view that it benefits from having an independent
and diverse membership, enabling a broader evaluation of all matters under
consideration and contributing to a culture of collaborative and constructive
discussion. This is captured in the Board Diversity Policy, which applies to the
Board and its Committees, reflects the Board's belief that it is critical that Board
membership includes a diverse range of skills, professional and industry
backgrounds, geographical experience and expertise, gender, tenure, ethnicity
and diversity of thought. The Board supports the recommendations of the FTSE
Women Leaders Review on gender diversity and the Parker Review on ethnic
diversity. The Board's approach to inclusion and diversity includes objectively
considering candidates for Board and Executive Committee roles from multiple
perspectives, including on the basis of their skill set, experience, expertise,
knowledge, gender, cultural and geographical backgrounds, ethnicity and age.
Therefore, the Policy sets out specific objectives with parity between male and
female members of the Board being the ultimate goal in terms of gender
diversity, with a commitment to have no less than 40% female representation on
the Board, and having at least one Director reflecting ethnic diversity as defined
in accordance with the Parker Review. The Committee is pleased to confirm
that the diversity targets set out in the Board Diversity Policy and by the FCA in
the UK Listing Rules have been met. The Board Diversity Policy also sets out
the Board’s support for management’s actions to increase the proportion of
senior leadership roles held by women and by people from ethnic minority
backgrounds and other under-represented groups. As at 30 June 2026, the
percentage of women on the Executive Committee and their direct reports is
46%.
The Board's Diversity Policy is available at https://www.diageo.com/en/our-
business/corporate-governance/board-diversity
99 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Board and Executive Committee reporting on gender identity or sex(1)
Number of Board members | Percentage of the Board | Number of senior positions on the Board (CEO, CFO, SID and Chair) | Number in executive management | Percentage of executive management | |
Men | 4 | 40.0% | 3 | 9 | 69.2% |
Women | 6 | 60.0% | 1 | 4 | 30.8% |
Not specified/prefer not to say | — | — | — | — | — |
Board and Executive Committee reporting on ethnic background(1)
Number of Board members | Percentage of the Board | Number of senior positions on the Board (CEO, CFO, SID and Chair) | Number in executive management | Percentage of executive management | |
White British or other White (including minority-white groups) | 6 | 60.0% | 3 | 8 | 61.5% |
Mixed/Multiple Ethnic Groups | — | — | — | 1 | 7.7% |
Asian/Asian British | 3 | 30.0% | 1 | 3 | 23.1% |
Black/African/Caribbean/Black British | 1 | 10.0% | — | — | — |
Other ethnic group, including Arab | — | — | — | 1 | 7.7% |
Not specified/prefer not to say | — | — | — | — | — |
Board composition(1) |
ò | Chair |
ò | Executive Director |
ò | Non-Executive Director |
Non-Executive Director tenure(1) |
ò | 0 – 3 years |
ò | 3 – 6 years |
ò | 6 – 9 years |
Board gender diversity(1) |
ò | Male |
ò | Female |
Board ethnic diversity(1) |
ò | Directors of colour |
ò | White European |
Board nationality(1) |
ò | British | ò | French | |
ò | American/British | ò | Indian |
Board diversity data
•Directors are defined as all Non-Executive and Executive Directors appointed
to the Board. Board diversity related data are collated directly from each
director annually using a questionnaire and are given on a self-identifying
basis.
•Directors of colour are defined in accordance with the Parker
Review definitions as those 'who identify as or have evident heritage from
African, Asian, Middle Eastern, Central and South American regions'.(1)
(1)Graphs and data above are as at 30 June 2026.
Executive committee nationality(1) |
ò | British | ò | Spanish | |
ò | American/British | ò | Colombian | |
ò | Indian | ò | South African | |
ò | Irish | ò | Australian/American |
100 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Directors' remuneration report
Annual statement
by the Chair of the
Remuneration
Committee
Susan Kilsby
Senior Independent Director and Chair of the Remuneration
Committee
“A new, simpler Directors' Remuneration Policy designed
to strengthen our performance culture and support
Diageo's transformation.”
Dear Shareholder
I am pleased to present the Directors' Remuneration Report for the year ended
30 June 2026, which contains:
•Our revised Directors’ Remuneration Policy, which shareholders are being
asked to approve at the Annual General Meeting (AGM) on 5 November
2026; and
•The annual report on remuneration, describing how the Directors'
Remuneration Policy has been put into practice in 2026 and will, subject
to approval, be implemented in 2027.
In this year's report | Page |
Consultation on our 2026 Directors' Remuneration Policy | 101 |
Remuneration at a glance | 108 |
Pay for performance summary | 109 |
Remuneration Committee governance | 110 |
2026 Directors' Remuneration Policy | 111 |
Annual Report on Remuneration | 118 |
Planned implementation for 2027 | 129 |
Introduction
During fiscal 26 the alcoholic beverage sector has remained challenging with
continued pressure on consumer wallets amid an uncertain macroeconomic
backdrop. While we face headwinds including a softer trading environment in the
US, we have seen growth in our other regions and we have confidence in the
attractiveness of the sector longer term. Across the year, we built the foundations to
deliver improved performance and stronger shareholder returns. We have a newly
defined purpose, a more agile and cost effective operating model and clear
strategy defining where we play and how we win.
The Board has been focused on building a leadership team capable of transforming
Diageo, and the Remuneration Committee has been mindful of its responsibility to
develop a reward framework that supports our strategy, strengthens our performance
culture and allows us to compete for the best global talent.
The following pages set out the decisions taken by the Committee during the year
under review and provide details of the process undertaken, and proposals formed, in
respect of the review of the Directors' Remuneration Policy.
Role of the committee
•Responsible for the design and
implementation of the Directors’
Remuneration Policy (the Policy),
ensuring our approach to remuneration
attracts and retains talented executives,
and incentivises the delivery of our
strategy.
•Sets remuneration for Executive
Directors, the Chair of the Board and the
Executive Committee in line with the
principles of the UK Corporate
Governance Code.
Read more on page 110.
Committee members
As at the end of fiscal 26 the following
directors were members of the Remuneration
Committee:
•Susan Kilsby (Committee Chair)
•Melissa Bethell
•Karen Blackett CBE
•Valérie Chapoulaud-Floquet
Read more on page 110.
Principal areas of focus
•Ensures the Policy supports delivery of
our strategy, and considers the views of
our shareholders, employees, and other
stakeholders.
•Sets the level of fixed, short- and long-term
pay opportunity for Executive Directors.
•Reviews the design and operation of the
Annual Incentive Plan and Diageo
Long-Term Incentive Plan.
•Reviews wider workforce remuneration,
considering the alignment between
executive pay and our employees.
Read more on pages 112-117.
101 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Appointment of Sir Dave Lewis as Chief Executive Officer
Fiscal 26 saw the appointment of a new Chief Executive Officer to lead the
transformation of our business.
Debra Crew stepped down as Chief Executive and an Executive Director early
in the financial year and details of her leaving arrangements were set out in last
year’s annual report.
While the Board conducted its search for a permanent successor, Nik Jhangiani
served as Interim Chief Executive Officer between 16 July 2025 and 1 January
2026 after which he returned to his role as Chief Financial Officer. During this
period Nik received a salary supplement allowance, with details set out on page
118.
Following a rigorous global search process involving internal and external
candidates, Sir Dave Lewis was appointed as our new Chief Executive Officer
on 1 January 2026. He has a truly outstanding track record leading global
consumer businesses, growing world-class brands, and providing operational
and financial rigour. As disclosed at the time of appointment, Sir Dave’s
remuneration package on joining comprised a base salary of £1,500,000, with
maximum annual bonus and long-term incentive opportunity set in line with the
current Policy at 200% and 500% of salary respectively (consistent with the
previous incumbent). Sir Dave’s salary was set slightly above his predecessor's
reflecting his extensive executive experience. No one-off awards or buy-out
arrangements were made to Sir Dave in relation to this appointment.
A simplified Remuneration Policy focused on performance
With our Directors’ Remuneration Policy (the ‘Policy’) due for renewal at the
November 2026 AGM, the Committee undertook a detailed review and
assessment of our current Policy in the context of our new strategy set out
earlier in this annual report on pages 10-11.
It is crucial that we have the right remuneration framework and the
right tools to enable the successful delivery of this reshaped strategy to
drive long-term value creation for shareholders.
Our current policy establishes the framework for incentive design and reward
opportunity across the organisation. It is important that we are able to compete
for, and retain, the global leadership we need to succeed and drive a high-
performance culture.
In fiscal 26 more than 92% of net sales were generated outside of Great Britain,
with the US representing both our largest market and our greatest opportunity
for performance improvement. Our global footprint has informed the
benchmarking peer group used in our review, which we have set out in detail in
this report. Since 2014 we have not changed our overall incentive design or
increased the opportunity level. As a result, we are no longer competitive in our
key markets.
In the last few months I engaged with our largest shareholders who represent
around 45% of our share capital. I would like to thank them for the level of
engagement we received, and the well-considered feedback that was shared on
our proposals. While views differed on some aspects, there was broad support
for our proposals and the Committee carefully considered all feedback before
finalising the Policy now presented for shareholder approval.
As set out in the following pages, the Committee concluded from its review that
the existing Policy no longer fully reflected the business we are today or the
transformation we need to deliver. Further detail on the Committee's review
process, the principles that guided our decisions, and the main themes we heard
from investors and how it helped shape our 2026 Policy can be found on pages
102 to 106.
2026 Directors' Remuneration Policy review
Our proposed Policy was reviewed and designed in line with four core principles | ||
Compete for global talent: Delivering a successful transformation requires exceptional leadership. Our remuneration framework must enable us to attract, retain and motivate the talent needed to deliver. | ||
Strengthen our performance culture: Reward is clearly linked to performance, supportive of our new behaviours (One Team, Competitive and Decisive) and with greater emphasis on variable pay. | ||
Simplify and focus: Reduce the complexity and duplication in our incentives to improve clarity for management, and transparency for shareholders. | ||
Reinforce shareholder alignment: Ensure our performance measures support our new strategic focus and reinforce alignment between executive reward and long-term shareholder experience. |
Timeline and approach to the Committee's review of the Directors' Remuneration Policy | ||||
November 2025 | ||||
Assessed current Policy and potential areas for change. | ||||
January 2026 | ||||
Discussed key challenges with the current Policy, narrowed down areas of focus, and agreed core principles. | ||||
March 2026 | ||||
Reviewed global competitiveness and assessed the impact of potential changes on our wider workforce framework. Discussed Policy options including incentive plan design, performance measures and delivering to the core principles. | ||||
April and May 2026 | ||||
Further consideration of proposals and preparation for consultation with investors. | ||||
June 2026 | ||||
Engagement meetings with the Chair of the Committee and shareholders (15 meetings) and three proxy advisors on our proposals. | ||||
July 2026 | ||||
Feedback considered, adjustments to original proposals made, and proposed Policy agreed for approval of shareholders. | ||||
102 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Directors' remuneration report continued
Attracting and retaining global talent
Our global footprint in fiscal 26
Net sales: 26%
Employees: 37%
Net sales: 37%
Employees: 11%
Net sales: 8%
Employees: 7%
Net sales: 11%
Employees: 16%
(i)See page 22 for further detail on fiscal 26 net
sales and average number of employees.
Ensuring globally competitive pay
Diageo is a global business, with products sold in more than 180 countries and a
workforce spanning over 60 countries. Around 80% of our employees are based
outside the UK and 20% of our Executive Committee and senior leadership
team are based in the US. North America represented 37% of Diageo's net sales
in fiscal 26 and an even greater proportion of operating profit. A successful
turnaround in this market depends on our ability to attract and retain exceptional
leadership talent.
Talent Flow Assessment Findings
The assessment reviewed all management and leadership joiners and
leavers across the globe from 2023 to 2025. We noted:
•60% of joiners come from consumer companies, the majority of which
sit within the proposed peer group.
•Over 30% of voluntary leavers depart to consumer peer companies.
•Our talent is international and mobile, for example, 2/3rds of the
Executive Committee have non-UK nationality.
•Multiple cases exist where we had been unsuccessful at the offer stage
for senior leadership roles, specifically relating to pay expectations
from candidates.
During fiscal 26, we appointed new leadership across our key markets and
global functions. As we continue to execute our transformation we expect to
make further senior appointments. It is therefore essential that our
remuneration framework allows us to attract, retain and motivate the
calibre of leaders needed across our global business, particularly in the
US where pay structures and levels are notably different.
Many UK-listed companies with global footprints have already responded by
making Policy changes to enhance competitiveness and strengthen the link to
performance within reward structures. We believe similar changes are necessary
to ensure our Policy remains effective.
The limits within our current Policy have, in some cases, reduced our ability to
secure preferred candidates, required bespoke remuneration arrangements, or
resulted in a greater reliance on fixed pay to offset less competitive
performance-based incentives. Over time, this has also increased internal pay
compression within our senior leadership population.
Case Study: Unsuccessful Global Leadership Appointment
Our candidate was a global leader from a consumer peer where they already
had total pay arrangements equivalent to the value we offer at the next level
of leadership. We would have had to introduce a bespoke LTIP opportunity
or provide long-term bridging payments, and appoint on a base salary at
over 50% higher than peers. This would have delivered a pay mix weighted
to fixed pay, created pay compression issues with the next level up, and
misalignment with the individual's direct peers. The offer process did not
progress.
This is a situation we encounter not only in the US, but also across key
leadership and specialist roles globally, as we compete for top talent in
highly constrained talent markets.
Net sales: 17%
Employees:
29%
Against this backdrop, the Committee undertook a detailed review of our
existing global consumer peer group to determine if it remained appropriate for
benchmarking leadership remuneration. This assessment considered the scale
and complexity of these peers taking into account market capitalisation,
revenue, sector and reward structures. We also reflected on organisations from
which we have recruited senior leaders and those to which senior leaders have
departed over the past three years.
As a result, the Committee agreed to make certain adjustments to the original
consumer peer group reflecting the latest insight on our global talent pool, and
we will now primarily reference this revised group. The FTSE 30 (excluding
financial services) will continue as a secondary comparator. The Committee will
keep the composition of this group under regular review, although it expects the
group to remain broadly stable over the life of the Policy. Details of the revised
peer group are set out on the following page.
Benchmarking data is an important input to the Committee's deliberations but
does not determine pay outcomes, which continue to reflect individual
performance, experience and the needs of the business.
103 | Diageo Form 20-F 2026 |
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Our global remuneration benchmarking peer group
Market Capitalisation(1)
Revenue(1)
Our remuneration
benchmarking global
consumer peer group
reflects the companies with
which we compete for
talent.
The group provides a
representative spirits, beer,
and large market
capitalisation consumer
sample. It is balanced
across size, complexity,
with Diageo positioned at
or near the median against
most of the criteria
reviewed.
Employees(1)
Global Footprint(1) (2)
(1)Shown in descending order for each metric.
(2)Number of countries/territories with product
sales.
Diageo
Median (excluding Diageo)
Peer Group Composition
AB InBev, Brown-Forman, Campari Group, Carlsberg, Colgate-Palmolive. Constellation Brands, Danone, Haleon, Heineken, Kraft Heinz, L'Oréal,
Mondelēz International, Nestlé, PepsiCo, Pernod Ricard, Procter & Gamble, Reckitt, The Coca-Cola Company and Unilever.
Creating a more competitive remuneration package
In determining the Policy, we considered how the remuneration framework
balanced fixed and variable reward and we will now place a greater emphasis on
variable pay and incentives. The Committee believes the role of incentives is
two-fold: to attract and retain exceptional leaders and to drive those leaders to
deliver sustained high performance.
Diageo has consistently aligned pay with performance, with incentive outcomes
reflecting business results. Recent performance challenges have reinforced the
credibility of our remuneration framework, however, have also reduced the
competitiveness of our overall reward proposition in a competitive talent
market.
The Committee reviewed the Annual Incentive Plan (AIP) and concluded that to
best support the transformation any increase in remuneration opportunity should
be focused on long-term, performance-based incentives. Accordingly, no
changes are proposed to opportunity under the AIP, which will remain at 100%
of salary at target and 200% of salary at maximum for Executive Directors.
The Committee considered alternative long-term structures, and we decided that
to best support our new strategy we will retain the current hybrid long-term
incentive plan which comprises a Performance Share Plan (PSP) and a Senior
Executive Share Option Plan (SESOP). This hybrid approach aligns with
prevailing market practice among the global consumer companies with which
we compete for talent, particularly in the US, our largest market.
To allow us to attract and retain talent we propose to increase the maximum
DLTIP (Diageo Long-Term Incentive Plan) opportunity. The increase will be
delivered entirely through the PSP, with no change to the opportunity level
under the SESOP as set out in the table below. At the same time, the target
payout under the PSP will reduce from 60% to 50% of maximum, increasing the
emphasis on delivering outperformance before higher levels of reward are
earned.
Proposed DLTIP maximum award levels (as a % of base salary)
CEO: 650% maximum award (previously 500%)
•525% performance shares (from 375%)
•125% options (no change from current)
CFO: 550% maximum award (previously 480%)
•430% performance shares (from 360%)
•120% options (no change from current)
The chart below highlights the increase in pay opportunity under the PSP at
target and at maximum with the increase being realised through delivering
above target performance. The next chart shows the change in pay mix as it
shifts towards a long-term incentive opportunity.
CEO: change in PSP opportunity (% salary)
Target: 262.5%
Maximum: 525%
+40%1
+17%1
1 Increase on
current PSP
structure
Target: 225%
Maximum: 375%
CEO: shifting pay mix to the longer term
Maximum Total Direct Compensation (% of overall opportunity)
21%
11
%
68%
13
%
62%
25%
104 | Diageo Form 20-F 2026 |
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Directors' remuneration report continued
Total Direct Compensation (TDC): CEO current and proposed market position at target and maximum
opportunity
The proposed Policy change to the maximum DLTIP opportunity positions Sir Dave Lewis just above the market median for target TDC when assessed against this
global consumer group, and ahead of the median when assessed on a maximum opportunity basis. The Committee also considered the FTSE 30 (excluding financial
services) as a secondary reference point when developing the proposed changes and noted the material movements in variable pay in recent years. Our revised Policy
results in a greater proportion of pay delivered over the longer term, with higher levels of reward earned for outperformance and a reduced payout percentage at target
performance through a new vesting schedule introduced under the PSP.
CEO Target TDC
Median TDC = £8.1m
¢ | Base | ¢ | Bonus | ¢ | LTI P |
Strengthening our performance culture
Incentives must clearly link to strategic delivery, drive accountability and be
well understood. During the review, the Committee recognised that, while the
existing framework had operated as intended, it had become overly complex,
with multiple overlapping performance measures across the AIP and DLTIP
plans.
To provide greater clarity for management and improve transparency for
shareholders, the Committee concluded two key changes were appropriate:
reduce the number of metrics across our incentive plans and remove the
performance conditions under the SESOP which operated as a 'double hurdle'
because an option plan is inherently performance-linked by design with value
only delivered through share price appreciation.
Determining the right metrics to support the transformation
The Board will continue to oversee performance across all aspects of the
business, however, the Committee believes that a smaller number of carefully
selected measures will better align incentives with our strategy and provide
executives with clearer direction and focus. We are therefore introducing a more
streamlined set of performance measures from fiscal 27.
Under the AIP management will be rewarded for delivering Net Sales
growth (NSV), Operating Profit (OP) growth and Individual Business
Objectives. Within the DLTIP, the measures will include Earnings per
Share (eps) growth, Cumulative Free Cash Flow (FCF) and Adjusted
Return on Invested Capital (ROIC) - more details overleaf.
CEO Maximum TDC
Median TDC = £11.9m
(i)Benchmark data provided by the Committee's independent advisor, WTW. Note,
maximum TDC is not disclosed for all companies in the global peer group.
As a result, a number of existing performance measures including relative TSR
and our Spirit of Progress measures will no longer be included as separately
weighted elements within the long-term incentive plan but will remain
embedded within our reward framework as set out below:
1.Driving shareholder alignment through financial metrics
The Committee believes that management can drive better results for
shareholders when incentives related to financial performance are within
management control. Therefore, we are removing relative TSR as a
performance measure. This change also addresses the ongoing challenge of
constructing a robust and appropriate TSR peer group for the assessment of
business performance within the DLTIP. Our current TSR peer group
comprises a broad set of consumer companies. Spirits businesses are most
closely aligned with our core operations, however, two of the four spirits
peers are materially smaller and have narrow category and geography
exposure. The larger non-alcoholic beverage peers face different industry
dynamics. The Committee therefore concluded that neither approach - a
broad consumer group or a more refined alcoholic beverage group -
provides an optimal comparison basis when assessing business
performance. However, we are confident that executives are well aligned
with shareholders given they receive market aligned share options under the
SESOP. As set out earlier, we will retain a consumer peer group for
benchmarking individual remuneration reflecting the talent markets in
which we compete.
105 | Diageo Form 20-F 2026 |
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2.Our commitment to ESG is embedded in day-to-day operations
Diageo was market-leading in 2020 when including Environmental, Social,
and Governance (ESG) measures in our long-term incentive arrangements
to align with the launch of our ‘Spirit of Progress’ plan. Since then, Spirit
of Progress priorities and targets have become firmly embedded in how we
operate and make decisions as a business.
Our commitment to Spirit of Progress is unchanged. The Board will
continue to set targets, closely monitor performance, and report against all
areas of ESG in our Annual Report and other ESG disclosures. The
Committee will continue to take this ESG performance into account as part
of its holistic assessment of overall business performance before
determining vesting outcomes. Additionally, appropriate Spirit of Progress
measures continue to be included within the Individual Business Objectives
for relevant leaders as part of their AIP.
A rebalanced AIP for fiscal 27
To streamline our AIP structure we will increase the weighting of NSV growth
AIP and DLTIP: % of maximum opportunity realised
and OP growth and remove Adjusted Operating Cash Flow in order that it is no
longer assessed both annually and in the longer term.
Current | New for fiscal 27 | ||
Net sales growth | 26.7% | Net sales growth | 40% |
Operating profit growth | 26.7% | Operating profit growth | 40% |
Adjusted operating cash flow | 26.7% | Individual business objectives | 20% |
Individual business objectives | 20% | ||
The proposed change in our Policy from fiscal 27 to allow for the AIP payment
to be made in cash subject to meeting the minimum shareholding requirement
may not be immediately applicable to our new Executives; however, the
Committee took on board shareholder feedback concerning the reduced ability
to apply malus and clawback when an all-cash award is paid. As a result the
Committee has revised the Malus and Clawback Policy as set out on page 111,
and, amongst other changes to align Diageo to the latest corporate governance
practice, we have extended clawback from one to three years in respect of a
cash payment under the AIP.
DLTIP: Performance Share Plan targets for fiscal 27-29
A targeted DLTIP to be granted in fiscal 27
Our priority for the new Policy is to drive performance and strengthen
alignment with the shareholder. After detailed assessment we have agreed that
from fiscal 27 we will reduce the number of performance measures from eight
to three.
Under the PSP we will introduce Earnings per Share (eps) growth which
captures value creation per share, and to support delivery of optimised returns
we will retain Return on Invested Capital (ROIC) introduced last year. When we
(1)Definitions for the PSP performance measures above are set out on page 129.
combine with Free Cash Flow, collectively these will measure whether Diageo
is growing, whether we are doing so efficiently, and whether we are cash
generative and rewarding in a way which is aligned with the shareholder
experience.
As previously set out above, we propose to remove the performance conditions
attached to the SESOP.
Current | New for fiscal 27 | ||
Performance Share Plan | |||
Net sales growth | 28.3% | Earnings per share growth | 40% |
PBET growth | 28.3% | Cumulative free cash flow | 40% |
Adjusted ROIC | 28.3% | Adjusted ROIC | 20% |
Carbon reduction | 5% | ||
Water replenishment | 5% | ||
Positive drinking | 5% | ||
Senior Executive Share Option Plan | |||
Cumulative free cash flow | 50% | Intrinsic share price growth performance condition present within share options. | |
Total shareholder return | 50% | ||
Designing metrics and setting targets
When designing the incentive plans, the Committee establishes both the
performance measures and the definitions that will apply for each award. These
definitions are intended to ensure that incentive outcomes appropriately reflect
underlying business performance and are calculated consistently. Measure
definitions have been detailed under the table setting out the DLTIP award grant
performance conditions in the 'Looking ahead to 2027' section of the report (see
page 129).
At the end of the performance period, the Committee reviews the formulaic
outcome to determine whether it fairly reflects overall business performance
and the shareholder experience. In accordance with the Policy, the Committee
may exercise discretion where appropriate, including in relation to significant
strategic investments or material one-off events that were not anticipated when
the performance targets were set. Any exercise of discretion will be clearly
disclosed and explained in the relevant Remuneration Report.
To set appropriately stretching targets the Committee considers the strategic
plan agreed by the Board, historical performance and external factors such as
the alcoholic beverage sector context, the wider consumer environment and the
investor consensus for Diageo and relevant peers.
The table below shows AIP payout and DLTIP vesting levels over the last five
years, demonstrating how our robust approach to setting stretching targets has
operated.
2022 | 2023 | 2024 | 2025 | 2026 | |
AIP1 | 80.0% | 26.0% | 12.8% | 32.0% | 15.2% |
PSP2 | 59.3% | 98.7% | 56.5% | 12.5% | 12.7% |
SESOP2 | 61.5% | 77.5% | 0% | 0% | 0% |
(1)80% = maximum (financial measures excluding IBOs are worth 80% of the AIP). (2)PSP and SESOP shown in the year of vesting (i.e. performance at the end of the three-year performance period). | |||||
Setting targets to underpin a high performance culture
The Committee undertook extensive analysis and deliberation across multiple
Committee meetings when considering the appropriate targets to set for the first
three years of our new strategy. The financial targets for the period fiscal 27-29
set out below align to the external commitments we made in our recent Capital
Markets Day.
Earnings per share growth (CAGR)1 | Cumulative free cash flow ($m)1 | Improvement in adjusted return on invested capital1 | |
Weighting (% total) | 40% | 40% | 20% |
Maximum (100% vesting) | 12% | $10,000m | 230 bps |
Target (50% vesting) | 8% | $9,000m | 130 bps |
Threshold (20% vesting) | 4% | $8,000m | 30 bps |
As we set these targets, we took in to account the following:
•EPS: the target for this pre-exceptionals growth measure represents a
significant step up in performance compared to the decline seen over
the three year period covering fiscal years 24 to 26. Achieving target
level of performance is stretching and would position Diageo above
the median of our consumer group peers, while delivery at maximum
would place performance in the upper quartile.
•Cumulative FCF: the F27-F29 target at $9 billion is consistent with
F26–F28 despite the loss of c.$0.9 billion of forecasted FCF as a result
of the prospective disposal of East African Breweries PLC. It
therefore represents a significantly higher underlying level of ambition
on a comparable basis.
•ROIC improvement: increased to reflect our higher ambition, with the
target level set at approximately 130 bps of improvement, compared
with 80 bps for the F26–F28 period, reinforcing the focus on stronger
capital efficiency and value creation.
We are confident these targets provide significant levels of stretch for our
leadership and if delivered will represent performance at the upper end of
expectations for our business. They seek to incentivise sustainable performance
and the metrics ensure that exceptional items including restructuring costs and
asset impairment impacts are excluded from the outcomes. The Committee will,
as is normal practice, review all results versus the targets at the end of the
performance period prior to vesting and evaluate holistic performance including
the assumptions made when the targets were set.
106 | Diageo Form 20-F 2026 |
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Directors' remuneration report continued
A simplified Policy to strengthen Diageo's performance culture and support our transformation
We consulted with shareholders on our Policy proposals and significant implementation changes to our short- and long-term incentive performance measures. The
table below sets out what we sought to discuss with shareholders, what we heard, and our final proposals to be put for shareholder approval under the new Policy.
Policy element | What we consulted on | What we heard in consultation | Our proposed Policy changes |
Base salary | •Benchmark salaries and overall remuneration against a global consumer group as a primary reference point. | •Recognition that global organisations like ours compete in tight global talent pools and that peer groups need to reflect this. | •Committee will use a global consumer peer group as the primary reference point while also reviewing FTSE 30 (excluding financial services) practice. |
Pension | •No change. | •n/a | •None, allowance remains at 14% of base salary. |
Annual Incentive Plan (AIP) | •No change to maximum opportunity. •Remove the mandatory deferral of one- third of AIP into shares once met shareholding requirement. | •No significant concerns but strengthen clawback enforceability if AIP was an all- cash award. | •Remove the requirement to defer one- third of any AIP award to shares when the shareholding requirement is met. •Malus and clawback strengthened to include a three-year clawback period for AIP. |
Diageo Long-Term Incentive Plan (DLTIP) | •Retaining our hybrid LTIP structure: comprising Performance Share Plan (PSP) and Senior Executive Share Option Plan (SESOP). •Increase the maximum opportunity from 500% to 650% of salary to improve competitiveness, address internal pay compression, and incentivise outperformance. •Under the PSP: for simplicity align all participants to a common vesting schedule with threshold performance increasing from 20% to 25% of maximum. However, to ensure any quantum increase drives performance reduce the payout at target from 60% to 50%. •Under the SESOP: remove performance conditions because an option plan is inherently a performance-based vehicle. | •Increase in DLTIP opportunity is matched by more stretching targets to strengthen pay and performance link. •Supported the reduction of the target payout from 60% to 50% under the PSP to incentivise outperformance but prefer to maintain the 20% threshold vesting level. •Extensive discussion on metric choice but supportive of simplification. •Discussed SESOP as a performance vehicle versus tools such as restricted shares. | •Maximum DLTIP opportunity will increase to 650% for the CEO from 500%. 125% in SESOP will be unchanged and PSP will increase from 375% to 525%. •Maximum DLTIP opportunity for the CFO from 480% to 550%. 120% in SESOP will be unchanged and PSP will increase from 360% to 430%. •Under the PSP, threshold vesting will remain at 20% of maximum and target vesting reduced from 60% to 50%. •Under the SESOP, performance conditions will be removed, with value driven by share price appreciation. The Committee will review holistic performance before determining vesting outcomes. |
Shareholding requirement | •Requirement increased in line with higher DLTIP opportunity. | •Enhances alignment with shareholders and in line with market practice. | •Shareholding requirement will increase to 650% for the CEO and 550% for the CFO. |
Malus and clawback | •No specific proposals were included. | •Given the proposal to remove bonus deferral, the Committee should look at the enforceability and appropriate clawback period under the AIP. | •We have strengthened our trigger events, enhanced the enforceability of the policy and increased the period where clawback for the AIP can be applied from one year to three years following payment. |
Chair and Non- Executive Director fees | •Introducing the choice for Non-Executive Directors to receive a portion of their fee in Diageo shares (which aligns with the current choice available to the Chair of the Board). | •Supported the increased shareholder alignment without compromising independence. | •NEDs can opt to receive a portion of their annual fee in Diageo shares (purchased monthly at market rates). |
107 | Diageo Form 20-F 2026 |
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Remuneration decisions for fiscal 26
Incentive outcomes
Annual incentive
During fiscal 26, the Annual Incentive Plan was assessed against the financial
measures of Operating Profit (OP), Net Sales Value (NSV), and adjusted
Operating Cash Flow (OCF).
OP delivery for the year was just above threshold performance while NSV was
below, resulting in minimal and no payout under these two measures
respectively.
OCF delivery was between threshold and target performance, following two
adjustments to the outcome which related to the increase of inventory at the end
of the year. In both cases the adjustments reflected how additional working
capital was deployed to protect business continuity in early fiscal 27 and had not
been contemplated when targets were set. The impact of both adjustments saw
the outcome of the OCF measure increase from 26% to 32% of maximum (see
page 120 for full details).
The AIP also includes Individual Business Objectives (IBOs) and the outcomes
for the Executive Directors are set out in more detail on page 119. As a result of
the financial and individual performance outcomes for fiscal 26, Sir Dave Lewis
received 35.2% of maximum, pro-rated for time served, and Nik Jhangiani
received 30.1% of maximum.
Long-term incentives
Our Diageo Long Term Incentive Plan comprises a Performance Share Plan
(PSP) and a Senior Executive Share Option Plan (SESOP). The 2023 DLTIP
covered performance for the three-year period to 30 June 2026. Given their
respective appointment dates, neither Sir Dave Lewis nor Nik Jhangiani held
any awards under the 2023 DLTIP. The vesting outcome relates only to former
Chief Financial Officer, Lavanya Chandrashekar (see page 127). Under the
2023 PSP, 12.7% of maximum vested in relation to ESG achievement, with 0%
of the SESOP vesting with all measures below threshold performance. Further
detail is set out on page 121.
In determining the final annual and long-term incentive outcomes, the
Committee considered both the formulaic results and wider business
performance, including market share delivery, performance relative to peers,
broader financial and non-financial performance, the interests of stakeholders,
including employees, and overall delivery against the Spirit of Progress goals.
Having reviewed performance for fiscal 26, the Committee concluded that the
outcomes reflected the challenging trading period and were aligned with the
shareholder experience and overall business performance. Accordingly, the
Committee did not apply upward or downward discretion. Finally, malus or
clawback provisions were not applied in fiscal 26.
Remuneration decisions for fiscal 27
Alongside our review of the Policy, the Committee completed its regular annual
cycle decisions while taking into account the changes under the proposed
Policy. Towards the end of the fiscal we reviewed the annual salary for the
Executive Directors in the context of both internal factors, including wider
employee pay decisions, and external considerations including our new primary
global consumer peer group while also reviewing FTSE 30 (excluding financial
services) practice.
For both Executive Directors, the Committee agreed an increase of 3%,
effective 1 October 2026. This represents an increase below the wider
workforce budget for the UK, and in line with the budget for the wider
workforce in the US. For both Directors this is the first increase in salary since
their appointment, which for Nik Jhangiani dates back to September 2024.
In conclusion
On behalf of the Committee, I would like to thank all of our investors and
stakeholders who engaged with us over the course of the Policy review. The
openness to hearing about the challenges we face, the remuneration tools we
believe are required to support the transformation and the insightful feedback
shared has been highly valued by the Committee and has, we believe, resulted in
a well balanced Policy design. I look forward to spending time again with
investors in the autumn and ask that shareholders vote to approve this Directors’
Remuneration Report and our proposed Directors' Remuneration Policy at the
AGM on 5 November 2026.
Susan Kilsby
Senior Independent Director and Chair of the Remuneration Committee
108 | Diageo Form 20-F 2026 |
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Directors' remuneration report continued
Remuneration at a glance
High level summary of the Directors' Remuneration Policy, how it was implemented in fiscal 26 and how we propose to implement in fiscal 27 for each of the core
components of the remuneration package.
Salary | Allowances and benefits | Annual incentive | Long-term incentives | Shareholding requirement |
Purpose | ||||
•Supports the attraction and retention of the best global talent with the capability to deliver Diageo’s strategy. | •Provision of market- competitive and cost- effective benefits supports attraction and retention of talent. | •Incentivises delivery of Diageo’s financial and strategic targets. •Provides focus on key financial metrics and the individual’s contribution to the company’s performance. | •Rewards consistent long-term performance in line with Diageo’s business strategy. •Provides focus on delivering superior long-term returns to shareholders. | •Ensures alignment between the interests of Executive Directors and shareholders. |
Implementation in year ended 30 June 2026 | ||||
•No increase for Nik Jhangiani in fiscal 26, however, an annual Salary Supplement Allowance of £300,000 was paid pro-rata for the period as Interim Chief Executive Officer. | •Allowances, benefits and pension unchanged from prior year. | •Payout of 19% of maximum for the financial elements of the plan. •Total payout of 35.2% of maximum for Sir Dave Lewis and 30.1% for Nik Jhangiani. | •Given their respective appointment dates, current Executive Directors Sir Dave Lewis and Nik Jhangiani did not have a 2023 DLTIP award. However, outcomes were: •Vesting of 2023 performance shares at 12.7% of maximum. •The 2023 share options vested at 0%. | •Sir Dave Lewis was appointed on 1 January 2026 and will seek to build his shareholding over the next five years in line with the Policy. •As at 30 June 2026, Nik Jhangiani's shareholding was 223% of salary (he has until December 2029 to meet his requirement). |
Key features of proposed policy (see page 111 for summary of key changes and rationale) | ||||
•Normally reviewed annually on 1 October. •Salaries take account of external market and internal employee context. | •Provision of competitive benefits linked to local market practice. •Maximum company pension contribution is unchanged at 14% of salary, which is aligned to the offering for the wider workforce in the U.K. | •Target opportunity is 100% of salary and maximum is 200% of salary. •Performance measures, weightings and stretching targets are set by the Remuneration Committee. •Subject to malus and clawback provisions. •Executive Directors defer a minimum of one-third of earned bonus payment into Diageo shares held for three years, remainder paid as cash (unless the minimum shareholding requirement is met, in which case paid entirely as cash). | •Annual grant of performance shares and share options: •Chief Executive Officer award up to 650% of salary. •Chief Financial Officer award up to 550% of salary. (% of salary for both Executive Directors described in performance share equivalents). •Performance measures, weightings and stretching targets are set annually. •Three-year performance period plus two-year retention period. •Subject to malus and clawback provisions. | •Increase to minimum shareholding requirement within five years of appointment: •Chief Executive Officer: 650% of salary (from 500%). •Chief Financial Officer: 550% of salary (from 400%). •Post-employment shareholding requirement for Executive Directors of 100% of the in- employment requirement (or, if lower, their actual shareholding on cessation) to be retained in full for two years after leaving the company. |
Planned implementation for year ending 30 June 2027 | ||||
•3.0% salary increase for the CEO and CFO, which is below the annual salary budget for the wider workforce in the UK and in line with the US. | •Allowances, benefits and pension unchanged from prior year. | •Size of annual incentive award opportunity is unchanged from the prior year. For fiscal 27, measures are net sales growth and operating profit growth, 80% in total and weighted equally, with the remaining 20% on individual business objectives. | •Performance measures are earnings per share growth (40% weighting), cumulative free cash flow (40%), and adjusted return on invested capital (20%). •Size of long-term incentive award opportunity is in line with the proposed policy. | •In-employment shareholding requirement increased in line with higher proposed grant levels. •Post-employment shareholding in line with the proposed policy. |
109 | Diageo Form 20-F 2026 |
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Pay for performance at a glance
The charts below show payout and vesting outcomes against performance targets for the annual incentive and long-term incentive plans. Targets under both incentive
plans are set with reference to Diageo’s strategic plan and the historical and forecasted performance of Diageo and its peers. Further details on performance outcomes
can be found on pages 119 and 121.
Annual incentive (for the period 1 July 2025 to 30 June 2026)
Net sales growth | Operating profit growth | |||||||||||
Threshold | Target | Maximum | Threshold | Target | Maximum | |||||||
0.3% | 1.2% | 2.1% | 2.0% | 7.0% | 10.0% | |||||||
Actual -2.0%
Payout* 0%
Adjusted operating cash flow | ||||||
Threshold | Target | Maximum | ||||
$4,650m | $5,150m | $5,350m | ||||
Actual 2.0%
Payout* 6.7%
* Payout as a % of maximum bonus | ||
Actual $4,785m