Diageo (NYSE: DEO) cuts dividend amid $1.2B restructuring drive
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
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.
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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.
18 | Diageo Form 20-F 2026 |
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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.
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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.
21 | Diageo Form 20-F 2026 |
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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.
42 | Diageo Form 20-F 2026 |
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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.
51 | Diageo Form 20-F 2026 |
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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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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 |
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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 |
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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
Payout* 8.5%
Long-term incentives (for the period 1 July 2023 to 30 June 2026)
Organic net sales growth | Cumulative free cash flow | ||||||||||||
CAGR | Threshold | Midpoint | Maximum | Threshold | Midpoint | Maximum | |||||||
4.0% | 6.0% | 8.0% | $9,400m | $11,000m | $12,600m | ||||||||
Actual -0.3%
Vesting* 0%
Actual $8,738m
Vesting* 0%
Organic profit before exceptional items and tax growth | Relative TSR ranking vs peer group | ||||||||||||
CAGR | Threshold | Midpoint | Maximum | Threshold | Midpoint | Maximum | |||||||
4.5% | 8.0% | 11.5% | 9th (median) | – | 3rd and above | ||||||||
Actual -3.4%
Vesting* 0%
Actual 15th (of 17)
Vesting* 0%
ESG measure | Unit of measurement | Threshol d | Midpoint | Maximum | Actual | Vesting* |
Carbon reduction | Reduction in greenhouse gas emissions (cum%) | 17.9% | 21.9% | 25.9% | 21.9% | 3.0% |
Water efficiency index | Improvement in water efficiency index (cum%) | 3.7% | 6.0% | 8.3% | 5.1% | 2.2% |
Positive drinking | Number of people educated who change their attitude to underage drinking | 2.8m | 3.5m | 4.2m | 4.8m | 5.0% |
Inclusion & diversity | % female leaders globally | 47% | 48% | 49% | 44% | – |
% ethnically diverse leaders globally | 44% | 45% | 46% | 46% | 2.5% |
* Vesting as a % of maximum
Historic reward outcomes under the annual and long-term incentive plans over the past five years are shown below. Vesting outcomes under the long-term incentive
plan are shown against total shareholder return for the three-year performance period ended in the year of vesting (i.e. TSR for the three years ended 30 June 2026 is
shown against the vesting outcome for the 2023 DLTIP award vesting in 2026). Outcomes against AIP financial measures are shown against organic operating profit
growth for each respective financial year, as disclosed in prior year annual reports.
5-year vesting outcomes of long-term incentives (DLTIP) | |
Executive Director vesting outcome (% of maximum) | TSR % |
77.5%
56.5%
ò | Performance shares |
ò | Share options |
ò | Total shareholder return over three-year long-term incentive performance period |
5-year history of annual incentive (AIP) payouts | |
Payout (% of maximum AIP opportunity) | Operating profit growth % |
26.0%
ò | Annual incentive payout (financial measures excluding individual business objectives - worth 80% of overall AIP) |
ò | Organic operating profit growth (% on prior year) |
110 | Diageo Form 20-F 2026 |
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Directors' remuneration report continued
Remuneration Committee Governance
Remuneration Committee
The Remuneration Committee consisted of the following independent Non-
Executive Directors in fiscal 26: Susan Kilsby, Melissa Bethell, Karen Blackett
CBE, and Valérie Chapoulaud-Floquet. Susan Kilsby is the Chair of the
Remuneration Committee and also the Senior Independent Director. The Chair
of the Board and the Chief Executive Officer are invited to attend Remuneration
Committee meetings, except when their own remuneration is being discussed.
The Chief People Officer and Global Performance and Reward Director are also
invited by the Remuneration Committee to provide their views and advice. The
Chief Financial Officer may also attend to provide performance context to the
Committee during its discussions about target setting and incentive outcomes.
The Remuneration Committee's terms of reference are available in the corporate
governance section of the company's website and on request from the Company
Secretary.
The Remuneration Committee is responsible for all executive remuneration
decisions throughout the year, which includes setting financial targets for the
annual and long-term incentive plans and the outcomes under these plans.
External advisors
During the year ended 30 June 2026, the Remuneration Committee received
advice on Directors' remuneration from WTW. WTW were appointed by the
Committee in April 2025 as its independent advisor, following a comprehensive
tendering process led by the Chair involving leading advisory organisations.
The fees paid to WTW in fiscal 26 for advice to the Committee were £187,350,
excluding VAT. All fees were determined on a time and expenses basis.
The Committee is satisfied that WTW's engagement partners, and the teams that
provide remuneration advice to the Committee, have no connections with
Diageo that may impair their independence. The Committee reviewed the
potential for conflicts of interest and judged that there were appropriate
safeguards against such conflicts. WTW provided consultancy and advice to
management including market pay data to assist in the annual employee pay
review and global employee benefits support. WTW are members of the
Remuneration Consultants Group (RCG) which is responsible for developing
and maintaining the Code of Conduct for Consultants to Remuneration
Committees of UK listed companies. WTW attended Remuneration Committee
meetings during the year and the Committee is satisfied that the advice it has
received has been objective and independent.
Statement of voting
The following table summarises the details of votes cast in respect of the resolutions on the Directors’ Remuneration Policy at the AGM on 28 September 2023, and
the Directors' Remuneration Report at the AGM on 6 November 2025.
For | Against | Total votes cast | Abstentions | ||
Directors’ Remuneration Policy As shown on pages 132–138 of the 2023 Annual Report | Total number of votes | 1,663,080,546 | 80,098,370 | 1,743,178,916 | 1,023,145 |
Percentage of votes cast | 95.41% | 4.59% | 100% | n/a | |
Directors' Remuneration Report for 2025 | Total number of votes | 1,549,090,796 | 187,800,216 | 1,736,891,012 | 20,114,060 |
Percentage of votes cast | 89.19% | 10.81% | 100% | n/a |
111 | Diageo Form 20-F 2026 |
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Directors' Remuneration Policy
This section of the report sets out the Directors' Remuneration Policy for approval by shareholders at the AGM on 5 November 2026 which, if approved, will apply for
three years from that date and replace the existing Policy.
The Committee reserves the right to make minor changes to the Policy, where required for regulatory, tax or administrative reasons.
The table below sets out the main changes to the Directors' Remuneration Policy and the rationale behind each proposed change. The full Policy shareholders will be
asked to approve is set out from page 112.
Policy area | Proposed changes to the 2026 Policy | Rationale |
Base salary | •A global consumer peer group as the primary reference point considered by the Committee when benchmarking salaries and overall pay opportunity, while also continuing to review FTSE 30 (excluding financial services) practice. | •Diageo is a global business with a workforce spanning 60 countries and around 80% of our employees are based outside of the UK and 20% of our senior leadership are based in the US. Our talent is international and mobile and we need to compete in tight global talent pools for the exceptional talent needed to deliver a turnaround. •This global consumer peer represents the organisations we have recruited senior leaders from and those to which senior leaders have departed representing spirits, beer, and large market capitalisation consumer sample that is balanced across size, complexity and considering remuneration structures. |
Annual Incentive Plan (AIP) | •We will remove the requirement to defer one-third of any AIP award into shares with a three-year holding period after the Executive Director has met their shareholding requirement. | •This change aligns with our core principles of simplification across our pay structures and importantly ensures we are competitive in the global talent markets in which we compete. •When paired with the increased shareholding requirement level and malus and clawback strengthening set out below, which includes the three-year clawback for AIP, the Committee remains confident arrangements are aligned to the shareholder experience. |
Diageo Long-Term Incentive Plan (DLTIP) | •Maximum opportunity under the DLTIP will increase to (expressed as a percentage of base salary): •650% for the Chief Executive Officer (from 500%) •550% for the Chief Financial Officer (from 480%) •Increase to quantum will be delivered entirely under the PSP. •The vesting at threshold will remain at 20% of the maximum award and the vesting at target will be reduced from 60% to 50% of the maximum award. •Remove the financial performance conditions under the SESOP which operate as a 'double hurdle' given options are a performance based tool with value driven by share price appreciation. | Increase to quantum •We require a remuneration framework which allows us to attract, retain and motivate the calibre of leaders needed in all our global markets to deliver our turnaround. •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. •When coupled with the reduction in payout at target under the PSP from 60% to 50% of maximum, the majority of the increase to quantum is focused on delivering outperformance. •Increased headroom under the Policy flows through to the wider Diageo pay framework, providing us the opportunity to address compression issues below Executive Director and reduce reliance on fixed pay and bespoke arrangements to ensure we can attract and retain talent. Senior Executive Share Option Plan (SESOP) performance condition removal •Aids simplification of our pay framework, with fewer, more impactful measures deployed under the DLTIP as a whole. •SESOP continues to have an intrinsic condition requiring share price appreciation and allows us to be more competitive against our global peer group as this aligns more closely with prevailing practice. |
Shareholding requirement | •We will increase the shareholder requirement to the new level of maximum DLTIP opportunity for each Executive Director being 650% of salary for the CEO and 550% of salary for the CFO. | •Approach ensures continued shareholder alignment, and is in line with best practice. |
Malus and clawback | •The clawback period for any cash payment under the AIP has been extended from one to three years. •Trigger events have been strengthened to include any exceptional circumstance the Committee, acting fairly and reasonably, deems appropriate. | •Our Malus and Clawback Policy has been updated in line with best practice to strengthen the terms and provide additional clarity. •The lengthening of the applicable period for clawback of any cash AIP award reflects the Policy proposal to pay AIP entirely as a cash payment once shareholding requirements are met and is aligned to market practice. |
Chair of the Board and Non-Executive Directors' fees | •Allows Non-Executive Directors to opt to receive a portion of their fee in Diageo shares. These shares would be purchased monthly at the prevailing market price and be retained until the NED retires from the company or ceases to be a Director. | •Matches the current Policy flexibility provided to the Chair of the Board, who can opt to take part of their fee in Diageo shares. •Strengthens shareholder alignment without compromising independence. •Follows publication of the Financial Reporting Council's guidance on this area. |
112 | Diageo Form 20-F 2026 |
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Directors' remuneration report continued
Directors' Remuneration Policy
Base salary |
Purpose and link to strategy |
Supports the attraction and retention of the best global talent with the capability to deliver Diageo’s strategy and performance goals. |
Operation |
•Normally reviewed annually with any increases usually taking effect from 1 October or following a change in responsibilities which would be effective at the relevant date. •The Remuneration Committee considers the following parameters when reviewing base salary levels: •Pay increases for other employees across the group. •Economic conditions and governance trends. •The individual’s performance, skills and responsibilities. •Base salaries (and total remuneration) are typically considered against a global consumer comparator benchmark group, with the Committee also reviewing practice across the FTSE 30 (excluding financial services). |
Opportunity |
Salary increases will be made in the context of the broader employee pay environment, and will not normally exceed those made to other employees in the relevant markets Diageo operates, typically the United Kingdom and the United States, unless there is a change in role, responsibility, or other exceptional circumstances. |
Benefits |
Purpose and link to strategy |
Provides market-competitive and cost-effective benefits as part of remuneration packages designed to attract and retain the best global talent. |
Operation |
•The provision of benefits typically depends on the country of residence of the Executive Director and may include but is not limited to a company car or travel allowance, the provision of a contracted car service or equivalent, product allowance, life insurance, accidental death and disability insurance, health screening, medical and dental cover, financial and tax advisory support and tax return preparation costs. •The Remuneration Committee has discretion to offer additional allowances, or benefits, to Executive Directors, if considered appropriate and reasonable. These may include, but are not limited to a housing allowance, school fees and relocation expenses, where a Director is asked to relocate from his/her home location as part of their appointment. Where appropriate, for example in relation to relocation benefits, the company may also meet the tax costs associated with the benefit provision. |
Opportunity |
The benefits package is set at a level which the Remuneration Committee considers: •provides an appropriate level of benefits depending on the role and individual circumstances; •is appropriate in the context of the benefits offered to the wider workforce; and •is in line with comparable roles in companies of a similar size and complexity. |
Post-retirement provision |
Purpose and link to strategy |
Provides competitive post-retirement benefits which are part of remuneration packages designed to attract and retain the best global talent. |
Operation |
Provision of market-competitive pension arrangements or a cash alternative based on a percentage of base salary. |
Opportunity |
The maximum pension contribution, or cash alternative allowance, for Executive Directors is 14% of salary. The Chief Executive Officer and Chief Financial Officer receive a pension contribution of 14% of salary, in line with the UK workforce. |
113 | Diageo Form 20-F 2026 |
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Annual Incentive Plan (AIP) |
Purpose and link to strategy |
Incentivises delivery of Diageo’s annual financial targets and the achievement of key individual objectives which are chosen to align with the business strategy and create a platform for sustainable longer-term performance. Compulsory deferral of a minimum of one-third of any annual incentive earned into shares for three years until an Executive Director has met their shareholding requirement after which awards are made on an entirely cash basis. Building a shareholding promotes longer- term alignment of Executive Directors' interests with shareholders’ interests. |
Operation |
•Performance measures, weightings and targets are set by the Remuneration Committee. Appropriately stretching targets are set by reference to the operating plan and historical and projected performance for the company and its peer group. •The level of award is determined with reference to Diageo’s overall financial and strategic performance and individual performance. •A minimum of one-third of the actual earned bonus payment is normally deferred into a share award (pre-tax deferral) or owned shares (post-tax deferral) under the Deferred Bonus Share Plan, to be held for a minimum period of three years, other than in exceptional circumstances. The remainder of the bonus payment is paid out in cash after the end of the financial year. This deferral requirement no longer applies when an Executive Director has met their shareholding requirement. See the 'Shareholding requirement' section below. •The Remuneration Committee has discretion to adjust the level of payment if it is not deemed to reflect appropriately the individual’s contribution or the overall business performance. Any discretionary adjustments will be detailed in the following year’s annual report on remuneration. •The Remuneration Committee has discretion to apply malus or clawback to bonus as detailed in the 'Malus and clawback' section below, and the Committee is satisfied that it has sufficient mechanisms to enforce clawback should it be required to do so following the removal of the one-third deferral element set out above upon meeting the shareholding requirement. •In the case of pre-tax deferral, notional dividends accrue on deferred bonus share awards, delivered as shares or cash at the discretion of the Remuneration Committee at the end of the vesting period (on post-tax deferral into owned shares, actual dividends are payable). |
Opportunity |
For threshold performance, up to 50% of salary may be earned, with up to 100% of salary earned for on-target performance and a maximum of 200% of salary payable for outstanding performance. The maximum includes the deferred share element but excludes dividend equivalents payable in respect of deferred share awards. |
Performance conditions |
Annual incentive plan awards are normally based 70-100% on financial measures which may include, but are not limited to, measures of sales and profit, and 0-30% on broader objectives based on strategic goals and/or individual contribution. The Remuneration Committee has discretion to amend the performance conditions in exceptional circumstances if it considers it appropriate to do so, including but not limited to in cases of accounting policy changes, merger and acquisition activities or disposals. Any such amendments would be fully disclosed and explained in the following year’s annual report on remuneration. |
Diageo Long-Term Incentive Plan (DLTIP) |
Purpose and link to strategy |
Provides a long-term incentive to achieve key performance measures which support the company’s strategy, and to align interests with shareholders. |
Operation |
•An annual grant of performance shares and/or market-priced share options. Performance shares vest subject to a performance test and continued employment, normally over a period of three years. Share options vest subject to continued employment, normally over a period of three years. •Measures and stretching targets are reviewed annually by the Remuneration Committee for each new award. •The Remuneration Committee has authority to exercise discretion to adjust the vesting outcome based on its assessment of overall business performance over the performance period. This may include, for example, the consideration of factors such as holistic performance relative to peers, stakeholder outcomes including shareholder experience and significant strategic investment or one-off impacts not known at the time awards were granted. •Following vesting, there is normally a further retention period of two years. Executive Directors are able to exercise an option or sell sufficient shares to cover any tax liability when an award vests, provided they retain the net shares arising for the two-year retention period. •Notional dividends accrue on performance share awards to the extent that the performance conditions have been met, delivered as shares or cash at the discretion of the Remuneration Committee at the end of the vesting period. •The Remuneration Committee has discretion to apply malus or clawback to bonus as detailed in the 'Malus and clawback' section below. |
Opportunity |
•The maximum annual grants for the Chief Executive Officer and Chief Financial Officer are 650% and 550% of salary in performance share equivalents, respectively (where a market-priced option is valued at one-third of a performance share). Included within that maximum, no more than 375% of salary will be awarded in face-value terms in options, with the balance awarded in performance shares, to any Executive Director in any year. •Performance share awards vest at 20% of maximum for threshold performance and 100% of maximum if performance conditions are met in full. The vesting schedule for levels of performance between threshold and maximum, including whether or not this will include an interim stretch performance level, will be determined by the Remuneration Committee on an annual basis and disclosed in the relevant remuneration report for that year. |
Performance conditions |
The vesting of performance share awards is linked to a range of measures which may include, but are not limited to growth or value creation measures (e.g. earnings per share growth, net sales growth, operating profit growth), or efficiency measures (e.g. operating margin, cumulative free cash flow, return on invested capital). While no financial performance conditions apply to market price options, they are a performance based vehicle and have an intrinsic condition as the share price needs to increase for an Executive Director to realise value ensuring direct alignment with shareholders. The Remuneration Committee has discretion to amend the performance conditions in exceptional circumstances if it considers it appropriate to do so, including but not limited to in cases of accounting policy changes, merger and acquisition activities or disposals. Any such amendments would be fully disclosed and explained in the following year’s annual report on remuneration. |
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Directors' remuneration report continued
Malus and clawback |
Under the AIP and DLTIP, the Remuneration Committee has discretion to apply malus and clawback in the circumstances specified in the applicable malus and clawback policy in place from time to time, for example: •Misstatement of results or an error resulting in overpayment. •Risk failure resulting in financial loss or any business area being the subject of a regulatory investigation or in breach of regulation. •Employee misconduct/disciplinary action. •Employee accountability for material reputational damage caused, or is reasonably likely to be caused, to the group. •In respect of the application of malus, deterioration in the financial situation of the group which limits the ability to fund incentive awards. •Any other matter which, in the reasonable opinion of the Remuneration Committee, is required to be considered to comply with prevailing legal and/or regulatory requirements, or in any other exceptional circumstance. The malus and clawback provisions may be invoked as an in-year adjustment for a performance year before it is awarded or paid, as malus after it is granted but before it is vested or as clawback for any paid or vested award for three years following an AIP cash payment and two years following a DLTIP vesting. The period reflects the typical timeframe within which the company's audit and risk processes would identify a trigger event, and is appropriate given the nature and profile of Diageo. Where the Remuneration Committee determines that malus and/or clawback will apply, the Remuneration Committee has discretion to determine the basis of application and the means by which malus and/or clawback will be implemented. The malus and clawback policy will be reviewed from time to time to ensure that the policy is compliant with any regulatory requirements, such as the NYSE listing rules. |
All-employee share plans |
Purpose and link to strategy |
To encourage broader employee share ownership through locally approved plans. |
Operation |
•The company operates tax-efficient all-employee share acquisition plans in various jurisdictions. •Executive Directors’ eligibility may depend on their country of residence, tax status and employment company. |
Opportunity |
Limits for all-employee share plans are set by the tax authorities. The company may choose to set its own lower limits. |
Performance conditions |
Under the UK Share Incentive Plan, the annual award of Freeshares may be based on Diageo financial measures which may include, but are not limited to, measures of sales, profit and cash. Conditions for locally approved plans which any non-UK Executive Director may be entitled to will follow the respective plan design. |
Shareholding requirement |
Purpose and link to strategy |
Ensures alignment between the interests of Executive Directors and shareholders. |
Operation |
•The minimum in-employment shareholding requirement is 650% of base salary for the Chief Executive Officer and 550% of base salary for any other Executive Director. Executive Directors are normally expected to build up their in-employment shareholding within five years of their appointment to the Board. •Shares that count towards these minimum shareholding requirements are shares beneficially held by the Executive Director and their connected persons, including Deferred Bonus Share Plan (DBSP) shares within the three-year deferral period, on a net (if post-tax deferral)/notional net (if pre-tax deferral) of tax basis. •Executive Directors are restricted from selling more than 50% of shares which vest under the Long-Term Incentive Plan or Deferred Bonus Share Plan (excluding the sale of shares to cover tax on vesting and other exceptional circumstances to be specifically approved by the Chief Executive Officer and/or Chair), until the shareholding requirement is met. •In order to provide further long-term alignment with shareholders, Executive Directors will normally be expected to maintain a Diageo shareholding of 100% of the in-employment shareholding requirement (or, if lower, their actual shareholding on cessation) for two years after leaving the company. •The Executive Directors enter into a deed undertaking to comply with the requirement and committing to hold the required number of shares in a specified nominee account. |
Chair of the Board and Non-Executive Directors' fees |
Purpose and link to strategy |
Supports the attraction and retention of world-class talent and reflects the value of the individual, their skills and experience. |
Operation |
•Fees for the Chair and Non-Executive Directors are normally reviewed every year, and considered in light of market practice in the FTSE 30 (excluding financial services companies), our global consumer peers, and anticipated workload, tasks and potential liabilities. •A proportion of the Chair’s or Non-Executive Director's annual fee may be used for the monthly purchase of Diageo ordinary shares, which have to be retained until the Chair or Non-Executive Director retires from the company or ceases to be a Director. •The Chair and Non-Executive Directors do not participate in any of the company’s incentive plans nor do they receive pension contributions or benefits. Their travel and accommodation expenses in connection with attendance at Board meetings (and any tax thereon) are paid by the company. •The Chair and the Non-Executive Directors are eligible to receive a product allowance or cash equivalent at the same level as the Executive Directors. •All Non-Executive Directors have letters of appointment. A summary of their terms and conditions of appointment is available at www.diageo.com. Sir John Manzoni was appointed as Chair of the Board on 5 February 2025 (having been a Non-Executive Director since 1 October 2020), terminable on three months’ notice by either party or, if terminated by the company, by payment of three months’ fees in lieu of notice. |
Opportunity |
Aggregate fees for Non-Executive Directors, including the Chair of the Board, are within the limits set by shareholders from time to time in accordance with the company’s articles of association. |
115 | Diageo Form 20-F 2026 |
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Policy considerations
Performance measures
Further details of the performance measures under the fiscal 27 annual incentive plan and measures and targets for DLTIP awards intended to be made in November
2026 following the AGM are set out on page 129. Annual incentive targets will be disclosed retrospectively in next year’s annual report on remuneration as they are
deemed by the Board to be commercially sensitive until after the end of the fiscal year.
Performance targets for performance share awards are set to be stretching yet achievable, and take into account the company’s strategic priorities and business
environment. The Remuneration Committee sets targets based on a range of reference points, including the corporate strategy and broker forecasts for both Diageo and
its peers. While no performance conditions apply to market price options, they have an intrinsic condition as the share price needs to increase for an Executive to
realise value ensuring direct alignment with shareholders.
Projected total remuneration scenarios
The graphs below illustrate scenarios for the projected total remuneration of Executive Directors at four different levels of performance: minimum, target, maximum
and maximum including assumed share price appreciation of 50%. The impact of potential share price movements is excluded from the other three scenarios. These
charts reflect projected remuneration for the year ending 30 June 2027.
Sir Dave Lewis, Chief Executive Officer
Nik Jhangiani, Chief Financial Officer
£1.87m
£1.14m
100%
100%
£5.17m
£9.40m
22%
18%
60%
64%
20%
16%
£15.00m
£8.09m
63%
14%
21%
67%
23%
12%
£20.02m
£10.64m
11%
17%
72%
15%
9%
75%
£0m
£5m
£10m
£15m
£20m
£25m
£0m
£2.5m
£5m
£7.5m
£10m
£12.5m
The ‘Minimum’ scenario shows fixed remuneration only, i.e. base salary and projected pension and benefit values for the year ending 30 June 2027. These are the only
elements of the Executive Directors’ remuneration packages that are not subject to performance (or share price) conditions. The ‘Target’ scenario shows fixed
remuneration as described above, plus a target payout of 50% of the maximum annual incentive and a target payout of 50% of the maximum Performance Share Plan
element of the long-term incentive award, with Senior Executive Share Option Plan awards at their grant value (i.e. an option is valued at one-third of a performance
share and not subject to performance conditions).
The ‘Maximum’ scenario reflects fixed remuneration, plus full payout of annual and long-term incentives. The ‘Maximum plus share price growth’ scenario reflects
fixed remuneration, plus full payout of annual and long-term incentives, including, for the latter, an assumed 50% share price appreciation over the performance
period.
Approach to recruitment remuneration
Diageo is a global organisation selling its products in nearly 180 countries and territories around the world. The ability to recruit and retain the best talent from all over
the world is critical to the future success of the business. People diversity in all its forms is a core element of Diageo’s global talent strategy and, managed effectively,
is a key driver in delivering Diageo’s strategy.
The Remuneration Committee’s overarching principle for recruitment remuneration is to pay no more than is necessary to attract an Executive Director of the calibre
required to shape and deliver Diageo’s business strategy, recognising that Diageo competes for talent in a global marketplace. The Committee will seek to align any
remuneration package with Diageo’s remuneration policy, but retains the discretion to offer a remuneration package which is necessary to meet the individual
circumstances of the recruited Executive Director and to enable the hiring of an individual with the necessary skills and expertise. However, the maximum short-term
and long-term incentive opportunity will follow the policy, although awards may be granted with different performance measures and targets in the first year. On
appointment of an external Executive Director, the Committee may decide to make one-off awards including to compensate for variable remuneration elements the
individual forfeits when leaving their current employer. The Committee will ensure that any compensation replacing forfeited awards would have a fair value no
higher than that of the awards forfeited, and would generally be determined on a comparable basis taking into account factors including the form in which the awards
were granted, performance conditions attached, the probability of the awards vesting (e.g. past, current and likely future performance), as well as the vesting schedules.
Depending on individual circumstances at the time, the Committee has the discretion to determine the type of award (i.e. cash, shares or options), holding period and
whether or not performance conditions would apply.
Any such award would be fully disclosed and explained in the following year’s annual report on remuneration. To facilitate recruitment-related share awards, the
Committee may utilise the exemption available under UK Listing Rule 9.3.2 (or other such rule), which allows share awards to be granted in exceptional
circumstances to support the hiring of an Executive Director without requiring prior shareholder approval or the use of an existing share plan. When exercising its
discretion in establishing the reward package for a new Executive Director, the Committee will carefully consider the balance between the need to secure an individual
in the best interests of the company against the concerns of investors about the quantum of remuneration and, if considered appropriate at the time, will consult with
the company’s biggest shareholders. The Remuneration Committee will provide timely disclosure of the reward package of any new Executive Director. When an
Executive Director is an internal promotion, participation in existing incentive plans or benefits that were agreed prior to appointment to the Board may continue.
116 | Diageo Form 20-F 2026 |
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Directors' remuneration report continued
Service contracts and policy on payment for loss of office (including takeover provisions)
Executive Directors have rolling service contracts, details of which are set out below. These are available for inspection at the company’s registered office.
Executive Director | Date of service contract |
Sir Dave Lewis | 9 November 2025 |
Nik Jhangiani | 3 May 2024 |
Notice period | The contracts provide for a period of six months’ notice by the Executive Director or 12 months’ notice by the company, the same as would apply for any newly appointed Executive Director. A payment may be made in lieu of notice consisting of a sum equivalent to the base salary which the Executive Director would have received for any notice period outstanding on the date employment ends and the cost to the company of providing contractual benefits for this period (including pension contributions but excluding incentive plans). If, on the termination date, the Executive Director has exceeded their accrued holiday entitlement, the value of such excess may be deducted by the company from any sums due to them. If the Executive Director, on the termination date, has accrued but untaken holiday entitlement, the company will, at its discretion, either require the Executive Director to take such unused holiday during any notice period or make a payment to them in lieu of it, provided that if the employment is terminated for cause then the Executive Director will not be entitled to any such payment. |
Mitigation | The Remuneration Committee requires (or may exercise its discretion to require) a proportion of the termination payment to be paid in instalments and, upon the Executive Director commencing new employment, to be subject to mitigation. |
Annual Incentive Plan (AIP) | Where the Executive Director leaves for reasons including retirement, death in service, disability, ill-health, injury, redundancy, transfer out of the group and other circumstances at the Committee’s discretion during the financial year, the Executive Director is usually entitled to an incentive payment pro-rated for the period of service during the performance period, which is typically payable at the usual payment date unless the Committee decides otherwise. Where the Executive Director leaves for any other reason, no payment or bonus deferral will be made. The amount is subject to performance measures being met and is at the discretion of the Committee. The Committee has discretion to determine an earlier payment date, for example, on death in service. The bonus may, if the Committee decides, be paid wholly in cash. |
Deferred Bonus Share Plan (DBSP) | Where the Executive Director leaves for any reason other than dismissal, they are entitled to retain any deferred bonus shares, which vest in full on departure, subject to any holding requirements under the post-employment shareholding policy. It is not considered necessary for the bonus deferral to continue to apply after leaving, since the bonus is already earned based on performance, and there is a post-employment shareholding requirement that ensures the Executive Director continues to be invested in the company’s longer-term interests. On a takeover, awards vest in full. On other corporate events, the Committee may allow awards to vest in full. |
Diageo Long-Term Incentive Plan (DLTIP) | Where the Executive Director leaves for reasons including retirement, death in service, disability, ill-health, injury, redundancy, transfer out of the group and other circumstances at the Committee’s discretion during the financial year, awards continue in effect. Awards will vest on the original vesting date with the exception of death in service, when awards will vest on the date of death, in each case unless the Committee decides otherwise. When an Executive Director leaves for any other reason, all unvested awards generally lapse immediately. The applicable retention period for vested awards continues for all leavers (other than in cases of disability, ill-health or death in service, where the retention period will end on the date of death or leaving employment), unless the Remuneration Committee decides otherwise. Where awards were granted in the form of options, on vesting they are generally exercisable for 12 months (or six months for approved options). The proportion of the award released depends on the extent to which the performance condition is met. The number of shares is reduced on a pro-rata basis reflecting the length of time the Executive Director was employed by the company during the performance period, unless the Committee decides otherwise (for example, in the case of death in service). Where an Executive Director leaves within one month of the normal vesting date of the award, awards are not time pro- rated, unless the Remuneration Committee decides otherwise. On a takeover or other corporate event, awards vest subject to the extent to which the performance conditions are met and, unless the Remuneration Committee decides otherwise, the awards are time pro-rated. Otherwise the Committee, in agreement with the new company, may decide that awards should be swapped for awards over shares in the new company. |
Repatriation/other | In cases where an Executive Director was recruited from outside the United Kingdom and has been relocated to the United Kingdom as part of their appointment, the company may pay reasonable repatriation costs for leavers at the Remuneration Committee’s discretion. The company may also pay for reasonable costs in relation to the termination, for example, tax, legal and outplacement support, where appropriate. |
117 | Diageo Form 20-F 2026 |
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Non-Executive Directors’ unexpired terms of
appointment
All Non-Executive Directors are on three-year terms which are expected to be
extended up to a total of nine years. The date of initial appointment to the Board
and the point at which the current letter of appointment expires for Non-
Executive Directors are shown in the table below.
Non-Executive Directors | Date of appointment to the Board | Current letter of appointment expires |
Sir John Manzoni | 1 October 2020 | AGM 2026 |
Susan Kilsby | 4 April 2018 | AGM 2027 |
Melissa Bethell | 30 June 2020 | AGM 2026 |
Karen Blackett CBE | 1 June 2022 | AGM 2028 |
Valérie Chapoulaud-Floquet | 1 January 2021 | AGM 2027 |
Ireena Vittal | 2 October 2020 | AGM 2026 |
Julie Brown | 5 August 2024 | AGM 2027 |
John Rishton | 1 November 2025 | AGM 2028 |
Payments under previous policies
The Committee reserves the right to make any remuneration payments and
payments for loss of office, notwithstanding that they are not in line with the
policy set out above, where the terms of the payment were agreed (i) under a
previous policy, in which case the provision of that policy shall continue to
apply until such payments have been made; (ii) before the policy or the relevant
legislation came into effect; or (iii) at a time when the relevant individual was
not a director of the company and, in the opinion of the Committee, the payment
was not in consideration for the individual becoming a director of the company.
Approach to stakeholder engagement
Shareholder engagement
The Committee values the views of investors and maintains an ongoing
dialogue with a broad group of shareholders and institutional advisors on
remuneration matters. In advance of finalising our proposed policy subject to
approval at the 2026 AGM, the Chair of the Remuneration Committee consulted
with the company's largest shareholders and their representatives about the
policy. The responses received from shareholders have been set out in detail on
page 106. As a Committee we were very appreciative of the thoughtful,
considered engagement during this policy review and we thank all those who
took the time to share their views as we developed our proposals.
Employee engagement on executive remuneration
Karen Blackett took over accountability for global workforce engagement
sessions in fiscal 24 and continues as the designated Non-Executive Director for
workforce engagement with focus group sessions led by her and other Non-
Executive Directors. In fiscal 26, there were two sessions where the
Remuneration Committee Chair shared information with employees about
executive remuneration, including the Directors' Remuneration Policy, the role
of the Remuneration Committee, executive remuneration principles and
structure and how executive pay aligns with pay for the wider workforce. This
approach on engagement on remuneration has been in place now since fiscal 24,
and is firmly embedded in how we gather and consider employee perspectives.
It continues to be a productive format for the Committee Chair and the
participating employees.
Diageo also runs annual employee engagement surveys, which gives employees
the opportunity to provide feedback and express their views on a variety of
topics, including remuneration. Fiscal 26 saw the introduction of a wider set of
remuneration questions which helped inform both policy considerations and
design for the wider workforce. Any comments relating to Executive Directors'
remuneration are fed back to the Remuneration Committee.
These activities ensure that shareholder views and interests, as well as the all-
employee reward context at Diageo, are considered when making executive
remuneration decisions.
Consideration of wider workforce remuneration
When reviewing Executive Directors’ salaries, the Committee takes
into account the company’s salary budgets for key geographies and, each year,
the Committee has a session reviewing various aspects of workforce
remuneration to deepen its understanding of employee pay arrangements. The
Committee is satisfied there is clear alignment in the approach to pay for
executives and the wider workforce in the way that remuneration principles are
followed, as well as the mechanics of the salary review process and incentive
plan design, which are broadly consistent throughout the organisation, and we
have sought to enhance this alignment and drive understanding under our new
Policy and implementation below Executive Directors. The performance
measures under the annual incentive plan and long-term incentive plan are the
same for executives and other eligible employees. The key differences are that a
larger percentage of Executive Directors' remuneration is performance related
than that of other employees and salary, benefits and incentive participation
levels vary according to role, seniority and business priorities.
When reviewing the Directors’ Remuneration Policy, the Committee considered
the remuneration arrangements for the workforce globally, as well as market
practice in the FTSE 30 (excluding financial services) and Diageo’s global
consumer peer group, alongside feedback on remuneration heard during the
Chair's engagement sessions in fiscal 26. The Committee sought to ensure that
the new Policy continued its aim to align the reward framework throughout
Diageo and incentivise collective delivery of our strategy, and additionally
provide the headroom required to attract and retain the talent we need below
Board level to deliver our turnaround ambition.
118 | Diageo Form 20-F 2026 |
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Directors' remuneration report continued
Annual report on remuneration
The following section provides details of how the company’s 2023 Directors' Remuneration Policy, which is available on our website, was implemented during the
year ended 30 June 2026. It also sets out how the Remuneration Committee intends to implement the proposed new Policy in the year ending 30 June 2027.
Single total figure of remuneration for Executive Directors
The table below details the Executive Directors’ remuneration for the year ended 30 June 2026.
Sir Dave Lewis(1)(8) | Nik Jhangiani(1)(7)(8) | Debra Crew(1)(8) | ||||
2026 | 2025 | 2026 | 2025 | 2026 | 2025 | |
£ '000 | £ '000 | £ '000 | £ '000 | £ '000 | £ '000 | |
Fixed pay | ||||||
Salary | £750 | — | £1,079 | £750 | £59 | £1,347 |
Benefits(2) | £46 | — | £97 | £70 | £20 | £236 |
Pension(3) | £105 | — | £151 | £105 | — | £201 |
Performance related pay | ||||||
Annual incentive(4) | £528 | — | £649 | £667 | — | £1,143 |
Long-term incentives(5) | — | — | £636 | — | — | £708 |
Other incentives(6) | — | — | £3 | — | — | £3 |
Other(9) | — | — | — | £7,893 | — | — |
Total single figure of remuneration(10) | £1,429 | — | £2,615 | £9,484 | £79 | £3,638 |
Notes
(1) | Exchange rate | Sir Dave Lewis and Nik Jhangiani are paid in GBP. Debra Crew was paid in USD in fiscal 26 and figures have been stated in GBP for comparison converted using the cumulative weighted average exchange rate for fiscal 26 (1 USD = 0.74583 GBP). Fiscal 25 figures have converted on the same basis. | |
(2) | Benefits | Includes the gross value of all taxable benefits. Sir Dave Lewis' includes a flexible benefits allowance (£9k), travel allowance (£15k) and life and long-term disability cover (£22k). Nik Jhangiani's includes a flexible benefits allowance (£18k), contracted car service during the period as Interim Chief Executive Officer (£25k), travel allowance payable as Chief Financial Officer (£4k), tax advice (£24k) and life and long-term disability cover (£25k). | |
(3) | Pension | Sir Dave Lewis and Nik Jhangiani received a pension allowance of 14% of salary, and can opt to take all or part as cash or as a contribution to the Diageo UK Pension Plan. The company pension contribution has been 14% of salary from 1 January 2023 for all Executive Directors, aligned to the rate for the UK workforce. For Debra Crew, balances over the year to the 16 July 2025 in the Diageo North America Inc. pension plans grew below the rate of inflation, with no value therefore reportable. | Page 122 |
(4) | Annual incentive | In accordance with their elections to defer pre-tax, one-third of the annual incentive for fiscal 26 shown in the table above for Sir Dave Lewis and Nik Jhangiani will be deferred into conditional RSUs that will vest after three years. For Sir Dave Lewis this is equivalent to £176,000, and £216,222 for Nik Jhangiani. The conditional RSUs are not subject to any additional service or performance conditions (but remain subject to the Malus and Clawback Policy). | Page 119 |
(5) | Long-term incentives | Given the appointment dates for Sir Dave Lewis (1 January 2026) and Nik Jhangiani (1 September 2024), no current Executive Director has an award vesting under the 2023 Diageo Long-Term Incentive Plan (DLTIP). As set out in last year's Annual Report on page 131, Debra Crew's 2023 DLTIP award lapsed on termination of employment. The 2026 long-term incentive value for Nik Jhangiani is in relation to a tranche of performance shares made under a Special Recruitment Award on joining Diageo to compensate for loss of in-flight awards from his former employer (details of the shares granted were set out on page 125 of the fiscal 25 Directors’ Remuneration Report). Value shown is based on a three-month average share price to 30 June 2026 of £15.08. Details of the performance achievement have been set out on page 121. There was no share price appreciation over the relevant performance period. The 2025 long-term incentive amount for Debra Crew has been restated to reflect the ADR share price on the vesting date of $110.70 instead of the average three-month ADR share price used in last year’s report of $108.49 and converted to GBP in line with footnote 1. | Page 120 |
(6) | Other incentives | Other incentives for Nik Jhangiani shows the grant face value of an award of 'Freeshares' made under the all employee UK Share Incentive Plan in fiscal 26 (no performance conditions are attached). The award shown was made in line with the scheme's maximum annual opportunity (which is capped at £3,000). | |
(7) | Other | Nik Jhangiani's salary figure for fiscal 26 includes the pro-rata Salary Supplement Allowance of £300,000 per annum paid during the period as Interim Chief Executive Officer (16 July 2025 to 31 December 2025), also payable during the transition period back to Chief Financial Officer to 18 February 2026 (£179k). | |
(8) | Other | Debra Crew stepped down from the Board on 16 July 2025. Nik Jhangiani served as Interim Chief Executive Officer between 16 July 2025 to 31 December 2025. Sir Dave Lewis was appointed as Chief Executive Officer on 1 January 2026. Figures are therefore pro-rata where applicable. | |
(9) | Other | The ‘Other’ total for Nik Jhangiani for fiscal 25 shows the joining arrangements awarded to him to compensate for the loss of (1) in-flight share awards and (2) 2024 bonus eligibility, when he joined Diageo from his former employer, Coca-Cola Europacific Partners. (1) Details of the shares granted are set out on page 125 of the fiscal 25 Directors’ Remuneration Report (face value of £7.3m). (2) Nik was awarded a cash payment of £593k in April 2025 to compensate him for loss of 2024 pro-rata bonus eligibility, with the calculation methodology set out in last year’s report. | |
(10) | Totals | Some figures and sub-totals may add up to slightly different amounts than the totals due to rounding. |
119 | Diageo Form 20-F 2026 |
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Looking back on 2026
Annual incentive plan (AIP) payouts for 2026 |
AIP payout for the year ended 30 June 2026
AIP payouts for the Executive Directors serving during the year are based 80% on performance against the group financial measures and 20% on performance against Individual
Business Objectives (IBOs), as assessed by the Remuneration Committee and summarised in the table below.
Group financial measures(1) | ||||||
Measure | Weighting (% of maximum AIP opportunity) | Threshold | Target | Maximum | Actual | Payout (% of maximum AIP opportunity) |
Payout opportunity (% maximum) | 25% | 50% | 100% | |||
Net sales value (% growth)(2) | 26.67% | 0.3% | 1.2% | 2.1% | (2.0%) | — |
Operating profit (% growth)(2) | 26.67% | 2.0% | 7.0% | 10.0% | 2.0% | 6.7% |
Adjusted operating cash flow(3)(7) | 26.67% | $4,650m | $5,150m | $5,350m | $4,785m | 8.5% |
Full year performance for 1 July 2025 - 30 June 2026 | 80.00% | 15.2% | ||||
Individual business objectives | |||
Measure and target | Weighting (% of maximum AIP opportunity) | Result | Payout (% of maximum AIP opportunity) |
Sir Dave Lewis Chief Executive Officer (from 1 January 2026) | 20.0% | 20.0% | |
Strategic review Review the Diageo strategy, setting out a future strategic direction by August 2026. | 10.0% | Thorough strategic review undertaken across H2 fiscal 26: •New strategy approved by the Board and subsequently communicated to the market at the Capital Markets Day on 6 August 2026. •The changes led by Sir Dave in fiscal 26 included a new purpose to reflect today's business, clear strategic priorities (competitive category strategies, customer delivery and fully integrated supply chain) and the design of the company's operating framework to simplify decision-making, clarify accountability and improve end-to-end execution. | 10.0% |
Free cash flow Deliver $3 billion FCF in fiscal 26 through working capital efficiencies, productivity savings, efficient deployment of capital and targeted disposals. | 5.0% | Free cash flow above plan with $3.21 billion achieved in fiscal 26. | 5.0% |
Accelerate Delivery of $208m saving via the Accelerate workstreams including demand generation spend effectiveness, supply chain optimisation and digital transformation. | 5.0% | Accelerate savings in fiscal 26 of $540m delivered. Significantly above plan for year one of the programme ($208m based on one-third of the $625m external commitment for the three years). | 5.0% |
Nik Jhangiani Chief Financial Officer | 20.0% | By role | |
As Interim Chief Executive (pro-rata for the period July 2025 to December 2025) | 13.3% | ||
Accelerate Delivery of $208m saving via the Accelerate workstreams including demand generation spend effectiveness, supply chain optimisation and digital transformation. | 6.7% | Accelerate savings in fiscal 26 of $540m delivered. Significantly above plan for year one of the programme ($208m based on one-third of the $625m external commitment for the three years). | 6.7% |
Market share(6) Hold or grow market share in 2/3rds of measured markets in the must-win battleground categories. | 6.7% | Not achieved. | — |
Commercial excellence Identify and segment on-trade universe and determine coverage in top 10 rest of world (excluding NAM)* markets globally. *Already complete ahead of IBO setting. | 6.7% | Outlet IQ delivered across 21 markets in fiscal 26 segmenting both on and off trade. | 6.7% |
As Chief Financial Officer (pro-rata for the period January 2026 to June 2026) | 16.7% | ||
Free cash flow Deliver $3 billion FCF in fiscal 26 through working capital efficiencies, productivity savings, efficient deployment of capital and targeted disposals. | 6.7% | Free cash flow above plan with $3.21 billion achieved in fiscal 26. | 6.7% |
Accelerate Delivery of $208m saving via the Accelerate workstreams including demand generation spend effectiveness, supply chain optimisation and digital transformation. | 6.7% | Accelerate savings in fiscal 26 of $540m delivered. Significantly above plan for year one of the programme ($208m based on one-third of the $625m external commitment for the three years). | 6.7% |
Finance technology transformation Deliver the 'go live' of the SAP S/4HANA programme. | 6.7% | Programme delivered and successfully launched globally in July 2026. | 3.3% |
120 | Diageo Form 20-F 2026 |
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Directors' remuneration report continued
Payout | |||||
Group (weighted 80%)(7) | IBO (weighted 20%) | Total (% maximum) | Total (% annual salary) | Total (’000) GBP | |
Sir Dave Lewis(4)(5) | 15.2% | 20.0% | 35.2% | 70.4% | £528 |
Nik Jhangiani(4)(5) as Interim Chief Executive Officer (July to December 2025) | 15.2% | 13.3% | 28.5% | 57.1% | £336 |
Nik Jhangiani(4)(5) as Chief Financial Officer (from January to June 2026) | 15.2% | 16.7% | 31.9% | 63.7% | £313 |
(1)Performance against the AIP measures is calculated using fiscal 26 budgeted exchange rates and is measured on a currency-neutral basis.
(2)For AIP purposes, net sales value growth and operating profit growth are calculated on budgeted exchange rates, after adjustments for acquisitions and disposals and incorporates the
organic treatment of hyperinflationary economies.
(3)For AIP purposes, adjusted operating cash flow represents operating cash flow adjusted to exclude the effects of exchange rate fluctuations and dividends from associates, and is
neutralised for movements in maturing stock.
(4)AIP payments are calculated using base salary as at 30 June 2026 in line with the global policy that applies to other employees across the company. Nik Jhangiani's totals are determined
inclusive of the Salary Supplement Allowance as set out on page 118).
(5)In accordance with the 2023 Directors' Remuneration Policy and their individual elections to defer pre-tax, one-third of Sir Dave Lewis' and Nik Jhangiani's pre-tax AIP payout disclosed
in the table above will be deferred into conditional RSUs that will vest after three years. The number of deferred shares will be disclosed in the fiscal 27 Directors' Remuneration Report.
(6)Market share reflects internal estimates incorporating Nielsen, Association of Canadian Distillers, CGA, Dichter and Neira, Frontline, Intage, IRI, ISCAM, NABCA, State Monopolies,
TRAC, Ipsos and other third-party providers.
(7)Adjustments were made in respect of the adjusted operating cash flow outcome which included: (1) Project Voyager (our SAP S/4HANA implementation programme), the largest digital
transformation project in Diageo's history, where a temporary and deliberate investment in additional inventory to ensure availability in fiscal 27 was required to mitigate system cutover
risk, protect customer service and preserve sales continuity during the go-live in July 2026. As referenced in our fiscal 26 H1 results announcement, this investment brought forward a
one-off cash impact from fiscal 27 inventory costs into fiscal 26. (2) External supply chain disruption caused by the Middle East crisis, including shipping interruptions, extended routes
and longer lead times all of which required precautionary inventory holdings across affected markets. The Committee agreed that while no adjustment in respect of the impact events had
on regular in-year trading was proposed, a specific adjustment related to the acceleration of fiscal 27 inventory costs being brought forward to protect fiscal 27 supply in light of the
conflict was appropriate. A reference was included within the Q3 Trading Statement in May 2026 that the conflict could have an impact on inventory and cash.
Long-term incentive plans (LTIP) vesting in 2026 |
Long-term incentive awards up to and including September 2023 were made under the Diageo 2014 Long-Term Incentive Plan (DLTIP), which was approved by
shareholders at the AGM in September 2014. Awards are designed to incentivise Executive Directors and senior managers to deliver long-term sustainable
performance and are subject to performance conditions measured over a three-year period. Awards are granted on an annual basis in both performance shares and
share options. Awards granted to Executive Directors vest at 20% of maximum for threshold performance, and 100% of the award will vest if the performance
conditions are met in full, with a straight-line payout between threshold and maximum.
No current Executive Directors have a 2023 DLTIP award. The award for Debra Crew, former Chief Executive, lapsed on termination. Vesting and treatment for
Lavanya Chandrashekar's 2023 DLTIP award (former Chief Financial Officer) can be found in the 'Payments to past Directors' section on page 127.
Share options – granted in September 2023, vesting in September 2026
The award was subject to performance conditions assessed over a three-year period based on the achievement of the following equally weighted performance
measures:
•Relative total shareholder return (TSR) ranked against the TSR of a peer group of international drinks and consumer goods companies; and
•Cumulative free cash flow (FCF).
The vesting profile for grants to Executive Directors for relative TSR is shown below:
TSR ranking (out of 17) | Vesting (% max) |
1st, 2nd or 3rd | 100 |
4th | 95 |
5th | 75 |
6th | 65 |
TSR ranking (out of 17) | Vesting (% max) |
7th | 55 |
8th | 45 |
9th | 20 |
10th or below | 0 |
TSR peer group (16 companies) | ||
AB InBev | Heineken | Pernod Ricard |
Brown-Forman | Kimberly-Clark | Procter & Gamble |
Carlsberg | L'Oréal | Reckitt |
The Coca-Cola Company | Mondelēz International | Unilever |
Colgate-Palmolive | Nestlé | |
Danone | PepsiCo | |
Performance shares – awarded in September 2023, vesting in September 2026
Awards vest after a three-year period subject to the achievement of three performance conditions outlined below:
•Organic net sales value growth (weighted 40%);
•Profit before exceptional items and tax (PBET) growth (weighted 40%); and
•ESG measures including water efficiency, carbon reduction, positive drinking, and inclusion and diversity metrics (weighted 20%).
Notional dividends accrue on awards and are paid out either in cash or shares on the number of shares which vest.
121 | Diageo Form 20-F 2026 |
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Vesting outcome for 2023 DLTIP performance share and share option awards in September 2026
The 2023 DLTIP share options lapsed having not met the threshold performance level for either performance measure as detailed below:
Vesting of 2023 DLTIP(5) | Weighting | Threshold | Midpoint | Maximum | Actual | Vesting (% maximum)(5)(6) |
Vesting if performance achieved (% maximum) | 20% | 60% | 100% | |||
Organic net sales value growth(1) | 40% | 4.0% | 6.0% | 8.0% | (0.3%) | — |
Profit before exceptional items and tax (PBET) growth(2) | 40% | 4.5% | 8.0% | 11.5% | (3.4%) | — |
Carbon reduction (ESG) | 5% | 17.9% | 21.9% | 25.9% | 21.9% | 3.0% |
Water efficiency index (ESG) | 5% | 3.7% | 6.0% | 8.3% | 5.1% | 2.2% |
Positive drinking (ESG) | 5% | 2.8m | 3.5m | 4.2m | 4.8m | 5.0% |
Inclusion & diversity - % female leaders globally (ESG) | 2.5% | 47% | 48% | 49% | 44% | — |
Inclusion & diversity - % ethnically diverse leaders globally (ESG) | 2.5% | 44% | 45% | 46% | 46% | 2.5% |
Vesting of performance shares (% maximum) | 12.7% | |||||
Cumulative free cash flow (FCF)(3) | 50% | $9,400m | $11,000m | $12,600m | $8,738m | — |
Relative total shareholder return(4) | 50% | 9th | — | 3rd | 15th | — |
Vesting of share options (% maximum) | — |
(1)Organic net sales growth is calculated at budgeted currency exchange rates, after adjustments for acquisitions and disposals and incorporates the organic treatment of
hyperinflationary economies.
(2)PBET growth is presented on a constant currency basis and it excludes the impact of acquisitions and disposals. The impact of hyperinflation on operating profit is considered under the
same organic methodology as for net sales while the impact on other lines (primarily on finance charges) is excluded. This metric also includes adjustment to exclude the fair value
remeasurement of contingent considerations, earn out arrangements and biological assets and to exclude post-employment credits. Furthermore, the metric excludes any interest on any
share repurchase programme and the year-over-year change of M&A related interest.
(3)Cumulative FCF is based on the outcome for each of the three years within the performance period, measured before exceptional items and on an FX neutral basis by adjusting actual
outcomes back to the base year exchange rates, and incorporates the organic treatment of hyperinflationary economies. Furthermore, the cash flow impact of any material business
development activities such as share repurchase programmes, acquisitions and disposals and investments in maturing stock, which were not known and planned at the beginning of the
vesting period, are excluded from the three-year performance period.
(4)Relative total shareholder return (TSR) is measured as the percentage growth in Diageo’s share price (assuming all dividends and capital distributions are re-invested) compared to the
TSR of a peer group of 16 international drinks and consumer goods companies. TSR calculations are based on an averaging period of six months and converted to a common currency
(US dollars). Calculation is performed and provided by WTW.
(5)No discretion was exercised by the Remuneration Committee in determining the long-term incentive outcomes.
(6)The vesting schedule for awards granted to executives below the Board has a threshold vesting of 25% of maximum (62.5% at midpoint). Vesting at threshold for awards granted to
Executive Directors is 20% of maximum (60% at midpoint).
The Committee considered Diageo’s overall business performance and value created for shareholders over the period and determined that the outcomes were fair and
appropriate; consequently no adjustment to the vesting outcomes were made. It also considered the level of difficulty of the targets and determined that the vesting
outcome was consistent with Diageo's long-term performance and returns to shareholders. No share options were exercised by any Director during the year ended 30
June 2026.
Vesting outcome for the 2022 DESAP performance share award for Debra Crew
In March 2022, Debra Crew was granted an award of performance shares under the Diageo Exceptional Stock Award Plan (DESAP). Vesting of a tranche of shares
under this award to be released was subject to the achievement of a performance hurdle based on winning or holding Diageo global market share in at least 2/3rds of
total net sales value in measured markets in fiscal 24, 25 and 26 (average across the three years, with each year measured separately). The performance condition was
not achieved with an average over the three financial years of 58%. Diageo achieved 75% in fiscal 24, 65% in fiscal 25, and 35% in fiscal 26. All shares retained on
termination under this tranche (5,811 ADS), as shown in the table of share interests on page 123, will therefore lapse.
Vesting outcome for the Special Recruitment Award for Nik Jhangiani
In September 2024 on joining Diageo, Nik Jhangiani was granted an award of performance shares as a Special Recruitment Award to compensate him for forfeiture of
incentives that he would have otherwise been entitled to with his previous employer, Coca-Cola Europacific Partners. When determining the structure and value of a
recruitment award, the Remuneration Committee looks to ensure that any such compensation has a fair value no higher than that of the awards forfeited and this would
generally be determined on a comparable basis (i.e. taking into account the likelihood of vesting of performance-based and other awards, award type, and structure).
These principles are reflected in the recruitment arrangements for Nik Jhangiani.
The terms of awards made under the Special Recruitment Award are materially in the same form as awards granted under the Diageo 2023 Long-Term Incentive Plan
which was approved by shareholders in September 2023, except the plan terms relating to the timing of awards and shareholder approval of amendments to the terms
do not apply. Vesting of the below tranche was subject to the achievement of a performance underpin based on the achievement of a productivity savings target across
fiscal 25 and H1 in fiscal 26. The productivity savings underpin was $492m (in line with the annual plans across fiscal 25 and the first half of fiscal 26), with $503m
achieved. Taking into account both the productivity savings realised over the period and in consideration of wider holistic performance, the Committee approved the
vesting of all shares as set out below.
Award | Award Date | Ordinary shares granted | Vesting (% Max) | Ordinary shares vesting | Vesting Date | |
Nik Jhangiani | Special Recruitment Award - Performance Shares | 03/09/2024 | 42,172 | 100% | 42,172 | 09/03/2026 |
122 | Diageo Form 20-F 2026 |
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Directors' remuneration report continued
Pensions and benefits in the year ended 30 June 2026 |
Benefits provisions for the Executive Directors are in accordance with the information set out in the Directors’ Remuneration Policy.
Pension arrangements
Sir Dave Lewis and Nik Jhangiani receive a 14% of base salary pension allowance and can opt to use this in full or in part and contribute to the UK Diageo Pension
Plan. In fiscal 26, Nik contributed £10,000 to the UK plan (£833.33 per month), with the balance of the pension allowance paid in cash. Sir Dave Lewis' pension
allowance was paid entirely in cash.
In the event of death in service, a lump sum of six times base salary is payable for Sir Dave Lewis and Nik Jhangiani.
Debra Crew is a member of the Diageo North America Inc. Supplemental Executive Retirement Plan (SERP) with an accrual rate of 14% of base salary. The SERP is
an unfunded, non-qualified supplemental retirement programme. Under the plan, accrued company contributions are subject to quarterly interest credits. Under the
rules of the SERP, they can withdraw the balance of the plan six months after leaving service or age 55, if later and the balance may be withdrawn in either a lump
sum or five equal annual instalments, depending on the size of the balance. Debra Crew also participated in the US Cash Balance Plan and the Benefit Supplemental
Plan (BSP) until 30 September 2022 and accrued benefits under both plans. The Cash Balance Plan is a qualified funded pension arrangement. Employer contributions
were 10% of pay capped at the Internal Revenue Service (IRS) limit. The BSP is a non-qualified unfunded arrangement; notional employer contributions were 10% of
pay above the IRS limit. Interest (notional for the BSP) is credited quarterly on both plans.
The table below shows the pension benefits accrued by or paid to each current (or former) Executive Director as at year end.
30 June 2026 | 30 June 2025 | 30 June 2026(2) | 30 June 2025 | |
Executive Director | UK benefit value £'000 | UK benefit value £'000 | US benefit value $'000 | US benefit value $'000 |
Sir Dave Lewis | 105 | n/a | n/a | n/a |
Nik Jhangiani(1) | 151 | 105 | n/a | n/a |
Debra Crew(2) | n/a | n/a | 1,573 | 1,558 |
(1)Nik Jhangiani's pension allowance was also payable on his Interim Salary Supplement Allowance paid as Interim Chief Executive Officer.
(2)Debra Crew’s US benefits reflect an increase of $15,000 over the year pro-rated to 16 July 2025. This increase reflects $13,000 which is due to additional pension benefits earned over
the period; and $2,000 of which is due to interest earned on her deferred US benefits. However, the single figure shown in the table for Debra Crew on page 118 is reported as nil as the
increase in benefits was less than when accounting for inflation over the period.
The Normal Retirement Age applicable to Debra Crew's US benefits depends on the pension scheme, as outlined below.
Executive Director | US benefits (Cash Balance Plan) | US benefits (BSP) | US benefits (SERP) | |
Debra Crew | 65 | 6 months after leaving service, or age 55 if later | 6 months after leaving service, or age 55 if later |
Long-term incentive awards made during the year ended 30 June 2026 |
Nik Jhangiani and Sir Dave Lewis received awards of performance shares and market-priced share options under the DLTIP based on a percentage of base salary as
outlined below, with grants made on 8 September 2025 and 16 March 2026, respectively. The three-year period over which performance will be measured is 1 July
2025 to 30 June 2028.
The performance measures and targets for awards granted in September 2025 and March 2026 are outlined below. Net sales and profit before exceptional items and
tax are key levers for driving top and bottom line growth, with adjusted return on invested capital ensuring growth is capital efficient. The free cash flow measure was
selected because it represents a robust indicator of cash performance consistent with typical external practice and is a key strategic priority. Total shareholder return,
the only relative performance measure under the plan, provides alignment with shareholder interests and increases the leverage based on share price growth. Finally,
the environmental, social and governance (ESG) measure (15% of total performance share award) reinforces strategically important goals under Diageo's ‘Spirit of
Progress’ ESG action plan to help create an inclusive and sustainable world. The definitions for the ESG measures were set out on page 133 of the annual
remuneration report for fiscal 25.
Performance shares | Share options | ||||||||
2025 DLTIP | Organic net sales value (CAGR) | Organic profit before exceptional items and tax (CAGR) | Adjusted return on invested capital (ROIC) | Greenhouse gas reduction | Water replenishment | Positive drinking | Cumulative free cash flow | Relative TSR | |
Weighting | 28.3% | 28.3% | 28.3% | 5% | 5% | 5% | 50% | 50% | |
Maximum | 4.5% | 9.1% | 130 bps | 15.8% | 85% | 10.0m | $10,400m | 4th and above | |
Midpoint | 3.0% | 6.1% | 80 bps | 12.2% | 80% | 8.1m | $9,000m | - | |
Threshold | 1.5% | 3.1% | 30 bps | 8.6% | 76% | 6.3m | $7,600m | 10th | |
20% of DLTIP awards will vest at threshold, with vesting in a straight line up to 100% if the maximum level of performance is achieved. As explained in the 2023
Directors' Remuneration Policy, one performance share is deemed equal in value at grant to three share options.
Executive Director | Date of grant | Plan | Share type | Awards made during the year | Exercise price | Face value '000 | Face value (% of salary) |
Sir Dave Lewis | 16/03/2026 | DLTIP - share options | ORD | 306,039 | £14.66 | £5,625 | 375% |
Sir Dave Lewis | 16/03/2026 | DLTIP - performance shares | ORD | 306,039 | £5,625 | 375% | |
Nik Jhangiani | 08/09/2025 | DLTIP - share options | ORD | 151,472 | £20.34 | £3,240 | 360% |
Nik Jhangiani | 08/09/2025 | DLTIP - performance shares | ORD | 151,472 | £3,240 | 360% |
123 | Diageo Form 20-F 2026 |
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The proportion of the awards outlined that will vest is dependent on the achievement of performance conditions and continued employment, and the actual value
received may be nil. The vesting outcomes will be disclosed in the 2028 Directors' Remuneration Report.
In accordance with the plan rules, the number of performance shares and share options granted under the DLTIP was calculated by using the average closing ordinary
share (ORD) price for the last six months of the preceding financial year for Nik Jhangiani, and the six months prior to the appointment date for Sir Dave Lewis
(£21.39 and £18.38, respectively). This price is used to determine the face value in the table above. In accordance with the plan rules, the exercise price was calculated
using the average closing ORD price of the three days preceding the grant date (£20.34 and £14.66, respectively).
Outstanding share plan interests |
Plan name | Date of award | Performance period | Year of vesting | Award calculation share price | Exercise price | Number of shares/options at 30 June 2025(1) | Granted | Vested/ exercised | Dividend equivalent shares released | Lapsed | Number of shares/ options at 30 June 2026(1) | |
Debra Crew(2) | ||||||||||||
DLTIP - Share Options | Sep 2022 | 2022-2025 | 2025 | $176.95 | 26,629 | 26,629 | — | ADR | ||||
DLTIP - Share Options | Sep 2023 | 2023-2026 | 2026 | $166.67 | 36,971 | 36,971 | — | ADR | ||||
DLTIP - Share Options | Sep 2024 | 2024-2027 | 2027 | $132.46 | 48,182 | 48,182 | — | ADR | ||||
Total unvested share options subject to performance in ordinary shares | — | ORD | ||||||||||
DLTIP - Share Options(3) | Sep 2020 | 2020-2023 | 2023 | $133.88 | 23,308 | 23,308 | ADR | |||||
Total vested but unexercised share options in ordinary shares(4) | 93,232 | ORD | ||||||||||
DLTIP - Performance Shares | Sep 2022 | 2022-2025 | 2025 | $195.29 | 26,629 | 3,328 | 288 | 23,301 | — | ADR | ||
DLTIP - Performance Shares | Sep 2023 | 2023-2026 | 2026 | $177.50 | 36,971 | 36,971 | — | ADR | ||||
DLTIP - Performance Shares | Sep 2024 | 2024-2027 | 2027 | $141.99 | 48,182 | 48,182 | — | ADR | ||||
DESAP - Performance Shares(5) | Mar 2022 | 2023-2025 | 2026 | $197.06 | 8,796 | 1,802 | 6,994 | ADR | ||||
DESAP - Performance Shares(5) | Mar 2022 | 2024-2026 | 2027 | $197.06 | 8,930 | 3,119 | 5,811 | ADR | ||||
DESAP - Performance Shares(5) | Mar 2022 | 2025-2027 | 2028 | $197.06 | 8,930 | 4,014 | 4,916 | ADR | ||||
Total unvested shares subject to performance in ordinary shares(4) | 70,884 | ORD | ||||||||||
DESAP - Restricted Stock Unit(5) | Mar 2022 | 2027 | $197.06 | 8,796 | 2,398 | 3,073 | 3,325 | ADR | ||||
DESAP - Restricted Stock Unit(5) | Mar 2022 | 2028 | $197.06 | 8,930 | 2,060 | 4,014 | 2,856 | ADR | ||||
DESAP - Restricted Stock Unit(5) | Mar 2022 | 2029 | $197.06 | 8,930 | 1,785 | 4,669 | 2,476 | ADR | ||||
Total unvested shares not subject to performance in ordinary shares(4) | 34,628 | ORD | ||||||||||
Nik Jhangiani | ||||||||||||
DLTIP - Share Options | Sep 2024 | 2024-2027 | 2027 | £24.79 | 115,796 | 115,796 | ORD | |||||
DLTIP - Share Options | Sep 2025 | 2025-2028 | 2028 | £20.34 | 151,472 | 151,472 | ORD | |||||
Total unvested share options subject to performance in ordinary shares | 267,268 | ORD | ||||||||||
DLTIP - Performance Shares | Sep 2024 | 2024-2027 | 2027 | £27.98 | 115,796 | 115,796 | ORD | |||||
SRA - Performance Shares(6) | Sep 2024 | 2024-2026 | 2026 | £27.98 | 42,172 | 42,172 | — | ORD | ||||
DLTIP - Performance Shares | Sep 2025 | 2025-2028 | 2028 | £21.39 | 151,472 | 151,472 | ORD | |||||
Total unvested shares subject to performance in ordinary shares | 267,268 | ORD | ||||||||||
SRA - Restricted Stock Unit(6) | Sep 2024 | 2026 | £27.98 | 58,970 | 58,970 | — | ORD | |||||
SRA - Restricted Stock Unit(6) | Sep 2024 | 2027 | £27.98 | 8,934 | 8,934 | ORD | ||||||
SRA - Restricted Stock Unit(6) | Sep 2024 | 2027 | £27.98 | 53,609 | 53,609 | ORD | ||||||
Deferred Bonus Share Plan(7) | Sep 2025 | 2028 | £20.34 | 10,924 | 10,924 | ORD | ||||||
Total unvested shares not subject to performance in ordinary shares | 73,467 | ORD | ||||||||||
Sir Dave Lewis | ||||||||||||
DLTIP - Share Options | Mar 2026 | 2025-2028 | 2028 | £14.66 | 306,039 | 306,039 | ORD | |||||
Total unvested share options subject to performance in ordinary shares | 306,039 | ORD | ||||||||||
DLTIP - Performance Shares | Mar 2026 | 2025-2028 | 2028 | £18.38 | 306,039 | 306,039 | ORD | |||||
Total unvested shares subject to performance in ordinary shares | 306,039 | ORD | ||||||||||
124 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Directors' remuneration report continued
(1)For unvested awards, this is the number of shares/options initially awarded. For exercisable share options, this is the number of outstanding options. All share options have an expiry date
of 10 years after the date of grant (unless changed on leaving).
(2)The shareholding information for Debra Crew is stated as at her resignation date from the Board on 16 July 2025, and treatment of awards on termination.
(3)The total number of share options granted under the DLTIP in 2020 showing as outstanding as at 30 June 2026 are vested but unexercised share options.
(4)ADRs have been converted to ORDs (one ADR is equivalent to four ordinary shares) for the purpose of calculating the total number of vested and unvested shares and options.
(5)Debra Crew was granted a number of performance shares and restricted stock units under the DESAP in March 2022. As set out under the terms of Debra's departure, the DESAP
performance shares will vest based on a performance hurdle of winning or holding market share in at least 2/3rds of total NSV in measured markets over the respective three-year
performance periods (F23-F25 for awards due to vest in September 2026, F24-F26 for awards due to vest in September 2027 and F25-F27 for awards due to vest in September 2028).
The DESAP restricted stock units vest on their normal dates. The restricted stock units shown as 'Vested/exercised' were vested and sold to satisfy Debra Crew’s Section 409A tax
liabilities on termination, with the resulting proceeds remitted to the relevant tax authorities.
(6)These awards were granted to Nik Jhangiani on joining Diageo as compensation for loss of in-flight long-term incentives from his former employer. Details on grant were set out on page
125 in the 2025 Annual Report.
(7)Shares under the Deferred Bonus Share Plan were awarded to Nik Jhangiani on 8 September 2025. The award was made as conditional RSUs that will vest after three years, with the
grant value based on one-third deferral (pre-tax) of the fiscal 25 Annual Incentive Plan award (£222,187.50) and a grant price of £20.34 (three-day average preceding the grant date).
(i)No share options were exercised by Executive Directors during the year.
(ii)DLTIP awards of performance shares and share options are subject to a three-year performance period, followed by a two-year retention period post-vesting.
Directors’ shareholding requirement and share interests |
The beneficial interests of the Directors who held office during the year ended 30 June 2026 (and their connected persons) in the ordinary shares (or ordinary share
equivalents) of the company are shown in the table below.
Ordinary shares or equivalent(1)(2) | ||||||
10 August 2026 | 30 June 2026 (or date of cessation, if earlier) | 30 June 2025 (or date of appointment if later) | Shareholding requirement (% salary)(3) | Shareholding at 30 June 2026 (% salary)(3) | Shareholding requirement met | |
Chair | ||||||
Sir John Manzoni | 9,935 | 9,137 | 4,348 | |||
Executive Directors | ||||||
Debra Crew(4)(5)(6) | — | 166,100 | 166,100 | 500% | n/a | All shares held on exit to retained to September 2027 |
Sir Dave Lewis | — | — | — | 500% | 0% | No - to be met by December 2030 |
Nik Jhangiani | 127,588 | 127,561 | 73,750 | 400% | 223% | No - to be met by December 2029 |
Non-Executive Directors | ||||||
Susan Kilsby(4) | 2,600 | 2,600 | 2,600 | |||
Melissa Bethell | 2,668 | 2,668 | 2,668 | |||
Valérie Chapoulaud-Floquet | 2,284 | 2,284 | 2,224 | |||
Ireena Vittal | — | — | — | |||
Karen Blackett CBE | 702 | 702 | 702 | |||
Julie Brown | 2,700 | 2,700 | 2,700 | |||
John Rishton(7) | 3,274 | 3,274 | — | |||
Notes
(1)Each person listed beneficially owns less than 1% of Diageo’s ordinary shares. Ordinary shares held by Directors have the same voting rights as all other ordinary shares.
(2)Any change in shareholding between the end of the financial year on 30 June 2026 and the last practicable date before publication of this report, being 10 August 2026, is outlined in the
table above.
(3)For Sir Dave Lewis and Nik Jhangiani both the shareholding requirement and shareholding at 30 June 2026 are expressed as a percentage of base salary on 30 June 2026 and calculated using
a three-month average share price for period ended 30 June 2026 of £15.08. For the purposes of the shareholding requirement, any vested but unexercised share options, and pre-tax
conditional Deferred Bonus Share Plan (DBSP) awards, are reflected on an estimated net of tax basis.
(4)Debra Crew and Susan Kilsby have share interests in ADRs (one ADR is equivalent to four ordinary shares). The share interests in the table are stated as ordinary share equivalents.
(5)The total share interests shown above include post-tax DBSP shares for Debra Crew (1,309 ADRs).
(6)Debra Crew resigned from the Board on 16 July 2025. Under the post-employment shareholding requirement policy, Debra is required to continue to hold Diageo shares equal in value to
500% of her salary, or actual shareholding if lower, for two years post-cessation of employment.
(7)John Rishton joined the Board on 1 November 2025.
Relative importance of spend on pay
The graphs below illustrate the relative importance of spend on pay (total remuneration of all group employees) compared with distributions to shareholders and the
percentage change from the year ended 30 June 2025 to the year ended 30 June 2026. There are no other significant distributions or payments of profit or cash flow.
Distributions to shareholders
(19.7)%
Staff pay
2.5%
125 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
CEO total remuneration and TSR performance |
The graph below shows the total shareholder return for Diageo plc and the FTSE 100 Index since 30 June 2016 and demonstrates the relationship between pay and
performance for the Chief Executive Officer, using current and previously published single total remuneration figures. The FTSE 100 Index has been chosen because
it is a widely recognised performance benchmark for large companies in the United Kingdom.
Total shareholder return value of hypothetical £100 holding | Chief Executive Officer total remuneration (includes legacy LTIP awards) (£'000) |
ò | Diageo |
ò | FTSE 100 |
ò | Chief Executive Officer total remuneration |
Ivan Menezes(1) £'000 F17 | Ivan Menezes(1) £'000 F18 | Ivan Menezes(1) £'000 F19 | Ivan Menezes(1) £'000 F20 | Ivan Menezes(1) £'000 F21 | Ivan Menezes(1) £'000 F22 | Ivan Menezes(1) £'000 F23 | Debra Crew(1) £'000 F23 | Debra Crew(1) £'000 F24 | Debra Crew(1) £'000 F25 | Debra Crew(2) £'000 F26 | Nik Jhangiani(2) £'000 F26 | Sir Dave Lewis(2) £'000 F26 | |
CEO total remuneration(2) | 3,399 | 8,995 | 11,776 | 2,273 | 6,019 | 7,343 | 10,582 | 403 | 3,026 | 3,638 | 79 | 1,317 | 1,429 |
Annual incentive(3) | 68.0% | 70.0% | 61.0% | 0.0% | 93.8% | 93.8% | 37.3% | 35.4% | 24.8% | 42.0% | — | 28.5% | 35.2% |
Share options(3) | 0.0% | 60.0% | 73.1% | 27.5% | 10.0% | 61.5% | 77.5% | 77.5% | 0.0% | 0.0% | — | — | — |
Performance shares(3) | 0.0% | 70.0% | 89.3% | 10.0% | 29.3% | 59.3% | 98.7% | 98.8% | 58.9% | 12.5% | — | — | — |
(1)To enable comparison, Ivan Menezes’ and Debra Crew's single total figure of remuneration has been converted into sterling using the average weighted exchange rate for the relevant
financial year. The figure represented in the graph for fiscal 23 is the combined single figure total for Ivan Menezes and Debra Crew.
(2)The figure represented in the graph for fiscal 26 is the combined single figure total for Debra Crew (converted to GBP using the average weighted exchange rate for fiscal 26), Nik
Jhangiani's pro-rata total during the period as Interim Chief Executive Officer (16 July 2025 to 31 December 2025), and Sir Dave Lewis (from 1 January 2026).
(3)% of total maximum opportunity. F25 total also includes a DESAP award which will vest at 100% of maximum opportunity, granted prior to Debra Crew's appointment as Chief
Executive. 12.5% shown above reflects the 2022 DLTIP performance share element only for consistency year-on-year.
Remuneration for the wider workforce and CEO pay ratio |
Alignment of Executive pay with the wider workforce
There is clear alignment in the approach to pay for executives and the wider workforce in the way that remuneration principles are followed, as well as the mechanics
of the salary review process and incentive plan design, which are broadly consistent throughout the organisation. There is a strong focus on performance-related pay
and one we will look to further strengthen under our new Policy, and the performance measures under the annual incentive plan and long-term incentive plan are the
same for executives and other eligible employees. The reward package for Executive Directors is consistent with that of the senior management population, however, a
much higher proportion of total remuneration for the Executive Directors is linked to business performance, compared to the rest of the employee population.
The structure of our reward packages is based on the principle that it should enable Diageo to attract and retain the best talent globally within our broader industry. It is
driven by local market practice, as well as the level of seniority and accountability, reflecting the global nature of our business. Diageo is committed to fostering an
inclusive and diverse workplace, and creating a culture where every individual can thrive. Reflective of this, pay parity and consistency of treatment for all employees
are critical to the reward practices across the organisation and an area of key focus for the Committee and Diageo. The reward framework is regularly reviewed to
ensure employees are rewarded fairly and appropriately, in line with the business strategy, performance outcomes, competitive market practice and our inclusion
agenda.
During the year, and following the introduction of this format in 2024, the Remuneration Committee Chair explained to employees the Directors' Remuneration
Policy, the role of the Committee, executive remuneration principles and structure and sought their feedback on wider reward matters during two global workforce
engagement sessions.
Remuneration Committee review of wider workforce pay
Each year, the Remuneration Committee has a detailed session reviewing wider workforce remuneration to assess practice across Diageo. In fiscal 26, the review
focused on:
•the prior year’s annual reward cycle outcomes;
•retaining talent in a global market including a spotlight on key talent segments within Diageo that are critical to our success;
•the level of differentiation across our reward programmes and alignment with performance;
•an update on new global programmes such as 'One World' (Diageo's global all employee share plan), and our innovative new approach to supporting globally
mobile talent;
•a review of Diageo's Sales Incentive Plans to ensure they support commercial excellence; and
126 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Directors' remuneration report continued
•an update on pay transparency and pay fairness in the context of the EU Pay Transparency Directive and increasing emphasis globally.
The Committee also again considered the challenges of attracting and retaining critical talent in a global marketplace at all levels, and reviewed the all-employee
reward priorities for the coming year. Information on wider workforce reward is also provided as required throughout the year to enable the Committee to consider the
broader employee context when making executive remuneration decisions, for example the annual salary increase budgets by country.
Supporting our employees
We continue to focus on all aspects of the wellbeing of our employees. Our global group of wellbeing champions work with regional and market teams to drive
wellbeing initiatives locally, coming together each quarter for a global connect.
We continually monitor the cost-of-living in all our geographies using a formal monitoring process and have implemented actions, typically by awarding off-cycle
salary increases in high-inflation geographies. In fiscal 26, we continued to embed our One World all employee global share plan, available in over 50 countries. On its
introduction in fiscal 25, 17,000 eligible employees were awarded £500 of Free Shares, creating 15,000 new Diageo shareholders. We continually look to enhance our
employee offering, innovating with our market-leading benefit policies that support and demonstrate our commitment to supporting all our employees. We believe that
our market leading benefits support the attraction and, crucially, retention of the best talent.
CEO pay ratio
In accordance with The Companies (Miscellaneous Reporting) Regulations 2018, the table below sets out Diageo’s CEO pay ratios for the year ended 30 June 2026.
These CEO pay ratios provide a comparison of the Chief Executive Officer’s total remuneration based on the sum total single figure of remuneration for CEOs in role
across fiscal 26: Debra Crew (converted to GBP), Nik Jhangiani's period as Interim CEO, and Sir Dave Lewis. This is compared to the equivalent remuneration for the
employees paid at the 25th (P25), 50th (P50) and 75th (P75) percentile of Diageo’s workforce in the United Kingdom. Also shown are the salary and total remuneration
for each quartile employee.
Year | Method | 25th percentile pay ratio | Median pay ratio | 75th percentile pay ratio |
2026(1) | Option A(4) | 59:1 | 43:1 | 35:1 |
2026 | Total pay and benefits | £47,822 | £65,879 | £80,825 |
2026 | Salary | £39,351 | £48,921 | £65,447 |
2025(2) | Option A(4) | 72:1 | 54:1 | 42:1 |
2024(2) | Option A(4) | 68:1 | 50:1 | 39:1 |
2023(2)(3) | Option A(4) | 231:1 | 177:1 | 137:1 |
2022 | Option A(4) | 146:1 | 114:1 | 90:1 |
2021 | Option A(4) | 127:1 | 100:1 | 79:1 |
2020 | Option A(4) | 50:1 | 38:1 | 31:1 |
2019 | Option A(4) | 265:1 | 208:1 | 166:1 |
(1)The CEO total single figure of remuneration figure (see page 118 for details) in fiscal 26 used in the calculation of the CEO pay ratio is based on the combined total of Debra Crew (to 16
July 2025), Nik Jhangiani (for the period as Interim Chief Executive between 16 July 2025 to 31 December 2025) and Sir Dave Lewis (from 1 January 2026). Totals are shown on page
125.
(2)Pay ratios have been updated to reflect the value of the updated prior year single figure of remuneration which incorporates long-term incentives based on the actual share price at
vesting, rather than the average share price in the last three months of the financial year which had been used for the original disclosure.
(3)2023 CEO pay ratios comprise the sum of both Sir Ivan Menezes' and Debra Crew's total single figure of remuneration converted to sterling.
(4)Only people employed in the United Kingdom and with the same number of contractual working hours throughout the full 12-month period have been included in the calculation.
Inclusion of employees outside of this group would require a complex simulation of full-time annual remuneration based on a number of assumptions and would not have a meaningful
impact on the ratio.
Methodology
Consistent with the approach for Diageo’s disclosure in previous years, the methodology used to identify the employees at each quartile for 2026 is Option A, as
defined in the regulations. We believe this is the most robust and accurate approach, and is in line with shareholder expectations.
Total full-time equivalent remuneration for employees reflects all pay and benefits received by an individual in respect of the relevant year and has, other than where
noted below, been calculated in line with the methodology for the ‘single total figure of remuneration’ for the Chief Executive Officer. The total remuneration
calculations were based on data as at 30 June 2026. Actual remuneration was converted into the full-time equivalent for the role and location by pro-rating earnings to
reflect full-time contractual working hours and these figures were then ranked to identify the employees sitting at the percentiles. To ensure that the total remuneration
for the selected median, 25th and 75th percentile employee is sufficiently representative of those positions, we calculated the total remuneration for a number of
employees above and below each of the selected median, 25th and 75th percentile UK employees and used the median value. In light of financial performance outcomes
being signed off close to the publication of the Annual Report, the Diageo Group business multiple, which is applicable to the majority of UK employees, has been
used to calculate all payments under the annual incentive, although some employees may receive a variation on this multiple in practice. Pension values for each
employee are not calculated on an actuarial basis as for the Chief Executive Officer, but rather as the notional cost of the company’s pension contribution during the
financial year, according to the relevant section of the pension scheme for each individual. This approach allows meaningful data for a large group of people to be
obtained in a more efficient way.
Points to note for the year ended 30 June 2026
The median level of remuneration and resulting pay ratio for 2026 is consistent with the pay and progression policies for Diageo’s UK employees as a whole and
reflect the impact of performance-related pay on total remuneration for the year. As the Chief Executive Officer role has a larger proportion of their total remuneration
linked to business performance than other employees in the UK workforce, the ratio has reduced at each quartile in fiscal 26, driven by lower annual incentive and
cumulative long-term incentive totals when compared to fiscal 25.
Payments to past Directors
Lavanya Chandrashekar was granted a DLTIP award in 2023, while Chief Financial Officer and Executive Director, subsequently stepping down and resigning from
the Board on 1 September 2024 part way through the 2023 DLTIP performance period. Consistent with the performance outcomes on page 121, 12.7% of the
127 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
performance share element of the award will vest and be released on completion of a further two-year holding period. The share options lapse, having not met the
performance conditions. As set out in the fiscal 24 Directors' Remuneration Report, Lavanya's DLTIP awards were retained on a pro-rated basis, subject to
performance conditions, on leaving Diageo.
Award | Award Date | Awarded (ADRs) | Vesting (% Max) | Vesting (ADRs) | Option price | ADR grant price | Dividend equivalent shares | Estimated value ($'000)(1) | |
Lavanya Chandrashekar(1) | Performance Shares | 04/09/2023 | 8,291 | 12.7% | 1,052 | — | $177.50 | 117 | $94 |
Share Options | 04/09/2023 | 8,291 | 0% | — | $166.67 | $177.50 | — | — |
(1)The number of ADRs and the resulting value of DLTP performance share awards and options relating to Lavanya Chandrashekar in the table above are pro-rata figures that reflect the
proportion of the three-year performance period in which she was in role as Chief Financial Officer before stepping down from the Board on 1 September 2024. The total number of
performance shares and share options was 21,182 for both awards, with each being reduced and pro-rated for time employed to 10,629 on leaving Diageo. 1,349 performance shares
vested in total of which 1,052 is shown above in relation to the proportion of time as Chief Financial Officer and Executive Director. The total value of the vested award including
dividend equivalent shares (117 ADRs) is $94,351, based on an average ADR price for the last three months of the fiscal year ($80.74). No DLTIP share options vested.
Payments for loss of office
Debra Crew stepped down as Chief Executive and as a Director of Diageo on 16 July 2025, and ceased to be an employee on 30 September 2025, with the relevant
details and values (where applicable) on the Committee’s determination of terms including the exercise of discretion set out in the 2025 Directors’ Remuneration
Report (page 131). Payments incurred in fiscal 26 were in relation to pay and benefits during a period of garden leave between 16 July 2025 and 30 September 2025
($510,549). The remainder of Debra’s 12-month contractual notice period has been paid as pay-in-lieu of notice (PILON) covering salary and benefits totalling
$1,490,562 in fiscal 26 (with three months' of PILON entitlement to be incurred in fiscal 27 ($496,854)). Relocation expenses and reimbursements were provided in
accordance with the Company’s Global Mobility Policy at a cost (including any required tax gross up on cash reimbursements) of £89,813 in fiscal 26.
Non-Executive Directors |
Fee policy
No changes were made to the Chair's fee or Non-Executive Directors fees in fiscal 26.
2026 | 2025 | |
Per annum fees | £'000 | £'000 |
Chair of the Board | 700 | 700 |
Non-Executive Directors | ||
Base fee | 113 | 113 |
Senior Independent Director | 38 | 38 |
Chair of the Audit Committee | 38 | 38 |
Chair of the Remuneration Committee | 38 | 38 |
Workforce Engagement Lead | 20 | 20 |
Single total figure of remuneration for Non-Executive Directors
Fees £'000 | Taxable benefits £'000(1) | Total £'000(2) | ||||
2026 | 2025 | 2026 | 2025 | 2026 | 2025 | |
Chair | ||||||
Sir John Manzoni(3) | 700 | 351 | 4 | 2 | 704 | 354 |
Non-Executive Directors | ||||||
Susan Kilsby | 188 | 185 | 25 | 19 | 212 | 204 |
Julie Brown(4) | 150 | 135 | 8 | 2 | 158 | 138 |
Karen Blackett CBE | 133 | 131 | 6 | 3 | 138 | 134 |
Melissa Bethell | 113 | 111 | 6 | 4 | 118 | 115 |
Valérie Chapoulaud-Floquet | 113 | 111 | 12 | 23 | 125 | 134 |
Ireena Vittal | 113 | 111 | 11 | 13 | 124 | 124 |
John Rishton(5) | 75 | — | 6 | — | 81 | — |
(1)Taxable benefits include a product allowance and expense reimbursements relating to travel, accommodation and subsistence in connection with attendance at Board meetings during the
year, which are deemed by HMRC to be taxable in the United Kingdom. The amounts in the single total figure of remuneration table above include any tax gross-ups on the benefits
provided by the company on behalf of the Directors. Non-taxable expense reimbursements have not been included in the single figure of remuneration table above.
(2)Total may not sum to fees and taxable benefits columns due to rounding.
(3)Sir John Manzoni was appointed as Chair of the Board on 5 February 2025, having served as a Non-Executive Director since 1 October 2020.
(4)Julie Brown was appointed to the Board on 5 August 2024.
(5)John Rishton was appointed to the Board on 1 November 2025.
128 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Directors' remuneration report continued
Looking ahead to 2027
Salary increases for the year ending 30 June 2027 |
The Remuneration Committee reviewed base salaries for Executive Committee
members and agreed the following increases for the Chief Executive Officer and
Chief Financial Officer, effective 1 October 2026. Both increases are below the
average level of increase across the UK wider workforce, and in line with those
in the United States. This is the first increase in salary for Nik Jhangiani since
appointment on 1 September 2024.
Sir Dave Lewis | Nik Jhangiani | |||
Salary at 1 October ('000) | 2026 | 2025 | 2026 | 2025 |
Base salary | £1,545 | n/a1 | £927 | £900 |
% increase | 3.0% | n/a | 3.0% | 0% |
1.Sir Dave Lewis was appointed to the Board on 1 January 2026.
Annual incentive design for the year ending 30 June 2027 |
The measures and targets for the Annual Incentive Plan (AIP) are reviewed
annually by the Remuneration Committee and are carefully chosen to drive
financial and individual business performance goals related to the company’s
short-term strategic operational objectives. As set out in the Chair's statement on
page 105, and following extensive discussion as a Committee and valuable
engagement with shareholders on our Policy and implementation proposals, we
have reduced the number of performance measures in the AIP in fiscal 27. The
plan design for Executive Directors for the year ending 30 June 2027 will
comprise the following performance measures and weightings:
•Net Sales Value (% growth) (40% weighting): a key performance measure of
year-on-year top line growth;
•Operating Profit (% growth) (40% weighting): stretching profit targets drive
operational efficiency and influence the level of returns that can be delivered
to shareholders through increases in share price and dividend income not
including exceptional items or exchange; and
•Individual Business Objectives (20% weighting): measurable deliverables
that are specific to the individual and are focused on supporting the delivery
of key strategic objectives.
The Committee has discretion to adjust the payout to reflect appropriately an
individual's contribution or the overall business context.
Details of the targets for the year ending 30 June 2027 will be disclosed
retrospectively in next year’s annual report, by which time they will no longer
be deemed commercially sensitive by the Board. The annual incentive
opportunity for Executive Directors will remain consistent with prior years,
equal to 100% of base salary at target, with a maximum opportunity of 200% of
base salary.
Long-term incentive awards to be made in the year ending 30 June 2027 |
The long-term incentive plan measures are reviewed annually by the
Remuneration Committee and are selected to reward long-term sustainable
performance in line with Diageo’s business strategy and in alignment with the
delivery of value for shareholders.
For the awards to be made in fiscal 27, we are introducing earnings per share
(eps) growth which captures value creation per share and our delivery of
optimised returns over time, and is therefore directly linked to the experience of
Diageo shareholders. We will retain adjusted return on invested capital (ROIC)
introduced last year ensuring growth is capital efficient. Cumulative free cash
flow (FCF) will move from the Senior Executive Share Option Plan (SESOP) to
the Performance Share Plan (PSP) maintaining focus on our cash flow
commitment and acting as a quality of earnings check. Together these three
measures assess whether Diageo is growing, whether we are doing so
efficiently, and whether we are cash generative.
Subject to the approval of the proposed Directors' Remuneration Policy, DLTIP
awards will be granted to Executive Directors in November 2026 and will
comprise awards of both performance shares and share options, based on
stretching targets against the key performance measures as outlined in the table
on page 129 assessed over a three-year performance period.
To enable us to be more competitive, reduce complexity and provide greater
clarity for management, we will remove performance measures from the SESOP
under our new Directors' Remuneration Policy. As detailed in the earlier pages
of this remuneration report (see page 104) we believe performance conditions
under an option plan operate as a 'double hurdle'. Our SESOP plan already
requires share price appreciation before any value is delivered, and is
consequently intrinsically aligned to the shareholder experience.
The performance measures for the PSP element of the DLTIP in fiscal 27 are:
•Earnings per Share growth (% growth) (40% weighting): a pre-exceptionals
growth measure which assesses value creation;
•Free Cash Flow ($bn cumulative) (40% weighting): maintains a focus on
cash generation; and
•Adjusted Return on Invested Capital (cumulative bps improvement) (20%
weighting): ensures we reward capital efficient growth.
We have set out more detail on the target setting process and the considerations
against the backdrop of our transformation within the Committee Chair's letter
on page 105. Full definitions for each measure are shown on the next page
below the table which details the measures and targets.
The performance share element of the DLTIP applies to the Executive
Committee and the top level of senior leaders across the organisation
worldwide, while the share option element is applicable to a much smaller
population comprising only members of the Executive Committee. One market-
priced option is valued at one-third of a performance share.
The table below summarises the annual DLTIP award for Sir Dave Lewis and
Nik Jhangiani to be made in 2026, subject to approval of the proposed Directors'
Remuneration Policy.
Grant value (% salary) | Chief Executive Officer Sir Dave Lewis | Chief Financial Officer Nik Jhangiani |
Performance share equivalents (1 share: 3 options) | ||
Performance shares | 525% | 430% |
Share options | 125% | 120% |
Total | 650% | 550% |
129 | Diageo Form 20-F 2026 |
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Performance conditions for long-term incentive awards to be made in the year ending 30 June 2027(1)
Performance shares | ||||
Earnings per share growth (CAGR)(2) | Cumulative free cash flow ($m)(3) | Improvement in adjusted return on invested capital (4) | Vesting schedule | |
Weighting (% total) | 40% | 40% | 20% | |
Maximum | 12.0% | $10,000m | 230 bps | 100% |
Target | 8.0% | $9,000m | 130 bps | 50% |
Threshold | 4.0% | $8,000m | 30 bps | 20% |
(1)Details of the considerations taken into account when setting the targets for the Performance Share Plan element of the DLTIP by the Committee are set out on page 128. Awards under
the Senior Executive Share Option Plan (SESOP) have no performance conditions with vesting subject only to continued employment.
(2)Earnings per share growth: year-over-year growth in earnings per share before exceptional items, adjusted to exclude the effects of foreign exchange translation, acquisitions and
disposals, fair value remeasurements, hyperinflation impacts, income from associates and changes in the effective tax rate.
(3)Cumulative total free cash flow over the three-year performance period, based on cash flow generated from operating profit, including the add-back of non-cash operating items (i.e.
depreciation, hyperinflation and other inorganic activities), and adjusted to exclude the effects of foreign exchange translation, exceptional items, acquisitions, disposals, and dividends
received from associates.
(4)Adjusted return on invested capital is calculated based on the cumulative basis points improvement over the F27-F29 performance period, measured each fiscal year, calculated as Net
Operating Profit After Tax (NOPAT) divided by average invested capital, adjusted in accordance with the company's LTIP methodology. NOPAT is adjusted to exclude the effects of
foreign exchange translation, acquisitions and disposals, exceptional items, fair value remeasurements, hyperinflation impacts, income from associates and changes in the effective tax
rate. Invested capital is adjusted to exclude the impacts of acquisitions, disposals, investments in associates, financial assets and liabilities, and impairment-related balance sheet items.
Additional information
Key management personnel related party transactions
Key management personnel of the group comprises the Executive and Non-
Executive Directors, the members of the Executive Committee and the
Company Secretary.
Diageo plc has granted rolling indemnities to the Directors and the Company
Secretary, uncapped in amount, in relation to certain losses and liabilities which
they may incur in the course of acting as Directors or Company Secretary (as
applicable) of Diageo plc or of one or more of its subsidiaries. These
indemnities are categorised as a 'qualifying third-party indemnity' for the
purposes of the Companies Act 2006 and continue to be in place at 30 June
2026 on an ongoing basis.
Other than disclosed in this report, no Director had any interest, beneficial or
non-beneficial, in the share capital of the company. Save as disclosed above, no
Director has or has had any interest in any transaction which is or was unusual
in its nature, or which is or was significant to the business of the group and
which was effected by any member of the group during the financial year, or
which having been effected during an earlier financial year, remains in any
respect outstanding or unperformed. There have been no material transactions
during the last three years to which any Director or officer, or 3% or greater
shareholder, or any spouse or dependent thereof, was a party. There is no
significant outstanding indebtedness to the company from any Directors or
officer or 3% or greater shareholder.
Statutory and audit requirements
This report was approved by a duly authorised Committee of the Board of
Directors and was signed on its behalf on 14 August 2026 by Susan Kilsby who
is Chair of the Remuneration Committee.
The Board has followed the principles of good governance as set out in the UK
Corporate Governance Code and complied with the regulations contained in the
Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts
and Reports) Regulations 2008, the UK Listing Rules and the relevant schedules
of the Companies Act 2006.
The annual remuneration report is subject to an advisory vote by shareholders at
the AGM on 5 November 2026, alongside a binding shareholder vote on the
proposed Directors' Remuneration Policy at the same meeting. Terms defined in
this Directors' Remuneration Report are used solely herein.
130 | Diageo Form 20-F 2026 |
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Directors’ report
Directors’ report
The Directors present the Directors’ report and audited consolidated financial
statements for the year ended 30 June 2026.
Corporate governance statement
The corporate governance statement, prepared in accordance with the applicable
requirements of the Disclosure Guidance and Transparency Rules and the UK
Listing Rules, comprises the following sections of the Annual Report: the
‘Corporate governance report’, the ‘Audit Committee report’ and the
‘Additional information for shareholders’.
Company status
Diageo plc is a public limited liability company incorporated and domiciled in
England and Wales with registered number 23307 and registered office and
principal place of business at 16 Great Marlborough Street, London W1F 7HS,
United Kingdom. The company’s agent in the United States is General Counsel,
Diageo North America, Inc., 175 Greenwich Street, 3 World Trade Center, New
York, NY 10007, United States. The company was incorporated on 21 October
1886. It is the ultimate holding company of the group, a full list of whose
subsidiaries, partnerships, associates, joint ventures and joint arrangements is
set out in note 10 to the financial statements set out on pages 199-203.
Directors
The Directors of the company who currently serve are shown in the section
‘Board of Directors’ on pages 73 and 74, and the names of additional and
former Directors who served during the year are listed on page 72. In
accordance with the UK Corporate Governance Code, all Directors will retire at
the AGM and offer themselves for re-appointment. Further details of Directors’
contracts, remuneration and their interests in the shares of the company at 30
June 2026 are given in the Directors’ Remuneration Report. The Directors’
powers are determined by UK legislation and Diageo’s articles of association.
The Directors may exercise all the company’s powers, unless Diageo’s articles
of association or applicable legislation also require the company to seek
shareholders' approval.
Auditor
A resolution to recommend the re-appointment of PricewaterhouseCoopers LLP
as an external auditor of the company will be submitted for shareholders’
approval to the AGM due to be held in November 2026.
Disclosure of information to the auditor
In accordance with Section 418 of the Companies Act 2006, the Directors who
held office at the date of approval of this Directors’ report confirm that, so far as
they are each aware, there is no relevant audit information of which the
company’s auditor is unaware; and each Director has taken all reasonable steps
to ascertain any relevant audit information and to ensure that the company’s
auditor is aware of that information.
Significant agreements – change of control
The following significant agreements contain certain termination and other
rights for Diageo’s counterparties upon a change of control of the company.
Under the partners agreement governing the company’s 34% investment in Moët
Hennessy SAS (MH) and Moët Hennessy International SAS (MHI), if a
Competitor (as defined therein) directly or indirectly takes control of the
company (which, for these purposes, would occur if such Competitor acquired
more than 34% of the voting rights or equity interests in the company), LVMH
Moët Hennessy – Louis Vuitton SA (LVMH) may require the company to sell its
interests in MH and MHI to LVMH.
The master agreement governing the operation of the group’s market-level
distribution joint ventures with LVMH states that if any person acquires
interests and rights in the company resulting in a Control Event (as defined)
occurring in respect of the company, LVMH may within 12 months of the
Control Event either appoint and remove the chair of each joint venture entity
governed by such master agreement, who shall be given a casting vote, or require
each distribution joint venture entity to be wound up. Control Event for these
purposes is defined as the acquisition by any person of more than 30% of the
outstanding voting rights or equity interests in the company, provided that no
other person or entity (or group of affiliated persons or entities) holds directly or
indirectly more than 30% of the voting rights in the company.
Related party transactions
Transactions with related parties are disclosed in note 21 to the consolidated
financial statements.
Major shareholders
At 30 June 2026, the following substantial interests (3% or more) in the
company’s ordinary share capital (voting securities) had been notified to the
company:
Shareholder | Number of ordinary shares | Percentage of issued ordinary share (excluding treasury shares) | Date of notification of interest |
BlackRock Investment Management (UK) Limited (indirect holding)(1) | 147,296,928 | 5.89% | 3 December 2009 |
Capital Research and Management Company (indirect holding) | 124,653,096 | 4.99% | 28 April 2009 |
Massachusetts Financial Services Company (indirect holding)(2) | 111,560,606 | 4.99% | 29 February 2024 |
Artisan Partners Limited Partnership (indirect holding) | 111,928,723 | 5.03% | 17 April 2026 |
(1)On 25 January 2024, BlackRock Inc. filed an Amendment to Schedule 13G with the
SEC, reporting that as of 25 January 2024, 192,713,107 ordinary shares representing
8.62% of the issued ordinary share capital were beneficially owned by BlackRock Inc.
and its subsidiaries (including BlackRock Investment Management (UK) Limited).
(2)On 31 March 2025, Massachusetts Financial Services Company filed an Amendment
to Schedule 13G with the SEC, reporting that as of 31 March 2025, 110,110,419
ordinary shares representing 4.95% of the issued ordinary share capital were
beneficially owned by Massachusetts Financial Services Company and its subsidiaries.
The company has not been notified of any other substantial interests in its
securities since 30 June 2026. The company’s substantial shareholders do not
have different voting rights. Diageo, so far as is known by the company, is not
directly or indirectly owned or controlled by another corporation or by any
government. Diageo knows of no arrangements, the operation of which may at a
subsequent date result in a change of control of the company.
Employment policies
A key strategic imperative of the company is to attract, retain and grow a pool of
diverse, talented employees. Diageo recognises that a diversity of skills and
experiences in its workplace and communities will provide a competitive
advantage. To enable this, the company has various global employment policies
and standards, covering such issues as resourcing, data protection, human rights,
dignity at work, health, safety and wellbeing. These policies and standards seek
to ensure that the company treats current or prospective employees justly,
solely according to their abilities to meet the requirements and standards of their
role and in a fair and consistent way. This includes giving full and fair
consideration to applications from prospective employees who are disabled,
having regard to their aptitudes and abilities, and not discriminating against
employees under any circumstances (including in relation to applications,
training, career development and promotion) on the grounds of any disability.
In the event that an employee, worker or contractor becomes disabled in the
course of their employment or engagement, Diageo aims to ensure that
reasonable steps are taken to accommodate their disability by making
reasonable adjustments to their existing employment or engagement.
Political donations
The group has not given any money for political purposes in the
United Kingdom during the year. Diageo North America, Inc. made
contributions solely at its own discretion to non-UK political candidates and
committees in the United States, where it is common practice to do so.
Contributions of approximately $1.74 million (2025: $1.36 million) were made
by Diageo North America, Inc. during the financial year to state and local
candidates and committees, consistent with applicable laws. Additionally, our
Australian based subsidiary made contributions, solely at its own discretion,
totalling approximately $0.06 million (2025: $0.09 million).
131 | Diageo Form 20-F 2026 |
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The contributions in the United States reflect no endorsement of a particular
political party, and contributions were made with the aim of promoting a better
understanding of our business and our views on commercial matters, as well as
a generally improved business environment.
Trading market for shares
Diageo plc ordinary shares are listed on the London Stock Exchange (LSE).
Diageo ADSs, representing four Diageo ordinary shares each, are listed on the
New York Stock Exchange (NYSE). The principal trading market for the
ordinary shares is the LSE. Diageo shares are traded on the LSE’s electronic
order book. Orders placed on the order book are displayed on-screen through a
central electronic system and trades are automatically executed, in price and
then time priority, when orders match with corresponding buy or sell orders.
Only member firms of the LSE, or the LSE itself if requested by the member
firm, can enter or delete orders on behalf of clients or on their own account. All
orders are anonymous. Although use of the order book is not mandatory, all
trades, whether or not executed through the order book and regardless of size,
must be reported within three minutes of execution, but may be eligible for
deferred publication.
The Markets in Financial Instruments Directive (MiFID) allows for delayed
publication of large trades with a sliding scale requirement based on qualifying
minimum thresholds for the amount of consideration to be paid/the proportion
of average daily turnover (ADT) of a stock represented by a trade. Provided that
a trade/consideration equals or exceeds the qualifying minimum size, it will be
eligible for deferred publication ranging from 60 minutes from time of trade to
three trading days after time of trade.
As at the close of business on 5 August 2026, 270,576,312 ordinary shares,
including those held through American Depositary Shares (ADSs), were held by
approximately 1,667 holders (including American Depositary Receipt (ADR)
holders) with registered addresses in the United States, representing
approximately 12.15% of the outstanding ordinary shares (excluding treasury
shares). At such date, 67,714,186 ADSs were held by 1,896 registered ADR
holders. Since certain of such ordinary shares and ADSs are held by nominees
or former Grand Metropolitan PLC or Guinness plc ADR holders who have not
re-registered their ADSs, the number of beneficial owners may be higher.
American depositary shares
Fees and charges payable by ADR holders
Citibank N.A. serves as the depositary (Depositary) for Diageo’s ADS
programme. Pursuant to the deposit agreement dated 14 February 2013 between
Diageo, the Depositary and owners and holders of ADSs (the Deposit
Agreement), ADR holders may be required to pay various fees to the
Depositary, and the Depositary may refuse to provide any service for which a
fee is assessed until the applicable fee has been paid. In particular, the
Depositary, under the terms of the Deposit Agreement, shall charge a fee of up
to $5.00 per 100 ADSs (or fraction thereof) relating to the issuance of ADSs;
delivery of deposited securities against surrender of ADSs; distribution of cash
dividends or other cash distributions (i.e. sale of rights and other entitlements);
distribution of ADSs pursuant to stock dividends or other free stock
distributions, or exercise of rights to purchase additional ADSs; distribution of
securities other than ADSs or rights to purchase additional ADSs (i.e. spin-off
shares); and depositary services. Citibank N.A. is located at 388 Greenwich
Street, New York, New York, 10013, United States. In addition, ADR holders
may be required under the Deposit Agreement to pay the Depositary (a) taxes
(including applicable interest and penalties) and other governmental charges;
(b) registration fees; (c) certain cable, telex, and facsimile transmission and
delivery expenses; (d) the expenses and charges incurred by the Depositary in
the conversion of foreign currency; (e) such fees and expenses as are incurred
by the Depositary in connection with compliance with exchange control
regulations and other regulatory requirements; and (f) the fees and expenses
incurred by the Depositary, the custodian, or any nominee in connection with
the servicing or delivery of ADSs. The Depositary may (a) withhold dividends
or other distributions or sell any or all of the shares underlying the ADSs in
order to satisfy any tax or governmental charge and (b) deduct from any cash
distribution the applicable fees and charges of, and expenses incurred by, the
Depositary and any taxes, duties or other governmental charges on account.
Direct and indirect payments by the Depositary
The Depositary reimburses Diageo for certain expenses it incurs in connection
with the ADR programme, subject to a ceiling set out in the Deposit Agreement
pursuant to which the Depositary provides services to Diageo. The Depositary
has also agreed to waive certain standard fees associated with the administration
of the programme. Under the contractual arrangements with the Depositary,
Diageo has received approximately $5.13 million arising out of fees charged in
respect of dividends paid during the year and issuance and cancellation fees to
cover the Company's ADR programme costs. These payments are received for
expenses associated with non-deal road shows, third-party investor relations
consultant fees and expenses, Diageo’s cost for administration of the ADR
programme not absorbed by the Depositary and related activities (e.g. expenses
associated with the AGM), travel expenses to attend training and seminars,
exchange listing fees, legal fees, auditing fees and expenses, the SEC filing fees,
expenses related to Diageo’s compliance with US securities law and regulations
(including, without limitation, the Sarbanes-Oxley Act) and other expenses
incurred by Diageo in relation to the ADR programme.
Articles of association
The company is incorporated under the name Diageo plc, and is registered in
England and Wales under registered number 23307. The following description
summarises certain provisions of Diageo’s articles of association (as adopted by
special resolution at the Annual General Meeting on 6 November 2025) and
applicable English law concerning companies (the Companies Acts), in each case
as at 5 August 2026. This summary is qualified in its entirety by reference to the
Companies Acts and Diageo’s articles of association. Investors can obtain copies of
Diageo’s articles of association by contacting the Company Secretary at: the
cosec@diageo.com. Any amendment to the articles of association of the company
may be made in accordance with the provisions of the Companies Act 2006 by
way of special resolution. The company plans to propose changes to its articles of
association at the upcoming Annual General Meeting in November 2026 and the
recommended changes will be set out in the Notice of Meeting.
Directors
Diageo’s articles of association provide for a Board of Directors, consisting
(unless otherwise determined by an ordinary resolution of shareholders) of not
fewer than three Directors and not more than 25 Directors, in which all powers
to manage the business and affairs of Diageo are vested.
A Director does not vote on, or count towards the quorum in relation to, any
resolution of the Board in respect of any contract in which they have an interest
and, if they do so, their vote will not be counted. This prohibition does not apply
to any resolution where that interest cannot reasonably be regarded as likely to
give rise to a conflict of interest or where that interest arises only from certain
specified matters, including: (a) indemnifying the Director in respect of
obligations incurred at the request of or for the benefit of the company or any of
its subsidiary undertakings; (b) indemnifying a third party in respect of
obligations of the company or any of its subsidiary undertakings for which the
Director has assumed responsibility in whole or in part under an indemnity or
guarantee or by the giving of security; (c) offers of securities by the company or
any of its subsidiary undertakings in which the Director will or may be entitled
to participate as a holder of securities; (d) contracts concerning another
company in which the Director is the holder of or beneficially interested in less
than 1% of any class of the equity share capital of such company; (e) employee
benefits in relation to the company or any of its subsidiary undertakings in
which the Director will share in a similar manner to other employees; and (f) the
purchase or maintenance of insurance against any liability for, or for the benefit
of, any Director or Directors or for, or for the benefit of, persons who include
Directors.
The Directors are empowered to exercise all the powers of the company to
borrow money, subject to any limitation in Diageo’s articles of association
(currently two times the adjusted capital and reserves of the company as defined
in the articles of association), unless previously sanctioned by an ordinary
resolution of the company.
Directors are elected by Diageo's shareholders in a general meeting or are
appointed by the Board and their appointment is recommended for approval at
the next general meeting.
At each Annual General Meeting, all the Directors at the date on which the
notice convening the Annual General Meeting is approved by the Board retire
from office and may offer themselves for re-election by shareholders. There is
no age limit requirement in respect of directors.
132 | Diageo Form 20-F 2026 |
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Directors' report continued
Directors may also be removed before the expiration of their term of office in
accordance with the provisions of the Companies Acts.
Directors are not required to hold any shares of the company by way
of qualification.
Voting rights
At Diageo’s Annual General Meetings, voting is usually conducted on a poll.
On a poll, every shareholder who is present in person or by proxy has one vote
for every share held by that shareholder, but a shareholder or proxy entitled to
more than one vote need not cast all his/her votes or cast them all in the same
way (the deadline for exercising voting rights by proxy is set out in the form of
proxy).
In line with Diageo’s articles of association and the Companies Acts, matters
are recommended to shareholders for approval as:
•ordinary resolutions, which include resolutions for the election, re-election and
removal of Directors, the declaration of final dividends, the appointment and
re-appointment of the external auditor, the remuneration report and
remuneration policy, and the granting of authority to allot shares; and
•special resolutions, which include resolutions for the amendment of
Diageo’s articles of association, resolutions relating to the disapplication of
pre-emption rights, and resolutions modifying the rights of any class of
Diageo’s shares at a meeting of the holders of such class.
An ordinary resolution requires a simple majority of votes cast in favour in
order to be passed, while special resolutions require not less than three-quarters
of the votes to be cast in favour in order to be passed.
A shareholder is not entitled to vote at any general meeting or class meeting if
they have been served with a restriction notice (as defined in Diageo's articles of
association) after failure to provide Diageo with information concerning
interests in those shares required to be provided under the Companies Acts.
Pre-emption rights and new issues of shares
While holders of ordinary shares have no pre-emptive rights under Diageo’s
articles of association, the ability of the Directors to cause Diageo to issue
shares, securities convertible into shares or rights to shares, otherwise than
pursuant to an employee share scheme, is restricted. Under the Companies Acts,
with certain exceptions, the directors need to seek shareholder approval to
exercise the power to allot shares, but which in either event cannot last for more
than five years. Under the Companies Acts, Diageo may also not allot shares for
cash (otherwise than pursuant to an employee share scheme) without first
making an offer to existing shareholders to allot shares to them on the same or
more favourable terms in proportion to their respective shareholdings, unless
this requirement is waived by a special resolution of the shareholders.
Repurchase of shares
Subject to authorisation by special resolution, Diageo may purchase its own
shares in accordance with the Companies Acts. Any shares which have been
bought back may be held as treasury shares or will be cancelled immediately
upon completion of the purchase, thereby reducing the amount of Diageo’s
issued share capital.
The Directors’ authority to buy back shares (up to a maximum of 222,565,850
ordinary shares) was renewed at last year’s AGM and will expire at the end of
the AGM in 2026. No shares have been repurchased during the year under
review. The Directors will propose to seek new authority at the forthcoming
AGM, as set out in the Notice of Meeting. This authority, unless renewed, will
expire at the conclusion of the AGM in 2027 or if earlier, 15 months from the
passing of the resolution. The Board would only authorise such purchases after
careful consideration, taking account of other investment opportunities,
appropriate gearing levels, the overall financial position of the group and
whether the effect would be an increase in earnings per share and in the best
interests of shareholders generally.
Restrictions on transfers of shares
The Board may decline to register a transfer of a certificated Diageo share
unless the instrument of transfer (a) is duly stamped or certified or otherwise
shown to the satisfaction of the Board to be exempt from stamp duty, and is
accompanied by the relevant share certificate and such other evidence of the
right to transfer as the Board may reasonably require, (b) is in respect of only
one class of share and (c) if to joint transferees, is in favour of not more than
four such transferees. Registration of a transfer of an uncertificated share may
be refused in the circumstances set out in the uncertificated securities rules (as
defined in Diageo’s articles of association) and where, in the case of a transfer
to joint holders, the number of joint holders to whom the uncertificated share is
to be transferred exceeds four.
The Board may decline to register a transfer of any of Diageo’s certificated
shares by a person with a 0.25% interest (as defined in Diageo’s articles of
association) if such a person has been served with a restriction notice (as
defined in Diageo’s articles of association) after failure to provide Diageo with
information concerning interests in those shares required to be provided under
the Companies Acts, unless the transfer is shown to the Board to be pursuant to
an arm’s-length sale (as defined in Diageo’s articles of association).
133 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Other information
Other information relevant to the Directors’ report may be found in the following sections of the Annual Report:
Information (including that required by UK Listing Authority Listing Rule 6.6.1) | Location in Annual Report |
Agreements with controlling shareholders | Not applicable |
Contracts of significance | Not applicable |
Details of long-term incentive schemes | Directors’ remuneration report |
Directors’ indemnities and compensation | Directors’ remuneration report - Additional information; Consolidated financial statements - note 21 Related party transactions |
Dividends | Group financial review; Consolidated financial statements; Consolidated financial statements - note 18 Equity; Other additional information; |
Engagement with employees | Corporate governance report - Workforce engagement statement; Our people and culture |
Engagement with suppliers, customers and others | Corporate governance report - Stakeholder engagement |
Financial risk management | Consolidated financial statements - note 16 Financial instruments and risk management |
Future developments | Chair’s statement; Chief Executive’s statement; Our fiscal 26 performance; Our turnaround plan; Market dynamics; Investment case; |
Greenhouse gas emissions | Pioneering grain-to-glass sustainability |
Interest capitalised | Consolidated financial statements - note 5 Finance income and charges |
Internal controls and risk management system | Audit Committee's Report |
Non-pre-emptive issues of equity for cash (including in respect of major unlisted subsidiaries) | Not applicable |
Parent participation in a placing by a listed subsidiary | Not applicable |
Political donations | Directors' report |
Provision of services by a controlling shareholder | Not applicable |
Publication of unaudited financial information | Unaudited financial information |
Purchase of own shares | Repurchase of shares; Consolidated financial statements - note 18 Equity |
Research and development | Other additional information - Research and development; Consolidated financial statements - note 4 Operating costs |
Review of the business and principal risks and uncertainties | Chief Executive’s statement; Our principal risks and risk management; Pioneering grain-to-glass sustainability; Business review |
Share capital - structure, voting and other rights | Consolidated financial statements - note 18 Equity |
Share capital - employee share plan voting rights | Consolidated financial statements - note 18 Equity |
Shareholder waivers of dividends | Consolidated financial statements - note 18 Equity |
Shareholder waivers of future dividends | Consolidated financial statements - note 18 Equity |
Streamlined Energy and Carbon Reporting (SECR) disclosures | Pioneering grain-to-glass sustainability |
Sustainability and responsibility | Pioneering grain-to-glass sustainability |
Waiver of emoluments by a Director | Not applicable |
Waiver of future emoluments by a Director | Not applicable |
The Directors’ report of Diageo plc for the year ended 30 June 2026 comprises these pages and the sections of the Annual Report referred to under ‘Directors’,
‘Corporate governance statement’ and ‘Other information’ above, which are incorporated into the Directors’ report by reference.
In addition, certain disclosures required to be contained in the Directors’ report have been incorporated into the ‘Strategic report’ as set out in ‘Other information’
above.
The Directors’ report, which has been approved by a duly appointed and authorised committee of the Board of Directors, was signed by its order by Randall Ingber,
the Company Secretary, on 17 August 2026.
134 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Financial statements
Financial
statements
Contents | |
Report of Independent Registered Public Accounting Firm | 135 |
Primary statements | |
Consolidated income statement | 143 |
Consolidated statement of comprehensive income | 144 |
Consolidated balance sheet | 145 |
Consolidated statement of changes in equity | 146 |
Consolidated statement of cash flows | 147 |
Accounting information and policies | |
1. Accounting information and policies | 148 |
Results for the year | |
2. Segmental information | 150 |
3. Exceptional items | 153 |
4. Operating cost | 155 |
5. Finance income and charges | 156 |
6. Investments in associates and joint ventures | 157 |
7. Taxation | 158 |
Operating assets and liabilities | |
8. Acquisition and sale of businesses and brands and purchase of non-controlling interests | 161 |
9. Intangible assets | 165 |
10. Property, plant and equipment | 169 |
11. Biological assets | 170 |
12. Leases | 170 |
13. Other investments | 171 |
14. Post-employment benefits | 171 |
15. Working capital | 176 |
Risk management and capital structure | |
16. Financial instruments and risk management | 179 |
17. Net borrowings | 186 |
18. Equity | 187 |
Other financial statement disclosures | |
19. Contingent liabilities and legal proceedings | 190 |
20. Commitments | 192 |
21. Related party transactions | 192 |
22. Principal group companies | 193 |
135 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Diageo plc
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheet of Diageo plc and its subsidiaries (the “Group”) as of 30 June 2026
and 30 June 2025, and the related consolidated income statement, consolidated statement of comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash flows for each of the three years in the period ended 30 June 2026,
including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Group’s
internal control over financial reporting as of 30 June 2026, based on criteria established in Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
the Group as of 30 June 2026 and 30 June 2025, and the results of its operations and its cash flows for each of the three years in the
period ended 30 June 2026 in conformity with UK-adopted International Accounting Standards and IFRS Accounting Standards as
issued by the International Accounting Standards Board. Also in our opinion, the Group maintained, in all material respects, effective
internal control over financial reporting as of 30 June 2026, based on criteria established in Internal Control - Integrated Framework
(2013) issued by the COSO.
Basis for Opinions
The Group’s management is responsible for these consolidated financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's
Report on Internal Control over Financial Reporting appearing under Part II.15.B. Our responsibility is to express opinions on the
Group’s consolidated financial statements and on the Group's internal control over financial reporting based on our audits. We are a
public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required
to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A group's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A group’s internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
group; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the group are being made only in
accordance with authorizations of management and directors of the group; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the group’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting 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 that the degree of compliance with the policies or procedures may deteriorate.
136 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial
statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgements. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the
critical audit matters or on the accounts or disclosures to which they relate.
Uncertain tax positions in respect of indirect taxes in Brazil
As described in Note 19 to the consolidated financial statements, the Group’s current aggregate known possible exposure from tax
assessment values in Brazil is up to approximately $1,032 million with no provision in respect to these issues. As disclosed by
management, the Group has a large number of ongoing tax cases in Brazil and may be subject to further future tax assessments in this
jurisdiction based on the same or similar matters. Where it is possible that a settlement may be reached or it is not possible to make a
reliable estimate of the estimated financial effect, appropriate disclosure is made. Management judgement is necessary in assessing
the likelihood that a claim will succeed, or a liability will arise.
The principal considerations for our determination that performing procedures related to uncertain tax positions in respect of indirect
taxes in Brazil is a critical audit matter are (i) the significant judgements made by management in determining the likelihood that a
claim will succeed, or a liability will arise; (ii) a high degree of auditor judgement, subjectivity and effort in performing procedures
and evaluating audit evidence related to the assessment of the likelihood; and (iii) the audit effort involved the use of professionals
with specialised skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion
on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the uncertain tax
positions associated with indirect taxes. These procedures also included, among others: (i) assessing the reasonableness of
information used in determining the likelihood that tax authorities will ultimately prevail; (ii) evaluating management’s assessment of
the ongoing tax cases in Brazil and probability of settlement including inspecting opinions from external counsel; (iii) evaluating the
status and results of tax audits with the relevant tax authorities; and (iv) evaluating the sufficiency of the Group’s related disclosures.
Professionals with specialised skill and knowledge were used to assist in the evaluation of the likelihood that a claim will succeed, or
a liability will arise.
Carrying value of goodwill, brands and investments in associates and joint ventures
As described in Notes 6 and 9 to the consolidated financial statements, the Group’s balances of goodwill, brands and investments in
associates and joint ventures are $2,436 million, $8,558 million and $5,284 million, respectively, as of 30 June 2026. In the year
ended 30 June 2026, the Group recognised an impairment charge associated with goodwill and brands of $1,274 million. Goodwill
and intangible assets that are regarded as having indefinite useful economic lives are not amortised and are reviewed for impairment
at least annually or when there is an indication that the assets may be impaired. Associates and joint ventures are initially recorded at
cost including transaction costs, and the Group's share of post-acquisition changes in the investee's reserves are recognised under the
equity method. Impairment reviews are carried out to ensure that intangible assets, including brands and investments in associates
and joint ventures, are not carried above their recoverable amounts, which is the higher of value in use (‘VIU’) and fair value less
costs of disposal (‘FVLCD’). Where the carrying value exceeds the recoverable amount, an impairment charge is recognised. VIU is
determined using management’s estimates of forecast future cash flows, discount rates and long-term growth rates. FVLCD is
determined using different assumptions, which may include quoted market prices, market capitalisations, valuation multiples for
comparable companies applied to earnings, discounted cash flows, recent market transactions and other relevant market information.
Such estimates and judgements are subject to change as a result of changing economic conditions and actuals may differ from
forecasts.
The principal considerations for our determination that performing procedures relating to the carrying value of goodwill, brands and
investments in associates and joint ventures is a critical audit matter are: (i) the significant judgement by management when
developing the recoverable amounts; (ii) a high degree of auditor judgement, subjectivity, and effort in performing procedures and
evaluating management’s significant assumptions related to volume, net sales, costs, operating profit margins, long-term growth
rates, discount rates and valuation multiples; and (iii) the audit effort involved the use of professionals with specialised skill and
knowledge.
137 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion
on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s
impairment reviews of goodwill, brands and investments in associates and joint ventures. These procedures also included, among
others (i) testing management’s process for developing the recoverable amounts, (ii) evaluating the appropriateness of the
methodology used by management to estimate VIU and FVLCD, (iii) testing the completeness and accuracy of the underlying data
used in the calculations; (iv) evaluating the reasonableness of the significant assumptions used by management related to volume, net
sales, costs, operating profit margins, long-term growth rates, discount rates and valuation multiples. Evaluating management’s
assumptions related to volume, net sales, costs and operating profit margins involved evaluating whether the assumptions used by
management were reasonable considering (i) current and past performance; (ii) the consistency with external market and industry
data; and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit. Professionals with
specialised skill and knowledge were used to assist in evaluating the reasonableness of discount rates, long-term growth rates and
valuation multiples assumptions.
/s/ PricewaterhouseCoopers LLP
18 August 2026
We have served as the Company's auditor since 2015.
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Financial statements
Consolidated income statement
Year ended 30 June 2026 | Year ended 30 June 2025 | Year ended 30 June 2024 | ||
Notes | $ million | $ million | $ million | |
Sales | 2 | |||
Excise duties | 4 | ( | ( | ( |
Net sales | 2 | |||
Cost of sales | 4 | ( | ( | ( |
Gross profit | ||||
Marketing | 4 | ( | ( | ( |
Other operating items | 4 | ( | ( | ( |
Operating profit | ||||
Non-operating items | 3 | ( | ( | |
Finance income | 5 | |||
Finance charges | 5 | ( | ( | ( |
Share of after-tax results of associates and joint ventures | 6 | |||
Profit before taxation | ||||
Taxation | 7 | ( | ( | ( |
Profit for the year | ||||
Attributable to: | ||||
Equity shareholders of the parent company | ||||
Non-controlling interests | ||||
Weighted average number of shares | million | million | million | |
Shares in issue excluding own shares | ||||
Dilutive potential ordinary shares | ||||
cents | cents | cents | ||
Basic earnings per share | ||||
Diluted earnings per share |
The accompanying notes are an integral part of these consolidated financial statements.
144 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Financial statements continued
Consolidated statement of comprehensive income
Year ended 30 June 2026 | Year ended 30 June 2025 | Year ended 30 June 2024 | ||
Notes | $ million | $ million | $ million | |
Other comprehensive income | ||||
Items that will not be recycled subsequently to the income statement | ||||
Net remeasurement of post-employment benefit plans | ( | ( | ( | |
Changes in the fair value of equity investments | ( | |||
Tax on items that will not be recycled to the income statement | ||||
( | ( | ( | ||
Of which: share of associates and joint ventures | ||||
Items that may be recycled subsequently to the income statement | ||||
Exchange differences on translation of foreign operations | ( | ( | ||
Exchange loss recycled to the income statement | ||||
Gains/(losses) on net investment hedges | ( | ( | ||
Cost of hedging | ( | ( | ||
(Losses)/gains on cash flow hedges | ( | |||
Losses/(gains) on cash flow hedges recycled to the income statement | ( | ( | ||
Tax on items that may be recycled to the income statement | ( | ( | ( | |
( | ( | |||
Of which: share of associates and joint ventures | ( | ( | ||
Other comprehensive (loss)/income net of tax for the year | ( | ( | ||
Profit for the year | ||||
Total comprehensive income for the year | ||||
Attributable to: | ||||
Equity shareholders of the parent company | ||||
Non-controlling interests | 18 | |||
Total comprehensive income for the year |
The accompanying notes are an integral part of these consolidated financial statements.
In the current period, the group has aggregated certain line items in the Consolidated statement of comprehensive income where management considers that such
aggregation improves the overall clarity of presentation. The presentation change has been applied retrospectively for prior periods. The amounts included in these
aggregated line items are provided in the accompanying notes to the financial statements.
145 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Consolidated balance sheet
30 June 2026 | 30 June 2025 | ||||
Notes | $ million | $ million | $ million | $ million | |
Non-current assets | |||||
Intangible assets | 9 | ||||
Property, plant and equipment | 10 | ||||
Biological assets | 11 | ||||
Investments in associates and joint ventures | 6 | ||||
Other investments | 13 | ||||
Other receivables | 15 | ||||
Other financial assets | 16 | ||||
Deferred tax assets | 7 | ||||
Post-employment benefit assets | 14 | ||||
Current assets | |||||
Inventories | 15 | ||||
Trade and other receivables | 15 | ||||
Corporate tax receivables | 7 | ||||
Assets held for sale | 8 | ||||
Other financial assets | 16 | ||||
Cash and cash equivalents | 17 | ||||
Total assets | |||||
Current liabilities | |||||
Borrowings and bank overdrafts | 17 | ( | ( | ||
Other financial liabilities | 16 | ( | ( | ||
Trade and other payables | 15 | ( | ( | ||
Liabilities held for sale | 8 | ( | ( | ||
Corporate tax payables | 7 | ( | ( | ||
Provisions | 15 | ( | ( | ||
( | ( | ||||
Non-current liabilities | |||||
Borrowings | 17 | ( | ( | ||
Other financial liabilities | 16 | ( | ( | ||
Other payables | 15 | ( | ( | ||
Provisions | 15 | ( | ( | ||
Deferred tax liabilities | 7 | ( | ( | ||
Post-employment benefit liabilities | 14 | ( | ( | ||
( | ( | ||||
Total liabilities | ( | ( | |||
Net assets | |||||
Equity | |||||
Share capital | 18 | ||||
Share premium | |||||
Other reserves | ( | ||||
Retained earnings | |||||
Equity attributable to equity shareholders of the parent company | |||||
Non-controlling interests | 18 | ||||
Total equity | |||||
The accompanying notes are an integral part of these consolidated financial statements.
These consolidated financial statements have been approved by a duly appointed and authorised committee of the Board of Directors on
17 August 2026 and were signed on its behalf by Sir Dave Lewis and Nik Jhangiani, Directors.
146 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Consolidated statement of changes in equity
Other reserves | Retained earnings/(deficit) | |||||||||||
Notes | Share capital $ million | Share premium $ million | Capital redemptio n reserve $ million | Hedging and exchange reserve $ million | Own shares $ million | Other retained earnings $ million | Total $ million | Equity attributable to parent company shareholders $ million | Non- controllin g interests $ million | Total equity $ million | ||
At 30 June 2023 | ( | ( | ||||||||||
Adjustment to 2023 closing equity in respect of hyperinflation in Ghana | — | — | — | — | — | |||||||
Adjusted opening balance | ( | ( | ||||||||||
Profit for the year | — | — | — | — | — | |||||||
Other comprehensive (loss)/income | — | — | — | ( | — | ( | ( | ( | ||||
Total comprehensive (loss)/income for the year | — | — | — | ( | — | |||||||
Changes in equity due to share-based payment transactions | — | — | — | — | ( | |||||||
Change in non-controlling interests due to acquisitions and sale of businesses | — | — | — | — | — | ( | ( | ( | ( | |||
Unclaimed dividend | — | — | — | — | — | — | ||||||
Change in fair value of put option | — | — | — | — | — | — | ||||||
Share buyback programme | ( | — | — | — | ( | ( | ( | — | ( | |||
Dividends | 18 | — | — | — | — | — | ( | ( | ( | ( | ( | |
At 30 June 2024 | ( | ( | ||||||||||
Profit for the year | — | — | — | — | — | |||||||
Other comprehensive income/(loss) | — | — | — | — | ( | |||||||
Total comprehensive income for the year | — | — | — | — | ||||||||
Changes in equity due to share-based payment transactions | — | — | — | — | ( | |||||||
Change in non-controlling interests due to acquisitions and sale of businesses | — | — | — | — | — | ( | ( | ( | ||||
Change in fair value of put option | — | — | — | — | — | — | ||||||
Reversal of share buyback transaction cost | — | — | — | — | — | — | ||||||
Dividends | 18 | — | — | — | — | — | ( | ( | ( | ( | ( | |
At 30 June 2025 | ( | ( | ||||||||||
Profit for the year | — | — | — | — | — | |||||||
Other comprehensive (loss)/income | — | — | — | ( | — | ( | ( | ( | ||||
Total comprehensive (loss)/income for the year | — | — | — | ( | — | |||||||
Changes in equity due to share-based payment transactions | — | — | — | — | — | |||||||
Change in non-controlling interests due to acquisitions and sale of businesses | 8 | — | — | — | — | — | — | — | — | ( | ( | |
Unclaimed dividend | — | — | — | — | — | — | ||||||
Change in fair value of put option | — | — | — | — | — | ( | ( | ( | — | ( | ||
Dividends | 18 | — | — | — | — | — | ( | ( | ( | ( | ( | |
At 30 June 2026 | ( | ( | ||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
In the current period, the group has aggregated certain line items in the Consolidated statement of changes in equity where management considers that such
aggregation improves the overall clarity of presentation. The presentation change has been applied retrospectively for prior periods.
147 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Consolidated statement of cash flows
Year ended 30 June 2026 | Year ended 30 June 2025 | Year ended 30 June 2024 | |||||
Notes | $ million | $ million | $ million | $ million | $ million | $ million | |
Cash flows from operating activities | |||||||
Profit for the year | |||||||
Taxation | |||||||
Share of after-tax results of associates and joint ventures | ( | ( | ( | ||||
Net finance charges | |||||||
Non-operating items | ( | ||||||
Operating profit | |||||||
Increase in inventories | ( | ( | ( | ||||
Increase in trade and other receivables | ( | ( | ( | ||||
Increase/(decrease) in trade and other payables and provisions | ( | ||||||
Net decrease/(increase) in working capital | ( | ( | |||||
Depreciation, amortisation and impairment | |||||||
Dividends received | |||||||
Post-employment payments less amounts included in operating profit | ( | ||||||
Other items | |||||||
Cash generated from operations | |||||||
Interest received | |||||||
Interest paid | ( | ( | ( | ||||
Taxation paid | ( | ( | ( | ||||
( | ( | ( | |||||
Net cash inflow from operating activities | |||||||
Cash flows from investing activities | |||||||
Disposal of property, plant and equipment and computer software | |||||||
Purchase of property, plant and equipment and computer software | ( | ( | ( | ||||
Cash inflow from loans, other investments and other financial assets | |||||||
Cash outflow from loans, other investments and other financial assets | ( | ( | ( | ||||
Sale of businesses and brands | 8 | ||||||
Acquisition of subsidiaries | 8 | ( | ( | ( | |||
Investments in associates and joint ventures | 8 | ( | ( | ( | |||
Net cash outflow from investing activities | ( | ( | ( | ||||
Cash flows from financing activities | |||||||
Share buyback programme | 18 | ( | |||||
Net sale of own shares for share schemes | |||||||
Net sale/(purchase) of treasury shares in respect of subsidiaries | ( | ||||||
Dividends paid to non-controlling interests | ( | ( | ( | ||||
Proceeds from bonds | 17 | ||||||
Repayments of bonds | 17 | ( | ( | ( | |||
Purchase of shares of non-controlling interests | 8 | ( | ( | ||||
Cash inflow from other borrowings | |||||||
Cash outflow from other borrowings | ( | ( | ( | ||||
Equity dividends paid | ( | ( | ( | ||||
Unclaimed dividends and share forfeiture | |||||||
Net cash outflow from financing activities | ( | ( | ( | ||||
Net (decrease)/increase in net cash and cash equivalents | 17 | ( | ( | ||||
Exchange differences | ( | ( | ( | ||||
Reclassification to assets and liabilities held for sale | ( | ( | |||||
Net cash and cash equivalents at beginning of the year | |||||||
Net cash and cash equivalents at end of the year | |||||||
Net cash and cash equivalents consist of: | |||||||
Cash and cash equivalents | 17 | ||||||
Bank overdrafts | 17 | ( | ( | ( | |||
The accompanying notes are an integral part of these consolidated financial statements.
148 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Accounting information and policies
statements as a whole. Accounting policies, critical accounting estimates and judgements specific to a note are included in the note to which they relate. Furthermore,
the section details new accounting standards, amendments and interpretations, that the group has adopted in the current financial year or will adopt in subsequent
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
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, 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.
The consolidated financial statements include the results of the company and its
subsidiaries together with the group’s attributable share of the results of
associates and joint ventures. A subsidiary is an entity controlled by Diageo plc.
The group controls an investee when it is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability to affect those
returns through its power over the investee. Where the group has the ability to
exercise joint control over an entity but has rights to specified assets and
obligations for liabilities of that entity, the entity is included on the basis of the
Items included in the financial statements of the group’s subsidiaries, associates
and joint ventures are measured using the currency of the primary economic
environment in which each entity operates (its functional currency). The
consolidated financial statements are presented in US dollar, which is the
functional currency of the parent company, Diageo plc. The functional currency
of Diageo plc is determined by using management judgement that considers the
parent company as an extension of its subsidiaries.
The income statements and cash flows of non-US dollar entities are translated
into US dollar at weighted average rates of exchange, except for subsidiaries in
hyperinflationary economies that are translated with the closing rate at the end
of the year, and for substantial transactions that are translated at the rate on the
date of the transaction. Exchange differences arising on the retranslation to
closing rates are taken to the exchange reserve.
Assets and liabilities are translated at the relevant year end closing rates.
Exchange differences arising on the retranslation at closing rates of the opening
balance sheets of non-US dollar entities are taken to the exchange reserve, as
are exchange differences arising on foreign currency borrowings and financial
instruments designated as net investment hedges, to the extent that they are
effective. Tax charges and credits arising on such items are also taken to the
exchange reserve. Gains and losses accumulated in the exchange reserve are
recycled to the income statement when the foreign operation is sold. Other
exchange differences are taken to the income statement. Transactions in foreign
currencies are recorded at the rate of exchange on the date of the transaction.
statements for the three years ended 30 June 2026, expressed in sterling and
euros per $1, were as follows:
2026 | 2025 | 2024 | |
Sterling | |||
Income statement and cash flows(1) | |||
Assets and liabilities(2) | |||
Euro | |||
Income statement and cash flows(1) | |||
Assets and liabilities(2) |
(1)Weighted average rates.
(2)Closing rates.
The group uses foreign exchange hedges to mitigate the effect of exchange rate
movements. For further information, see note 16.
149 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Details of critical estimates and judgements which the Directors consider could
have a significant impact on the financial statements are set out in the related
notes as follows:
•Taxation – management judgement whether a provision is required and
estimate of amount of corporate tax payable or receivable, the recoverability
of deferred tax assets and expectation on manner of recovery of deferred
taxes – pages 158 and 191.
•Brands, goodwill, other intangibles, investments in associates and contingent
considerations – management judgement whether the assets and liabilities are
to be recognised and synergies resulting from an acquisition. Management
judgement and estimate are required in determining future cash flows and
appropriate applicable assumptions to support the intangible asset, investment
in associate and contingent consideration value – pages 158 and 165.
•Post-employment benefits – management judgement whether a surplus can be
recovered and management estimate in determining the assumptions in
calculating the liabilities of the funds – page 171.
•Contingent liabilities and legal proceedings – management judgement in
assessing the likelihood of whether a liability will arise and an estimate
to quantify the possible range of any settlement; and significant
unprovided tax matters where maximum exposure is provided for each –
page 190.
The group applied hyperinflationary accounting for its operations in Türkiye
and Venezuela.
The group’s consolidated financial statements include the results and financial
position of its operations in hyperinflationary economies restated to the
measuring unit current at the end of each period, with hyperinflationary gains
and losses in respect of monetary items being reported in finance income and
charges. Comparative amounts presented in the consolidated financial
statements are not restated. When applying IAS 29 on an ongoing basis,
comparatives in stable currency are not restated and the effect of inflating
opening net assets to the measuring unit current at the end of the reporting
period is presented as part of 'Items that may be recycled subsequently to the
income statement' in other comprehensive income, amounting to a gain of $334
million). The movement in the publicly available official price index for the
year ended 30 June 2026 was 32 % (2025 – 35 %; 2024 - 72 %) in Türkiye. The
inflation rate used by the group for Venezuela is based on data of various
independent valuers, as no reliable officially published rate is available.
Movement in the price index for the year ended 30 June 2026 was 574 % (2025
– 171 %; 2024 - 77 %) in Venezuela.
The following accounting standards and amendments to standards, issued by the
IASB including those endorsed by the UK, were adopted by the group from 1
July 2025 with no material impact on the group’s consolidated results, financial
position or disclosures:
•Amendments to IAS 21 – Lack of exchangeability
and have not yet been adopted by the group, which are not expected to have
material impact on the group's consolidated results or financial position:
•Amendments to IFRS 9 and IFRS 7 – Amendments to the Classification and
Measurement of Financial Instruments (effective from the year ending 30
June 2027)
•Amendments to IFRS 7 and IFRS 9 – Contracts Referencing Nature-
dependent Electricity (effective from the year ending 30 June 2027)
Preparations for the implementation of IFRS 18 – Presentation and Disclosure
of Financial Statements, which will become effective for the consolidated
financial statements from the year ending 30 June 2028, are in progress.
IFRS 18 supersedes IAS 1 and makes consequential amendments to other
standards. As a result of IFRS 18 adoption, the group expects the following
changes:
•The structure of the consolidated income statement will be revised to
incorporate the categories and subtotals required by the standard.
Presentation of income and expenses in this newly defined structure will lead
to a change in operating profit, whilst keeping profit unchanged.
•The new operating profit subtotal will be the starting point of the
consolidated statement of cash flows and – as per IFRS 18 – cash flows from
dividends and interests can no longer be classified as part of operating cash
flow, but will be reported as investing and financing instead.
•Additional disclosure will be provided about management-defined
performance measures and other disclosure changes are expected in the
notes to comply with IFRS 18's guidance.
There are a number of other standards, amendments and clarifications to IFRSs,
effective in future years, which are not expected to significantly impact the
The results of climate change assessment and greenhouse gas emission targets
for Diageo's direct operations (Scope 1 and 2) for 2030 have been considered as
part of the assessment of estimates and judgements in preparing the group's
consolidated financial statements. We integrate climate risk into our enterprise
risk management processes, within our principal risk factors. This is an integral
part of our strategic and business continuity planning.
The climate change scenario analyses performed in 2026 – conducted in line
with TCFD recommendations (a Moderate Warming’ Scenario (RCP 4.5) and a
‘Severe Warming Scenario’ (RCP 8.5)) – identified no material financial impact
to these financial statements.
The following considerations were made in respect of the financial statements:
•The impact of climate change on factors like residual values, useful lives and
depreciation methods that determine the carrying value of non-current assets.
•The impact of climate change on forecasts of cash flows used (including
forecast depreciation in line with capital expenditure plans) in impairment
assessments for the value-in-use of non-current assets including goodwill (see
note 9).
•The impact of climate change on post-employment assets.
150 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
This section explains the results and performance of the group for the three years ended 30 June 2026. Disclosures are provided for segmental information, operating
costs, exceptional items, finance income and charges, the group's share of results of associates and joint ventures and taxation. For associates, joint ventures and
taxation, balance sheet disclosures are also provided in this section.
Accounting policies | ||
Sales comprise revenue from contracts with customers from the sale of goods, royalties and rents receivable. Revenue from the sale of goods includes excise and other duties which the group pays as principal but excludes duties and taxes collected on behalf of third parties, such as value added tax. Sales are recognised as or when performance obligations are satisfied by transferring control of a good or service to the customer, which is determined by considering, among other factors, the delivery terms agreed with customers. For the sale of goods, the transfer of control occurs when the significant risks and rewards of ownership are passed to the customer. Based on the shipping terms agreed with customers, the transfer of control of goods occurs at the time of dispatch for the majority of sales. Where the transfer of control is subsequent to the dispatch of goods, the time between dispatch and receipt by the customer is generally less than five days. The group includes in sales the net consideration to which it expects to be entitled. Sales are recognised to the extent that it is highly probable that a significant reversal will not occur. Therefore, sales are stated net of expected price discounts, allowances for customer loyalty and certain promotional activities and similar items. Generally, payment of the transaction price is due within credit terms that are consistent with industry practices, with no element of financing. | ||
Net sales are sales less excise duties. Diageo incurs excise duties throughout the world. In the majority of countries, excise duties are effectively a production tax which becomes payable when the product is removed from bonded premises and is not directly related to the value of sales. It is generally not included as a separate item on external invoices; increases in excise duty are not always passed on to the customer and where a customer fails to pay for products received, the group cannot reclaim the excise duty. The group therefore recognises excise duty, unless it regards itself as an agent of the regulatory authorities, as a cost to the group. | ||
Advertising costs, point of sale materials and sponsorship payments are charged to marketing in operating profit when the company has a right of access to the goods or services acquired. | ||
Exceptional items are those that in management’s judgement need to be disclosed separately. Such items are included in the income statement caption to which they relate, and form part of the segmental reporting. Management believes that separate disclosure of exceptional items and the classification between operating and non- operating further helps investors to understand the performance of the group. Changes in estimates and reversals in relation to items previously recognised as exceptional are presented consistently as exceptional in the current year. | ||
Diageo is an international manufacturer and distributor of premium drinks. Diageo also owns a number of investments in associates and joint ventures, as set out in
note 6.
The segmental information presented is consistent with management reporting provided to the Executive Committee (the chief operating decision-maker).
The Executive Committee considers the business principally from a geographical perspective based on the location of third-party sales and the business analysis is
presented by geographical segment. The group's operations also include the Corporate segment. Corporate costs are in respect of 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.
Diageo uses shared services operations to deliver transaction processing activities for markets and operational entities. These centres are located in India, Hungary,
Colombia and the Philippines. These captive business service centres also perform certain central finance activities, including elements of financial planning and
reporting, treasury and HR services. The costs of shared services operations are recharged to the regions.
Executive Committee makes decisions based on the analysis of several financial data sets including organic and IFRS reported data. The segmental analysis below is
derived from IFRS reported figures, except that operating performance is presented using operating profit before exceptional items, a non-GAAP measure used by the
Executive Committee. Supply Chain and Procurement (SC&P), which manufactures products for other group companies and includes the production sites in the
United Kingdom, Ireland, Guatemala and Mexico, as well as comprises the global procurement function, is considered a key intersegmental operation instead of a
separate operating segment.
151 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
North America | Europe | Asia Pacific | Latin America and Caribbean | Africa | Corporate and other | Total | |
2026 | $ million | $ million | $ million | $ million | $ million | $ million | $ million |
Sales | |||||||
Net sales | |||||||
Cost of sales | ( | ( | ( | ( | ( | ( | ( |
Marketing | ( | ( | ( | ( | ( | ( | ( |
Other operating items | ( | ( | ( | ( | ( | ( | ( |
Operating profit before exceptional items | ( | ||||||
Exceptional operating items(1) | ( | ||||||
Operating profit | |||||||
Non-operating items | |||||||
Net finance charges | ( | ||||||
Share of after-tax results of associates and joint ventures | |||||||
Profit before taxation |
North America | Europe | Asia Pacific | Latin America and Caribbean | Africa | Corporate and other | Total | |
2025 | $ million | $ million | $ million | $ million | $ million | $ million | $ million |
Sales | |||||||
Net sales | |||||||
Cost of sales | ( | ( | ( | ( | ( | ( | ( |
Marketing | ( | ( | ( | ( | ( | ( | ( |
Other operating items | ( | ( | ( | ( | ( | ( | ( |
Operating profit before exceptional items | ( | ||||||
Exceptional operating items(1) | ( | ||||||
Operating profit | |||||||
Non-operating items | ( | ||||||
Net finance charges | ( | ||||||
Share of after-tax results of associates and joint ventures | |||||||
Profit before taxation |
North America | Europe | Asia Pacific | Latin America and Caribbean | Africa | Corporate and other | Total | |
2024 | $ million | $ million | $ million | $ million | $ million | $ million | $ million |
Sales | |||||||
Net sales | |||||||
Cost of sales | ( | ( | ( | ( | ( | ( | ( |
Marketing | ( | ( | ( | ( | ( | ( | ( |
Other operating items | ( | ( | ( | ( | ( | ( | ( |
Operating profit before exceptional items | ( | ||||||
Exceptional operating items(1) | |||||||
Operating profit | |||||||
Non-operating items | ( | ||||||
Net finance charges | ( | ||||||
Share of after-tax results of associates and joint ventures | |||||||
Profit before taxation |
(1)For definition and details of exceptional items, see pages 153-155.
The group’s net finance charges are managed centrally and are not attributable to individual operating segments.
Approximately 37 % of annual net sales occurred in the last four months of calendar year 2025.
152 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
North America $ million | Europe $ million | Asia Pacific $ million | Latin America and Caribbean $ million | Africa $ million | Corporate and other(1) $ million | Total operating segments $ million | |
2026 | |||||||
Purchase of property, plant and equipment and computer software | |||||||
Depreciation and intangible asset amortisation | ( | ( | ( | ( | ( | ( | ( |
Impairment of associates and joint ventures | ( | ( | |||||
Exceptional accelerated depreciation and impairment of tangible assets | ( | ( | ( | ( | ( | ||
Exceptional impairment of intangible assets | ( | ( | ( | ( | |||
Exceptional impairment of associates and joint ventures | ( | ( | ( | ( | |||
2025 | |||||||
Purchase of property, plant and equipment and computer software | |||||||
Depreciation and intangible asset amortisation | ( | ( | ( | ( | ( | ( | ( |
Exceptional accelerated depreciation and impairment of tangible assets | ( | ( | ( | ( | ( | ||
Exceptional impairment of intangible assets | ( | ( | ( | ||||
Exceptional impairment of associates and joint ventures | ( | ( | ( | ( | |||
2024 | |||||||
Purchase of property, plant and equipment and computer software | |||||||
Depreciation and intangible asset amortisation | ( | ( | ( | ( | ( | ( | ( |
Impairment of intangible assets | ( | ( | |||||
Exceptional accelerated depreciation and impairment of tangible assets | ( | ( | ( | ( | |||
Exceptional impairment of intangible assets | ( | ( |
(1)Purchase of property, plant and equipment and computer software in respect of SC&P are included in the Corporate and other operating segment.
Category analysis | Geographic analysis | |||||||||
Spirits $ million | Beer $ million | Ready-to-drink $ million | Other $ million | Total $ million | United States $ million | India $ million | Great Britain $ million | Rest of World $ million | Total $ million | |
2026 | ||||||||||
Sales(1) | ||||||||||
Non-current assets(2), (3) | ||||||||||
2025 | ||||||||||
Sales(1) | ||||||||||
Non-current assets(2), (3) | ||||||||||
2024 | ||||||||||
Sales(1) | ||||||||||
Non-current assets(2), (3) | ||||||||||
(1)The geographical analysis of sales is based on the location of third-party customers.
(2)The geographical analysis of non-current assets is based on the geographical location of the assets and comprises intangible assets, property, plant and equipment, biological assets,
investments in associates and joint ventures, other investments and non-current other receivables.
153 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Accounting policies | ||
Exceptional items are those that in management’s judgement need to be disclosed separately. Such items are included in the income statement caption to which they relate, and form part of the segmental information included in note 2. Management believes that separate disclosure of exceptional items and the classification between operating and non- operating further helps investors to understand the performance of the group. Changes in estimates and reversals in relation to items previously recognised as exceptional are presented consistently as exceptional in the current year. | ||
Operating items | ||
Exceptional operating items are those that are unusual or non-recurring in nature, considered to be of a size that could distort the performance and are part of the operating activities of the group, such as one-off global restructuring programmes which can be multi-year, impairment of intangible assets and fixed assets, indirect tax settlements, property disposals and changes in post-employment plans. | ||
Non-operating items | ||
Gains and losses on the sale or directly attributable to a prospective sale of businesses, brands or distribution rights, step up gains and losses that arise when an investment becomes an associate or an associate becomes a subsidiary and unusual non-recurring items, that are considered to be of a size that could distort performance and not in respect of the production, marketing and distribution of premium drinks, are disclosed as exceptional non-operating items below operating profit in the income statement. | ||
Exceptional finance income/charge | ||
Exceptional finance incomes/charges are those that are unusual or non- recurring in nature, considered to be of a size that could distort the performance and are part of the financing activity of the group. | ||
Taxation items | ||
Exceptional current and deferred tax items comprise unusual or non- recurring items, that are considered to be of a size that could distort performance. Examples include direct tax provisions and settlements in respect of prior years and the remeasurement of deferred tax assets and | ||
2026 $ million | 2025 $ million | 2024 $ million | |
Exceptional operating items | |||
Impairment (charge)/income and other related charges (1) | ( | ( | |
Restructuring programmes (2) | ( | ( | ( |
Distribution model changes in various countries (3) | ( | ( | — |
Discretionary increase in pension benefits in Ireland (4) | ( | — | — |
Various dispute and litigation matters (5) | ( | ( | ( |
USVI cover-over (6) | ( | ||
( | ( | ||
Exceptional non-operating items | |||
Sale of businesses and brands | |||
Seychelles Breweries Limited (7) | ( | ||
Guinness Ghana Breweries PLC (8) | ( | ( | |
Sheridan's brand (9) | — | — | |
East African Breweries PLC and the Kenyan spirits business prospective sale (10) | ( | — | — |
Santa Vittoria (11) | ( | ( | |
Cîroc LLC (12) | ( | ( | |
Royal Challengers Sports Pvt Ltd prospective sale (13) | ( | — | — |
Guinness Nigeria PLC (14) | ( | ( | |
Joint operations (15) | ( | ( | |
Pampero brand (16) | ( | ||
Windsor business (17) | ( | ( | |
Cacique brand (18) | ( | ||
Safari brand (19) | |||
Guinness Cameroun S.A. (20) | ( | ( | |
Step acquisitions (21) | — | — | |
Other (22) | |||
( | ( | ||
Exceptional finance income | |||
Borrowing costs capitalised (23) | |||
Exceptional items before taxation | ( | ( | ( |
Tax on exceptional items (note 7(c)) | ( | ||
Total exceptional items | ( | ( | ( |
Attributable to: | |||
Equity shareholders of the parent company | ( | ( | ( |
Non-controlling interests | ( | ( | |
Total exceptional items | ( | ( | ( |
(1) In the year ended 30 June 2026, an impairment charge of $786 million in
respect of the Türkiye cash-generating unit that included the goodwill from the
Mey İçki acquisition and several brands, $287 million in respect of the Don
Papa brand, $44 million in respect of the Aviation American Gin brand and
$41 million in respect of the Ypióca brand and related fixed assets were
recognised in exceptional operating items. In addition, an impairment charge of
$138 million in respect of various brands sold predominantly in the US and
$190 million in respect of various other US tangible fixed assets and inventories
were also recognised in exceptional operating items.
In the year ended 30 June 2026, further impairment charge of $65 million in
respect of Diageo's investment in various Distill Ventures businesses was offset
by the discharge of liabilities provided for in the year ended 30 June 2025,
resulting in a net charge of $3 million. Given the original impairment and other
related charges of $458 million were recognised in exceptional operating items
in the year ended 30 June 2025, the change in liabilities and additional charge
are also classified as exceptional.
154 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
In the year ended 30 June 2025, an impairment charge of $231 million in
respect of the Aviation American Gin brand and tangible fixed assets,
$170 million in respect of various other US brands, tangible fixed assets and
inventory and $51 million in respect of the Bell’s whisky brand were recognised
in exceptional operating items.
For further information, see note 9(d).
In the year ended 30 June 2024, a net gain of $224 million was recognised in
exceptional operating items, driven by the reversal of Shui Jing Fang brand
impairment of $379 million, partially offset by an impairment charge of
$101 million in respect of the Chase brand and the related goodwill and tangible
fixed assets, and an impairment charge of $54 million in respect of certain
brands in the US ready-to-drink portfolio.
(2) In the year ended 30 June 2026, an exceptional charge of $908 million was
accounted for in respect of Diageo's restructuring programmes (2025 – $225
million; 2024 – $61 million). In June 2026, Diageo launched the
implementation of its new operating framework that redesigns the company to
be simpler, faster and more competitive by creating clearer accountabilities,
stronger market execution, tighter global support and one joined-up team. The
Accelerate restructuring programme (that also includes the supply chain agility
programme) was announced in May 2025 aiming to create a more agile global
operating model with cash delivery, cost savings and deleveraging targets. The
implementation costs of the restructuring programmes comprise non-cash items
and one-off expenses, the majority of which are expected to be recognised as
exceptional operating items. The exceptional charge in respect of the
restructuring programmes for the year ended 30 June 2026 mainly included
severance costs of $514 million (2025 – $73 million; 2024 – $nil) in respect of
the Europe, Corporate and other regions, impairment of property, plant and
equipment and other intangibles of $263 million (2025 – $117 million; 2024 –
$3 million) in North America and Mexico. In the year ended 30 June 2026, cash
expenditure in respect of restructuring was $156 million (2025 – $38 million;
2024 – $26 million).
(3) In the year ended 30 June 2026, an exceptional operating charge of
$75 million was accounted for in respect of the transformation of Diageo's
distribution model in Japan, Singapore and Thailand as the company agreed
with LVMH to terminate the existing distribution agreements for Diageo's
brands.
In the year ended 30 June 2025, Diageo completed the transformation of its
distribution model in France as the company agreed with LVMH to exit from
their joint operation and to terminate the existing distribution agreements for
Diageo brands. As a result, an exceptional operating charge of $145 million was
accounted for, mainly in relation to a termination fee paid to LVMH.
(4) In the year ended 30 June 2026, Diageo agreed with the trustee of the
Guinness Ireland Group Pension Scheme to provide a one-off discretionary
increase in pension benefits to pensioners. The increase resulted in a charge of
$38 million in past service costs and was accounted for as an exceptional
operating item.
(5) In the year ended 30 June 2026, $17 million was recorded as an exceptional
operating charge in respect of ongoing litigation in Europe. In the year ended 30
June 2025, $51 million (2024 – $107 million) was recorded as an exceptional
operating charge in respect of various dispute and litigation matters in North
America and Europe, including certain costs and expenses associated therewith.
(6) Diageo receives cover-over income in relation to its rum production in the
US Virgin Islands. The cover-over is based on a permanent standard rate and an
additional extender rate. A law made the extender rate permanent but no
retrospective approval was granted for the period after 31 December 2021. As a
result, Diageo reversed accrued income of $38 million in respect of prior years
as an exceptional operating item in the year ended 30 June 2025.
(7) On 1 July 2025, Diageo completed the sale of its 54.4 % shareholding in
Seychelles Breweries Limited to Phoenix Beverages. The transaction resulted in
a gain of $62 million in the year ended 30 June 2026. In the year ended 30 June
2025, $4 million in transaction costs were incurred in respect of the prospective
sale.
(8) On 3 July 2025, Diageo completed the sale of its 80.4 % shareholding in
Guinness Ghana Breweries PLC, its brewery in Ghana to the Castel Group
and a non-operating charge of $49 million incurred in the year ended 30 June
2026, including cumulative translation losses of $94 million and
hyperinflationary adjustment gain of $22 million recycled to the income
statement. In the year ended 30 June 2025, a charge of $114 million was
recognised attributable to the prospective sale.
(9) On 30 January 2026, Diageo completed the sale of the Sheridan’s brand and
related inventory to Casa Redondo. The transaction resulted in a non-operating
exceptional gain of $46 million in the year ended 30 June 2026.
(10) On 17 December 2025, Diageo announced the sale of its shareholding in
East African Breweries PLC and its shareholding in the Kenyan spirits business,
to Asahi Group Holdings, Ltd. and a non-operating charge of $43 million
attributable to the prospective sale was recognised in the year ended 30 June
2026.
(11) On 30 September 2025, Diageo completed the sale of Diageo Operations
Italy S.p.A., inclusive of the Santa Vittoria production facility, to NewPrinces
S.p.A. and recognised a non-operating loss of $7 million on the sale. In the year
ended 30 June 2025, a non-operating charge of $29 million was recognised in
relation to the prospective sale.
(12) In the year ended 30 June 2025, Diageo and Main Street Advisors, Inc.
(MSA) announced that they entered into a strategic contractual arrangement,
where Diageo contributed its ownership in Cîroc LLC, owner of the Cîroc IP
and distribution right for North America, while MSA contributed Lobos LLC,
owner of the Lobos 1707 premium tequila brand, into the newly formed
structure. As a result, Diageo lost the control over Cîroc LLC and accounts for
its investment in Cîroc LLC and Lobos LLC as associates. In the year ended 30
June 2026, the transaction resulted in a $5 million (2025 – $11 million) of non-
operating exceptional loss.
(13) On 24 March 2026, Diageo announced the sale of United Spirits Limited's
shareholding in Royal Challengers Sports Pvt Limited and a charge of
$3 million was recognised as a non-operating item, mainly in relation to
transaction and other costs directly attributable to the prospective sale of the
business.
(14) In the year ended 30 June 2026, Diageo recognised a gain of $2 million
(2025 – loss of $125 million, 2024 – loss of $6 million) in exceptional non-
operating items attributable to the sale of its shareholding in Guinness Nigeria
PLC to Tolaram, completed on 30 September 2024.
(15) In the year ended 30 June 2026, an exceptional charge of $2 million
attributable to Diageo's prospective exits from its joint operations with LVMH
in Japan and Singapore was recognised.
In the year ended 30 June 2025, an exceptional loss of $5 million was recorded
in relation to the disposal of Diageo's share in its joint operation with LVMH in
France.
(16) In the year ended 30 June 2025, an exceptional gain of $53 million was
accounted for in relation to the disposal of the Pampero brand to Gruppo
Montenegro. In the year ended 30 June 2026, additional transaction costs of
$1 million have been accounted for in relation to the disposal.
(17) In the year ended 30 June 2026, a charge of $1 million (2025 – gain of
$4 million, 2024 – loss of $58 million) was recognised in exceptional non-
operating items attributable to the sale of Windsor Global Co., Ltd. to PT W
Co., Ltd., completed on 27 October 2023.
(18) In the year ended 30 June 2025, an exceptional loss of $20 million was
recorded in relation to the disposal of the Cacique brand to Bardinet S.A.
(19) In the year ended 30 June 2025, an exceptional gain of $15 million was
recorded in relation to the disposal of the Safari brand to Casa Redondo.
(20) In the year ended 30 June 2025, a charge of $8 million (2024 –
$10 million) directly attributable to the disposal of Guinness Cameroun S.A. to
the Castel Group has been accounted for.
(21) In the year ended 30 June 2025, Diageo completed the acquisition of (i) the
entire issued share capital of Ritual Beverage Company LLC (owner of Ritual
Zero Proof non-alcoholic spirits brand), that it did not already own, resulting in
a step up gain of $25 million and (ii) a controlling stake in Nao Spirits &
Beverages Private Limited, resulting in a step up loss of $1 million, both
recognised in non-operating exceptional items.
(22) In the year ended 30 June 2026, the net gain of $7 million in other
exceptional non-operating items includes a gain of $4 million on the sale of
investments in various Distill Ventures businesses and a gain of $3 million on
the disposal of the UDL and Ruski RTD brands to Bickford's Australia Pty Ltd.,
completed on 1 October 2025.
In the year ended 30 June 2024, other exceptional non-operating items included
subsequent gains and charges of items that were originally recognised as
exceptional at inception and resulted in a net gain of $4 million, mainly driven
by of the sale of Popular brands of the United Spirits Limited (USL) business.
155 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
(23) In the year ended 30 June 2025, the group capitalised borrowing costs of
$58 million in respect of purchases of property, plant, equipment and computer
software in prior years.
For further information on acquisition and sale of businesses and brands, see
notes 8(a) and 8(b).
Cash payments and receipts included in net cash inflow from operating
activities in respect of exceptional items were as follows:
2026 $ million | 2025 $ million | 2024 $ million | |
Restructuring programme | ( | ( | ( |
Distribution termination fee | ( | ( | ( |
Distill Ventures exits | ( | ( | |
Thalidomide (note 15(d)) | ( | ( | ( |
Litigation | ( | ( | ( |
Winding down Russian operations | ( | ||
Total cash payments | ( | ( | ( |
The composition of operating costs for the three years ended 30 June 2026 is set
out in the table below:
2026 $ million | 2025 $ million | 2024 $ million | |
Excise duties | |||
Increase in inventories | ( | ( | ( |
Raw materials and consumables | |||
Marketing | |||
Other external charges | |||
Staff costs | |||
Depreciation, amortisation and impairment | |||
(Gains)/losses on disposal of properties | ( | ( | |
Net foreign exchange losses | |||
Other operating income | ( | ( | ( |
Other external charges mainly include distribution and warehousing costs,
utilities, other personnel costs not included in staff costs (e.g. travel,
entertainment or relocation cost), professional services costs, system and IT
costs, facilities costs, maintenance and repairs, research and development costs
and low value or short-term lease rental costs. Included in other external
charges, research and development expenditure in respect of new drinks
products and package design were $71 million (2025 – $74 million; 2024 – $69
million) and maintenance and repairs were $181 million (2025 – $179 million;
2024 – $171 million).
Other external charges include the fees of the principal auditor of the group,
PricewaterhouseCoopers LLP, and its affiliates (PwC) and are analysed below:
2026 $ million | 2025 $ million | 2024 $ million | |
Audit of these financial statements(1) | |||
Audit of financial statements of subsidiaries | |||
Total audit fees | |||
Audit related assurance services(2) | |||
Other assurance services(3) | |||
(1)For the year ended 30 June 2026, in respect of reporting under section 404 of the US
Sarbanes-Oxley Act is reported on the line of ‘Audit of these financial statements'.
(2)Audit related assurance services are in respect of the interim review and other audit-
related services over financial information.
(3)Other assurance services comprise the aggregate fees for assurance and related
services that are not reported under ‘total audit fees’.
Under SEC regulations, the auditors' fees of $16.3 million (2025 - $18.8
million, 2024 - $18.0 million) is required to be presented as follows: audit fee of
$15.1 million (2025 - $18.0 million, 2024 - $17.0 million) and other audit
Audit services provided by firms other than PwC for the year ended 30 June
2026 were $2.9 million (2025 – $0.5 million; 2024 – $0.1 million). Further PwC
fees for audit services in respect of post-employment plans were $0.6 million
for the year ended 30 June 2026 (2025 – $0.6 million; 2024 – $0.4 million).
2026 $ million | 2025 $ million | 2024 $ million | |
Aggregate remuneration | |||
Wages and salaries | |||
Share-based incentive plans | |||
Employer’s social security | |||
Employer’s pension | |||
Defined benefit plans | |||
Defined contribution plans | |||
Other post-employment plans | |||
employees of associates and joint ventures) was as follows:
2026 | 2025 | 2024 | |
North America | |||
Europe | |||
Asia Pacific | |||
Latin America and Caribbean | |||
Africa | |||
SC&P | |||
Corporate and other | |||
At 30 June 2026, on a full-time equivalent basis, the group had 27,972 (2025 –
group, including part-time employees, for the year was 28,400 (2025 – 30,232 ;
2024 – 30,839 ).
156 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Included in the table above are exceptional operating items as follows:
2026 $ million | 2025 $ million | 2024 $ million | |
Depreciation, amortisation and impairment | |||
Brand, goodwill, other intangibles, investments in associates and other investments impairment charges/(income) | ( | ||
Tangible asset impairment and accelerated depreciation | |||
Staff costs | |||
Other external charges | |||
Other operating income | ( | ||
Total exceptional operating items (note 3) | ( | ||
Cost of sales | |||
Other operating expenses/(income) | ( |
Accounting policies | ||
Net interest includes interest income and charges in respect of financial instruments and the results of hedging transactions used to manage interest rate risk. Finance charges directly attributable to the acquisition, construction or production of a qualifying asset, being an asset that necessarily takes a substantial period of time to get ready for its intended use or sale, are added to the cost of that asset. Borrowing costs which are not capitalised are recognised in the income statement using the effective interest method. All other finance charges are recognised primarily in the income statement in the year in which they are incurred. Net other finance charges include items in respect of post- employment plans, the discount unwind of long-term obligations and hyperinflation charges. The results of operations in hyperinflationary economies are adjusted to reflect the changes in the purchasing power of the local currency of the entity before being translated to US dollar. The impact of derivatives, excluding cash flow hedges that are in respect of commodity price risk management or those that are used to hedge the currency risk of highly probable future currency cash flows, is | ||
2026 $ million | 2025 $ million | 2024 $ million | |
Interest income | |||
Fair value gain on financial instruments | |||
Total interest income(1) | |||
Interest charge on bonds, bank loans and overdrafts | ( | ( | ( |
Interest charge on finance leases | ( | ( | ( |
Borrowing costs capitalised(2) | |||
Borrowing costs capitalised - exceptional item(3) | |||
Other interest charges | ( | ( | ( |
Fair value loss on financial instruments | ( | ( | ( |
Total interest charges(1) | ( | ( | ( |
Net interest charges | ( | ( | ( |
Net finance income in respect of post- employment plans in surplus (note 14) | |||
Monetary gain on hyperinflation in various economies (note 1(f)) | |||
Interest income in respect of direct and indirect tax | |||
Change in financial liability — Zacapa (Level 3) | |||
Other finance income | |||
Total other finance income | |||
Net finance charge in respect of post- employment plans in deficit (note 14) | ( | ( | ( |
Monetary loss on hyperinflation in various economies (note 1(f)) | ( | ||
Interest charge in respect of direct and indirect tax | ( | ( | ( |
Unwinding of discounts | ( | ( | ( |
Change in financial liability — Zacapa (Level 3) | ( | ||
Other finance charges | ( | ( | ( |
Total other finance charges | ( | ( | ( |
Net other finance charges | ( |
(1)Includes $145 million interest income and $883 million interest charge in respect of
financial assets and liabilities that are not measured at fair value through profit or loss
(2025 – $101 million income and $854 million charge; 2024 – $59 million income and
$765 million charge).
(2)Forecast effective interest rate for the year of 4.0 % has been used for capitalisation
(2025 - 4.1 %).
(3)Cumulative impact of prior years' unrecognised borrowing costs reclassified to
qualifying assets.
157 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Accounting policies | ||
An associate is an undertaking in which the group has a long-term equity interest and over which it has the power to exercise significant influence. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. The group’s interest in the net assets of associates and joint ventures is reported in investments in the consolidated balance sheet and its interest in their results (net of tax) is included in the consolidated income statement below the group’s operating profit. Associates and joint ventures are initially recorded at cost including transaction costs, and the group's share of post-acquisition changes in the investee's reserves are recognised under the equity method. Investments in associates and joint ventures acquired prior to 1 July 1998 comprise the cost of shares less goodwill written off to reserves that has not been reinstated, plus the group’s share of post-acquisition reserves. Investments in associates and joint ventures are reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. Impairment reviews compare the net carrying value to the recoverable amount (where the recoverable amount is the higher of fair value less costs of disposal and value in use). Where the carrying value exceeds the recoverable amount, an impairment charge is recognised. Critical accounting estimates and judgements Assessment of the recoverable amount of investments in associates and joint ventures are based on management’s estimates. Impairment reviews are carried out to ensure that the group’s investments in associates and joint ventures are not carried above their recoverable amount. Value in use and fair value less costs of disposal are both considered as part of these reviews and any impairment charge is based on these. Value in use is determined using management’s estimates of forecast future cash flows, discount rates and long-term growth rates. Fair value less cost of disposal is determined using different assumptions, which may include quoted market prices, market capitalisations, valuation multiples for comparable companies applied to earnings, discounted cash flows, recent market transactions and other relevant market information. Such estimates and judgements are subject to change as a result of changing economic conditions and actuals may differ from forecasts. | ||
Diageo’s principal associate is Moët Hennessy of which Diageo owns 34 %
through two legal entities; Moët Hennessy, SAS and Moët Hennessy
International. Moët Hennessy is the wines and spirits division of LVMH Moët
Hennessy Louis Vuitton SA (LVMH). LVMH is based in France and is listed
on the Paris Stock Exchange. Moët Hennessy is also based in France and is a
producer and exporter of champagne and cognac brands.
A number of joint distribution arrangements have been established with
LVMH in Asia Pacific, principally covering distribution of Diageo’s
premium scotch and gin brands and Moët Hennessy’s premium champagne
and cognac portfolio. Diageo has undertaken not to engage in any
champagne or cognac activities competing with those of Moët Hennessy.
The arrangements also contain certain provisions for the protection of
Diageo as a non-controlling shareholder in Moët Hennessy.
Joint distribution agreements were previously in place in France, Japan,
Singapore and Thailand. Diageo terminated the distribution agreements for all
the remaining Diageo brands in France effective 1 January 2025, and in Japan,
Singapore and Thailand effective 1 July 2026.
joint ventures is as follows:
Moët Hennessy $ million | Others $ million | Total $ million | |
Cost less provisions | |||
At 30 June 2024 | |||
Exchange differences | |||
Additions | |||
Share of profit/(loss) after tax | ( | ||
Step acquisition | ( | ( | |
Dividends | ( | ( | ( |
Share of movements in other comprehensive income and equity | |||
Impairment charged during the year | ( | ( | |
Transfer from other investments | |||
At 30 June 2025 | |||
Exchange differences | ( | ( | ( |
Additions | |||
Share of profit/(loss) after tax | ( | ||
Dividends | ( | ( | ( |
Share of movements in other comprehensive income and equity | ( | ( | |
Impairment charged during the year | ( | ( | |
Transfer to other investments | ( | ( | |
At 30 June 2026 |
Investment in associates includes loans given to and preference shares invested
Impairment testing for the year ended 30 June 2026 has identified Diageo’s
investment in Moët Hennessy as being sensitive to reasonably possible changes
in assumptions. The recoverable amount was estimated based on fair value less
cost of disposal. A decrease of 1.0x in the EBITDA multiple would result in an
impairment charge of $312 million. Similarly, a 10% decrease in EBITDA
would also result in an impairment charge of $388 million.
Following a strategic review in March 2025, Diageo decided it would no longer
be bringing any new brands into the Distill Ventures programme and to exit
several businesses, resulting in an impairment charge of $308 million in
exceptional operating items in the year ended 30 June 2025. As part of the exit
process from Distill Ventures, in the year ended 30 June 2026, Diageo provided
additional operational funding to these investments amounting to $25 million
which has been fully impaired.
(b) Moët Hennessy prepares its financial statements under IFRS as endorsed by
the EU in euros to 31 December each year. The results were adjusted for
alignment with Diageo accounting policies and were translated at $1 = €0.86
(2025 – $1 = €0.92 ; 2024 – $1 = €0.93 ).
balance sheet information as at 30 June 2026 and 30 June 2025 of Moët
Hennessy are as follows:
2026 $ million | 2025 $ million | 2024 $ million | |
Sales | |||
Profit for the year | |||
Total comprehensive income |
2026 $ million | 2025 $ million | |
Non-current assets | ||
Current assets | ||
Total assets | ||
Non-current liabilities | ( | ( |
Current liabilities | ( | ( |
Total liabilities | ( | ( |
Net assets |
Including acquisition fair value adjustments principally in respect of Moët
(c) Information on transactions between the group and its associates and joint
ventures is disclosed in note 21.
(d) The associates and joint ventures have not reported any material contingent
158 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Accounting policies | ||
Current tax is based on taxable profit for the year. Taxable profit is different from accounting profit due to temporary differences between accounting and tax treatments, and due to items that are never taxable or tax deductible. Tax treatments are not recognised unless it is probable that a tax authority will accept the treatment. Once considered to be probable, tax treatments are reviewed each year to assess whether a provision should be taken against full recognition of the treatment on the basis of potential settlement through negotiation and/or litigation with the relevant tax authorities. Tax provisions are included in current liabilities. Penalties and interest on tax liabilities are included in operating profit and finance charges, respectively. Full provision for deferred tax is made for temporary differences between the carrying value of assets and liabilities for financial reporting purposes and their value for tax purposes, except for deferred tax provision arising on goodwill from business combinations. The amount of deferred tax reflects the expected recoverable amount and is based on the expected manner of recovery or settlement of the carrying amount of assets and liabilities, using the basis of taxation enacted or substantively enacted by the balance sheet date. Deferred tax assets are not recognised where it is more likely than not that the assets will not be realised in the future. No deferred tax liability is provided in respect of any future remittance of earnings of foreign subsidiaries where the group is able to control the remittance of earnings and it is probable that such earnings will not be remitted in the foreseeable future, or where no liability would arise on the remittance. | ||
Critical accounting estimates and judgements | ||
The group is required to estimate the corporate tax in each of the jurisdictions in which it operates. Management is required to estimate the amount that should be recognised as a tax liability or tax asset in many countries which are subject to tax audits which by their nature are often complex and can take several years to resolve; current tax balances are based on such estimations. Tax provisions are based on management’s judgement and interpretation of country specific tax law and the likelihood of settlement. However, the actual tax liabilities could differ from the provision and in such event the group would be required to make an adjustment in a subsequent period which could have a material impact on the group’s profit for the year. The evaluation of deferred tax asset recoverability requires estimates to be made regarding the availability of future taxable income. For brands with an indefinite life, management’s intention is to recover the book value through a potential sale in the future, and therefore the deferred tax on the brand value is generally recognised using the appropriate country capital gains tax rate. To the extent brands with an indefinite life have been impaired, management considers this to be an indication of recovery through use and in such a case deferred tax on the brand value is recognised using the appropriate country corporate income tax rate. | ||
United Kingdom | Rest of world | Total | |||||||
2026 $ million | 2025 $ million | 2024 $ million | 2026 $ million | 2025 $ million | 2024 $ million | 2026 $ million | 2025 $ million | 2024 $ million | |
Current tax | |||||||||
Current year | |||||||||
Adjustments in respect of prior years | ( | ( | ( | ( | ( | ( | |||
Deferred tax | |||||||||
Origination and reversal of temporary differences | ( | ( | ( | ( | ( | ||||
Changes in tax rates | ( | ( | ( | ( | |||||
Adjustments in respect of prior years | ( | ( | ( | ||||||
( | ( | ( | ( | ( | |||||
Taxation on profit | |||||||||
2026 $ million | 2025 $ million | 2024 $ million | |
Tax on post-employment benefit plans | ( | ( | ( |
Tax relating to items that will not be recycled subsequently to the income statement | ( | ( | ( |
Tax on exchange differences | ( | ( | |
Changes in tax rates | ( | ||
Tax on effective portion of changes in fair value of cash flow hedges | ( | ( | |
Tax on hyperinflation adjustments | |||
Tax relating to items that may be recycled subsequently to the income statement | |||
159 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
The taxation charge includes the following exceptional items:
2026 $ million | 2025 $ million | 2024 $ million | |
Restructuring programmes(1) | ( | ( | ( |
Brand, goodwill and other assets impairment(2) | ( | ( | |
Distribution model change in various countries(3) | ( | ( | |
Discretionary increase in pension benefits in Ireland(4) | ( | ||
Disposal of businesses and brands(5) | ( | ||
Various dispute and litigation matters(6) | ( | ( | |
Borrowing costs capitalised(7) | |||
( | ( |
(1)In the year ended 30 June 2026, an exceptional tax credit of $213 million was recognised in respect of restructuring programmes.
(2)In the year ended 30 June 2026, impairment charges recognised within exceptional operating items resulted in exceptional tax credits of $187 million in respect of the Mey İçki goodwill
and several of its brands, $71 million in respect of Don Papa brand, $10 million in respect of Aviation American Gin brand, $7 million in respect of Ypióca brand and related fixed
assets, and $36 million in respect of various brands sold predominantly in the US and $45 million in respect of various other US tangible fixed assets and inventory. In the year ended 30
June 2025, exceptional tax credits were recognised in the amount of $30 million in respect of Distill Ventures, $55 million in respect of the Aviation American Gin brand and tangible
fixed assets, $40 million in respect of various US brands, tangible fixed assets and inventory and $13 million in respect of the Bell’s whisky brand. In the year ended 30 June 2024, an
exceptional tax charge of $95 million was recognised in relation to the reversal of the Shui Jing Fang brand impairment charge, partially offset by an exceptional tax credit of $19 million
in respect of the impairment of the Chase brand and the related tangible fixed assets and an exceptional tax credit of $13 million on brand impairments in the US ready-to-drink portfolio.
(3)In the year ended 30 June 2026, an exceptional tax credit of $19 million was recognised in respect of the transformation of Diageo's distribution model in Japan, Singapore and Thailand
as the company agreed with LVMH to terminate the existing distribution agreements for Diageo's brands. In the year ended 30 June 2025, an exceptional tax credit of $36 million was
recognised in respect of the transformation of the distribution model in France as the company agreed with LVMH to exist from their joint operation and to terminate the existing
distribution agreements for Diageo brands.
(4)In the year ended 30 June 2026, $5 million exceptional tax credit was recognised in respect of the one-off discretionary increase in pension benefits related to the Guinness Ireland Group
Pension Scheme.
(5)In the year ended 30 June 2026 the exceptional net tax charge of $18 million mainly comprised a tax charge of $16 million in respect of the sale of Sheridan's, and $5 million in respect
of the sale of Guinness Ghana Breweries PLC.
(6)In the year ended 30 June 2025, an exceptional tax credit of $12 million was recognised in respect of various dispute and litigation matters in North America and Europe, including
certain costs and expenses associated therewith. In the year ended 30 June 2024, an exceptional tax credit of $23 million was recorded in relation to various dispute and litigation matters
in North America, including certain costs and expenses associated therewith.
(7)In the year ended 30 June 2025, an exceptional tax charge of $15 million was recognised in relation to the capitalisation of borrowing costs on the purchase of property, plant, equipment
and computer software in the prior years.
2026 $ million | 2026 % | 2025 $ million | 2025 % | 2024 $ million | 2024 % | |
Profit before taxation | ||||||
Share of after-tax results of associates and joint ventures | ||||||
Profit before taxation excluding share of after-tax results of associates and joint ventures | ||||||
Notional charge at UK corporation tax rate | ||||||
Differences in overseas tax rates | ( | ( | ( | ( | ( | ( |
Non-taxable gain on disposals of businesses | ( | ( | ||||
Disposal of businesses and brands | ||||||
Other items not chargeable | ( | ( | ( | ( | ( | ( |
Impairment | ||||||
Other items not deductible | ||||||
Irrecoverable withholding taxes | ||||||
Movement in provision in respect of uncertain tax positions(1) | ( | ( | ||||
Changes in tax rates | ( | ( | ( | |||
Adjustments in respect of prior years(2) | ( | ( | ||||
Taxation on profit / Reported tax rate | ||||||
Tax rate before exceptional items | — | — | — |
(1)Movement in provision in respect of uncertain tax positions includes both current and prior year uncertain tax position movements.
(2)Excludes prior year movement in provisions.
The table above reconciles the notional taxation charge calculated at the UK tax rate, to the actual total tax charge. As a group operating in multiple countries, the
actual tax rates applicable to profits in those countries are different from the UK tax rate. The impact is shown in the table above as differences in overseas tax rates.
The group’s worldwide business leads to the consideration of a number of important factors which may affect future tax charges, such as the levels and mix of
profitability in different jurisdictions, transfer pricing regulations, tax rates imposed and tax regime reforms, acquisitions, disposals, restructuring activities, and
settlements or agreements with tax authorities.
Significant ongoing changes in the international tax environment and an increase in global tax audit activity mean that tax uncertainties and associated risks have been
gradually increasing. In the medium-term, these risks could result in an increase in tax liabilities or adjustments to the carrying value of deferred tax assets and
liabilities. See note 19(f).
160 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
The group has a number of ongoing tax audits worldwide for which provisions are recognised in line with the relevant international accounting standard, taking into
account best estimates and management’s judgements concerning the ultimate outcome of the tax audits. For the year ended 30 June 2026, ongoing audits that are
provided for individually are not expected to result in a material tax liability. The current tax asset of $244 million (30 June 2025 – $354 million) and tax liability of
$207 million (30 June 2025 – $138 million) include $213 million (30 June 2025 – $217 million) of provisions for tax uncertainties.
The cash tax paid in the year ended 30 June 2026 amounts to $817 million (30 June 2025 – $1,114 million) and is $199 million lower than the current tax charge (30
June 2025 – $11 million higher). This arises as a result of timing differences between the accrual of income taxes, the movement in the provision for uncertain tax
positions, the actual payment of cash and refund of the deposit payments.
The Pillar Two rules implemented in the United Kingdom apply to Diageo from the financial year ended 30 June 2025. Diageo is continuously monitoring the
implementation and development of the rules around the world. Diageo has applied the temporary exemption under IAS 12 in relation to the accounting for deferred
taxes arising from the implementation of the rules. A current tax expense of $13 million (2025 - $7 million) as a result of the Pillar Two rules has been included in the
total tax charge for the year ended 30 June 2026.
Deferred tax recognised in the consolidated balance sheet comprise the following net deferred tax (liabilities)/assets:
Property, plant and equipment $ million | Intangible assets $ million | Post-employment plans $ million | Tax losses $ million | Other temporary differences(1) $ million | Total $ million | |
At 30 June 2024 | ( | ( | ( | ( | ||
Exchange differences | ( | ( | ( | ( | ||
Recognised in income statement | ( | ( | ||||
Recognised in other comprehensive income and equity | ( | ( | ( | ( | ||
Tax rate change – recognised in income statement | ( | ( | ( | |||
Transfer from assets held for sale | ( | ( | ||||
At 30 June 2025 | ( | ( | ( | ( | ||
Exchange differences | ( | |||||
Recognised in income statement | ( | |||||
Recognised in other comprehensive income and equity | ( | ( | ( | ( | ||
Tax rate change – recognised in income statement | ( | ( | ( | |||
Tax rate change – recognised in other comprehensive loss and equity | ||||||
Acquisition | ( | ( | ||||
Transfer to assets held for sale | ( | ( | ||||
At 30 June 2026 | ( | ( | ( | ( |
(1)Deferred tax on other temporary differences includes hyperinflation, fair value movement on cross-currency swaps, interest and finance costs, share-based payments and intra-group sales
the same taxation authority on the same taxable fiscal unit, the net deferred tax
liability comprises:
2026 $ million | 2025 $ million | |
Deferred tax assets | ||
Deferred tax liabilities | ( | ( |
( | ( |
Deferred tax assets of $173 million include $73 million (2025 – $76 million)
arising in jurisdictions with prior year taxable losses. The majority of the asset
is in respect of Brazil, Germany and Mexico. It is considered more likely than
not that there will be sufficient future taxable profits to realise these deferred tax
assets, which for the most part arose on losses from a historic one-off
transaction. The majority of deferred tax assets can be carried forward
indefinitely. From the total recognised tax losses of $57 million, it is expected
that $10 million will be utilised in the year ending 30 June 2027.
(f) Unrecognised deferred tax assets
The following table shows the tax value of tax losses which has not been
recognised due to uncertainty over their utilisation in future periods. The gross
value of those losses is $699 million (2025 – $741 million).
2026 $ million | 2025 $ million | |
Capital losses – indefinite | ||
Trading losses – indefinite | ||
Trading and capital losses – expiry dates up to 2031 | ||
Additionally, no deferred tax asset has been recognised in respect of certain
temporary differences arising from brand valuations, as the group is not
planning to sell those brands, thus the benefit from the temporary differences is
unlikely to be realised.
(g) Unrecognised deferred tax liabilities
Relevant legislation largely exempts overseas dividends remitted from tax. A
tax liability is more likely to arise in respect of withholding taxes levied by the
overseas jurisdiction. Deferred tax is provided where there is an intention to
distribute earnings, and a tax liability arises. It is impractical to estimate the
amount of unrecognised deferred tax liabilities in respect of these unremitted
earnings.
The aggregate amount of temporary differences in respect of investments in
subsidiaries, branches, interests in associates and joint ventures for which
deferred tax liabilities have not been recognised is approximately $22.4 billion
161 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Introduction
This section describes the assets used in the group’s operations and the liabilities incurred. Liabilities relating to the group’s financing activities are included in section
‘Risk management and capital structure’ and balance sheet information in respect of associates, joint ventures and taxation are covered in section ‘Results for the
year’. This section also provides detailed disclosures on the group’s recent acquisitions and disposals, performance and financial position of its defined benefit post-
employment plans.
Accounting policies | ||
The consolidated financial statements include the results of the company and its subsidiaries together with the group’s attributable share of the results of associates and joint ventures. The results of subsidiaries acquired or sold are included in the income statement from, or up to, the date that control passes. Business combinations are accounted for using the acquisition method. Identifiable assets, liabilities and contingent liabilities acquired are measured at fair value at acquisition date. The consideration payable is measured at fair value and includes the fair value of any contingent consideration. Among other factors, the group considers the nature of, and compensation for the selling shareholders' continuing employment to determine if any contingent payments are for post- combination employee services, which are excluded from consideration. On the acquisition of a business, or of an interest in an associate or joint venture, fair values, reflecting conditions at the date of acquisition, are attributed to the net assets, including identifiable intangible assets and contingent liabilities acquired. Directly attributable acquisition costs in respect of subsidiary companies acquired are recognised in other external charges as incurred. The non-controlling interests on the date of acquisition can be measured either at the fair value or at the non-controlling shareholder’s proportion of the net fair value of the identifiable assets assumed. This choice is made separately for each acquisition. Where the group has issued a put option over shares held by a non-controlling interest, the group derecognises the non-controlling interests and instead recognises a contingent deferred consideration liability for the estimated amount likely to be paid to the non-controlling interest on the exercise of those options. Movements in the estimated liability in respect of put options are recognised in retained earnings. Transactions with non-controlling interests are recorded directly in retained earnings. For all entities in which the company directly or indirectly owns equity, a judgement is made to determine whether it controls and therefore should fully consolidate the investee. An assessment is carried out to determine whether the group has the exposure or rights to the variable returns of the investee and has the ability to affect those returns through its power over the investee. To establish control, an analysis is carried out of the substantive and protective rights that the group and the other investors hold. This assessment is dependent on the activities and purpose of the investee and the rights of the other shareholders, such as which party controls the board, executive committee and material policies of the investee. Determining whether the rights that the group holds are substantive, requires management judgement. Where less than 50% of the equity of an investee is held, and the group holds significantly more voting rights than any other vote holder or organised group of vote holders, this may be an indicator of de facto control. An assessment is needed to determine all the factors relevant to the relationship with the investee to ascertain whether control has been established and whether the investee should be consolidated as a subsidiary. Where voting power and returns from an investment are split equally between two entities then the arrangement is accounted for as a joint venture. | ||
162 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
(a) Acquisition of businesses
Net assets acquired and consideration | |||
2026 $ million | 2025 $ million | 2024 $ million | |
Brands and other intangibles | |||
Property, plant and equipment | |||
Inventories | |||
Other working capital | |||
Deferred tax | ( | ||
Borrowings | ( | ||
Cash | |||
Fair value of assets and liabilities | |||
Goodwill arising on acquisition | ( | ||
Non-controlling interests | ( | ||
Step acquisitions | ( | ||
Consideration payable | |||
Satisfied by: | |||
Cash consideration paid | ( | ||
Contingent consideration payable | ( | ||
Deferred consideration payable | ( | ||
( | |||
of shares of non-controlling interests in the three years ended 30 June 2026 were
as follows:
Consideration | |||
2026 $ million | 2025 $ million | 2024 $ million | |
Acquisitions in the year - subsidiaries | |||
Cash consideration paid | ( | ||
Cash acquired | |||
Prior year acquisitions - subsidiaries | |||
Other consideration | ( | ( | ( |
Investments in associates | |||
Cash consideration paid - increase in ownership interest | ( | ( | |
Capital injection(1) | ( | ( | ( |
Net cash outflow on acquisition of businesses | ( | ( | ( |
Purchase of shares of non-controlling interests | ( | ( | |
Total net cash outflow | ( | ( | ( |
(1)Additional investments in a number of Distill Ventures associates
In the year ended 30 June 2026, the changes in brands, goodwill, deferred tax
and non-controlling interests reflect the finalisation of the fair values of net
assets acquired on the acquisition of Nao Spirits & Beverages Private Limited in
June 2025.
Prior year acquisitions
On 24 September 2024, Diageo acquired the part of the entire issued share
capital of Ritual Beverage Company LLC (owner of Ritual Zero Proof non-
alcoholic spirits brand), that it did not already own.
On 19 June 2025, Diageo announced that it acquired a controlling stake in Nao
Spirits & Beverages Private Limited.
Purchase of shares of non-controlling interests
On 16 January 2024, Diageo agreed with Combs Wine and Spirits LLC to
purchase the 50 % of the share capital of DeLeon Holdco LLC that Diageo did
not already own for a total consideration of $223 million, including transaction
costs. The transaction was completed in fiscal 24 and Diageo is now the 100%
owner of the DeLeón brand.
Transactions were recognised in retained earnings.
163 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Diageo Operations Italy S.p.A. $ million | Other $ million | 2026 $ million | 2025 $ million | 2024 $ million | |
Sale consideration | |||||
Cash received | |||||
Cash disposed of | ( | ( | |||
Transaction and other directly attributable costs paid | ( | ( | ( | ( | ( |
Net cash received | |||||
Deferred consideration receivable | |||||
Investment in associates received | |||||
Transaction costs payable and other directly attributable items | ( | ( | ( | ||
Net (assets)/liabilities disposed of | |||||
Brands | ( | ( | |||
Other non-current assets | ( | ||||
Assets and liabilities held for sale | ( | ( | ( | ||
Inventories | ( | ( | |||
Other working capital | ( | ||||
Corporate tax | |||||
Deferred tax | |||||
( | ( | ( | ( | ( | |
Less non-controlling interest | ( | ||||
Hyperinflationary adjustment recycled from other comprehensive income | |||||
Impairment charge recognised for prospective sale of Guinness Ghana | ( | ||||
Exchange recycled from other comprehensive income | ( | ( | ( | ( | ( |
(Loss)/gain on disposal before taxation | ( | ( | ( | ||
Taxation | ( | ( | ( | ||
(Loss)/gain on disposal after taxation | ( | ( | ( | ( | ( |
Cash consideration received or paid in respect of the disposal of businesses and brands in the three years ended 30 June 2026 were as follows:
Diageo Operations Italy S.p.A. $ million | Other $ million | 2026 $ million | 2025 $ million | 2024 $ million | |
Net cash received as included in net cashflow from investing activities | |||||
Cash included in disposed assets and liabilities held for sale | ( | ( | ( | ||
Net cash flow from sale of businesses and brands | ( |
On 30 January 2026, Diageo completed the sale of the Sheridan’s brand and related inventory to Casa Redondo for a consideration of $48 million which resulted in a
non-operating exceptional gain before tax of $46 million.
On 17 December 2025, Diageo announced the sale of its shareholding in East African Breweries PLC and its shareholding in the Kenyan spirits business to Asahi
Group Holdings, Ltd. and a non-operating charge of $43 million attributable to the prospective sale was recognised in the year ended 30 June 2026.
On 30 September 2025, Diageo completed the sale of Diageo Operations Italy S.p.A., its manufacturing site in Italy to NewPrinces S.p.A. The aggregate consideration
for the disposal was $120 million, the disposed net assets of $144 million mainly included cash and cash equivalents. In the year ended 30 June 2026, the transaction
resulted in a non-operating exceptional loss of $7 million, including cumulative translation losses in the amount of $6 million recycled to the income statement.
On 3 July 2025, Diageo completed the sale of Guinness Ghana Breweries PLC, its brewery in Ghana, to the Castel Group. The aggregate consideration for the disposal
was $81 million, the disposed net assets of $64 million mainly included property, plant and equipment and trade and other payables. In the year ended 30 June 2026,
the transaction resulted in a non-operating exceptional loss before tax of $49 million, including cumulative translation losses of $94 million and hyperinflationary
adjustment gain of $22 million recycled to the income statement. The disposed Ghana operations contributed net sales of $nil (2025 – $322 million; 2024 –
$151 million), operating profit of $nil (2025 – $45 million; 2024 – loss of $5 million) in the year ended 30 June 2026.
On 1 July 2025, Diageo completed the sale of its shareholding in Seychelles Breweries Limited to Phoenix Beverages Limited. The aggregate consideration for the
disposal was $89 million, the disposed net assets of $32 million mainly included property, plant and equipment. In the year ended 30 June 2026, the transaction
resulted in a non-operating exceptional gain of $62 million, including cumulative translation losses of $8 million recycled to the income statement.
164 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
On 30 September 2024, Diageo completed the sale of its shareholding in Guinness Nigeria PLC to N-Seven Nigeria Ltd., part of the Tolaram group. The aggregate
consideration for the disposal was $64 million, the disposed net liabilities of $20 million mainly included trade and other payables and property, plant and equipment.
The transaction resulted in a non-operating exceptional loss before tax of $125 million, including cumulative translation losses in the amount of $175 million recycled
to the income statement. The disposed Nigeria operations contributed net sales of $65 million (2024 – $296 million; 2023 – $504 million), operating loss of
$10 million (2024 – $60 million; 2023 – $14 million) in the year ended 30 June 2025.
On 24 June 2025, Diageo announced the sale of Diageo Operations Italy S.p.A., inclusive of the Santa Vittoria production facility, to NewPrinces S.p.A. and a non-
operating charge of $29 million attributable to the prospective sale was recognised in the year ended 30 June 2025.
On 28 January 2025, Diageo announced the agreement to sell Guinness Ghana Breweries PLC, its brewery in Ghana to the Castel Group and a non-operating charge of
$114 million attributable to the prospective sale was recognised in the year ended 30 June 2025.
On 23 January 2025, Diageo sold the Cacique brand and related inventory to Bardinet S.A., a Spanish spirits company for a consideration of $68 million which
resulted in a non-operating exceptional charge before tax of $20 million.
On 15 October 2024, Diageo sold the Pampero brand and related inventory to Gruppo Montenegro, a leading Italian company in the premium spirits and food sectors,
for a consideration of $57 million which resulted in a non-operating exceptional gain before tax of $53 million.
On 19 September 2024, Diageo sold the Safari brand to Casa Redondo, a Portuguese beverage-alcohol company for a consideration of $16 million which resulted in a
non-operating exceptional gain before tax of $15 million.
On 27 October 2023, Diageo completed the sale of Windsor Global Co., Ltd. to PT W Co., Ltd., a Korean company sponsored by Pine Tree Investment &
Management Co., Ltd. for a total consideration of KRW 206 billion ($152 million). The transaction resulted in a loss of $58 million in the year ended 30 June 2024,
which was recognised as a non-operating item attributable to the sale, including cumulative translation losses in the amount of $26 million recycled to the income
statement.
2026 $ million | 2025 $ million | |
Intangible assets | ||
Property, plant and equipment | ||
Other financial assets | ||
Inventories | ||
Trade and other receivables | ||
Corporate tax receivables | ||
Cash | ||
Assets held for sale | ||
Trade and other payables | ( | ( |
Provisions | ( | |
Deferred tax liabilities | ( | ( |
Bank overdrafts | ( | |
Loans and leases | ( | ( |
Post-employment benefit liabilities | ( | |
Liabilities held for sale | ( | ( |
Total |
On 24 March 2026, Diageo announced the sale of United Spirits Limited's shareholding in Royal Challengers Sports Pvt Ltd to a consortium comprising the Aditya
Birla Group, The Times of India Group, Bolt Ventures and Blackstone. The sale was considered to be highly probable on 30 June 2026. Subject to regulatory
approvals, completion is expected in the year ending 30 June 2027. Consequently, the impacted assets and liabilities were classified as held for sale on 30 June 2026
and measured at cost as the lower of cost and fair value less cost of disposal.
On 17 December 2025, Diageo announced the agreement to sell its 100 % ownership in Diageo Kenya Limited, 65 % owner of East African Breweries PLC (EABL)
and its subsidiaries, and its remaining shares in UDV Kenya Limited, to Asahi. On completion, Asahi will take majority control of EABL, which produces and
distributes Guinness under a licence and royalty agreement. The sale was considered to be highly probable on 30 June 2026 and it is expected to be completed by 31
December 2026, subject to regulatory approval. The impacted assets and liabilities were classified as held for sale on 30 June 2026 measured at cost as the lower of
cost and fair value less cost of disposal. On 30 June 2026, cumulative translation losses recognised in exchange reserves were a loss of $85 million, which will be
recycled to the income statement on the completion of the transaction.
In the year ended 30 June 2026, Diageo completed the sale of a number of businesses, previously classified as assets and liabilities held for sale, comprising: (i) the
sale of Diageo Operations Italy S.p.A., inclusive of the Santa Vittoria production facility, to NewPrinces S.p.A., announced on 24 June 2025, (ii) the sale of Diageo’s
shareholding in Seychelles Breweries Limited, its brewery in Seychelles, to Phoenix Beverages Limited, announced on 2 April 2025, and (iii) the sale of Diageo’s
shareholding in Guinness Ghana Breweries PLC, its brewery in Ghana, to Castel Group, announced on 28 January 2025.
165 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Accounting policies | ||
Acquired intangible assets are held on the consolidated balance sheet at cost less accumulated amortisation and impairments. Acquired brands and other intangible assets are initially recognised at fair value if they are controlled through contractual or other legal rights, or are separable from the rest of the business, and the fair value can be reliably measured. Where these assets are regarded as having indefinite useful economic lives, they are not amortised. Goodwill represents the excess of the aggregate of the consideration transferred, the value of any non-controlling interests and the fair value of any previously held equity interest in the subsidiary acquired over the fair value of the identifiable net assets. Goodwill arising on acquisitions prior to 1 July 1998 was eliminated against reserves, and this goodwill has not been reinstated. Goodwill arising subsequent to 1 July 1998 has been capitalised. Impairment reviews are performed for cash-generating units (CGU) which are the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Amortisation of intangible assets is based on their useful economic lives and amortised on a straight-line basis and reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. Goodwill and intangible assets that are regarded as having indefinite useful economic lives are not amortised and are reviewed for impairment at least annually or when there is an indication that the assets may be impaired. Impairment reviews compare the net carrying value to the recoverable amount (where recoverable amount is the higher of fair value less costs of disposal and value in use). Where the carrying value exceeds the recoverable amount, an impairment charge is recognised. Amortisation and any impairment charges are recorded in other operating items in the income statement. At each reporting date, a review is performed to assess whether there is any indication that an impairment recognised in prior periods should be reversed for an asset other than goodwill. Reversal of impairment is considered if the recoverable amount of the assets is consistently and significantly above the carrying value over an extended period. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment shall not exceed the carrying amount that would have been determined (net of amortisation) had no impairment been recognised for the asset in prior years. Any reversal of impairment is charged against the same income statement line on which the initial impairment was recorded. Computer software is amortised on a straight-line basis to estimated residual value over its expected useful life. Residual values and useful lives are reviewed each year. Subject to these reviews, the estimated useful lives are up to | ||
Critical accounting estimates and judgements | ||
Assessment of the recoverable amount of an intangible asset and the useful economic life of an asset are based on management's estimates. Impairment reviews are carried out to ensure that intangible assets, including brands, are not carried above their recoverable amounts. Value in use and fair value less costs of disposal are both considered for these reviews and any impairment charge is based on these. Value in use is determined using management’s estimates of forecast future cash flows, discount rates and long-term growth rates. Fair value less costs of disposal is determined using different assumptions, which may include quoted market prices, market capitalisations, valuation multiples for comparable companies applied to earnings, discounted cash flows, recent market transactions and other relevant market information. Such estimates and judgements are subject to change as a result of changing economic conditions and actuals may differ from forecasts. | ||
Consideration of climate risk impact | ||
The impact of climate risk on the future cash flows has also been considered for scenarios analysed in line with the climate change risk assessment. The climate change scenario analyses performed in 2026 – conducted in line with TCFD recommendations (‘Transition Scenario’ (RCP 2.6), a ‘Moderate Warming’ Scenario (RCP 4.5) and a ‘Severe Warming Scenario (RCP 8.5)) – identified no material financial impact to the current year impairment assessments. | ||
166 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Brands $ million | Goodwill $ million | Other intangibles $ million | Computer software $ million | Total $ million | |
Cost | |||||
At 30 June 2024 | |||||
Hyperinflation adjustment | |||||
Exchange differences | ( | ||||
Additions | |||||
Disposals | ( | ( | ( | ( | |
Reclassification to assets held for sale | ( | ( | ( | ||
At 30 June 2025 | |||||
Hyperinflation adjustment | |||||
Exchange differences | ( | ( | ( | ( | ( |
Additions | |||||
Disposals | ( | ( | ( | ||
Acquisitions | ( | ||||
Reclassification to assets held for sale | ( | ( | ( | ( | ( |
At 30 June 2026 | |||||
Amortisation and impairment | |||||
At 30 June 2024 | |||||
Exchange differences | ( | ||||
Amortisation for the year | — | — | |||
Impairment | |||||
Disposals | ( | ( | ( | ( | |
At 30 June 2025 | |||||
Exchange differences | ( | ( | ( | ( | ( |
Amortisation for the year | — | — | |||
Impairment | |||||
Disposals | ( | ( | ( | ||
Reclassification to assets held for sale | ( | ( | ( | ||
At 30 June 2026 | |||||
Carrying amount | |||||
At 30 June 2026 | |||||
At 30 June 2025 | |||||
At 30 June 2024 |
167 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
(a) Brands
useful economic lives, are as follows:
Principal markets | 2026 $ million | 2025 $ million | |
Crown Royal whisky | |||
Captain Morgan rum | |||
Johnnie Walker whisky | |||
Smirnoff vodka | |||
Shui Jing Fang Chinese white spirit | |||
Casamigos tequila | |||
McDowell's No.1 whisky, rum and brandy | |||
Don Julio tequila | |||
Yenì Raki | |||
Seagram's 7 Crown whiskey | |||
Signature whisky | |||
Zacapa rum | |||
Black Dog whisky | |||
Antiquity whisky | |||
Gordon's gin | |||
Other brands | |||
Brands are protected by trademarks which are renewable indefinitely in all of
the major markets where they are sold. There are not believed to be any legal,
regulatory or contractual provisions that limit the useful lives of these brands.
The nature of the premium drinks industry is that obsolescence is not a common
issue, with indefinite brand lives being commonplace, and Diageo has a number
of brands that were originally created more than 100 years ago. Accordingly,
the Directors believe that it is appropriate that the brands are treated as having
indefinite lives for accounting purposes and are therefore not amortised.
For the purposes of impairment testing, goodwill has been attributed to the
following cash-generating units:
2026 $ million | 2025 $ million | |
North America | ||
Europe | ||
Türkiye | ||
Asia Pacific | ||
Greater China | ||
India | ||
Latin America and Caribbean | ||
Mexico | ||
Other cash-generating units | ||
Goodwill has arisen on the acquisition of businesses and includes synergies
arising from cost savings, the opportunity to utilise Diageo’s distribution
network to leverage marketing of the acquired products and the extension of the
group’s portfolio of brands in new markets around the world.
(c) Other intangibles
Other intangibles principally comprise distribution rights. Diageo owns the
global distribution rights for Ketel One vodka products in perpetuity, and the
Directors believe that it is appropriate to treat these rights as having an
indefinite life for accounting purposes. The net book value at 30 June 2026 was
$1,800 million (2025 – $1,800 million).
(d) Impairment testing
Impairment tests are performed annually, or more frequently if events or
circumstances indicate that the carrying amount may not be recoverable.
Recoverable amounts are estimates based on the higher of value in use and fair
value less costs of disposal. Value in use is determined using management
estimates of forecast future cash flows, discount rates and long-term growth
rates. Fair value less costs of disposal is determined using different assumptions,
which may include quoted market prices, market capitalisations, valuation
multiples for comparable companies applied to earnings, discounted cash flows,
recent market transactions and other relevant market information. Individual
brands, other intangibles with indefinite useful lives and the associated property,
plant and equipment are aggregated as separate cash-generating units. Separate
tests are carried out for each cash-generating unit and for each of the markets.
Goodwill is attributed to each of the markets.
The key assumptions used for the value in use calculations are as follows:
Cash flows
Cash flows are forecasted for each cash-generating unit for the financial years
based on management's approved plans and reflect the following assumptions:
•Cash flows are projected based on the actual operating results and a three
to five years using expected growth rates in line with management’s best
estimates. Growth rates reflect expectations of sales growth, operating costs
and margin, based on past experience and external sources of information;
•The five years forecast period is extended by up to an additional ten years for
some intangible assets and goodwill when management believes that this
period is justified by the maturity of the market and expects to achieve
growth in excess of the terminal growth rate driven by Diageo’s sales,
marketing and distribution expertise. These cash flows beyond the five years
period are projected using steady or progressively declining growth rates;
•Cash flows for the subsequent years after the forecast period are
extrapolated based on a terminal growth rate which does not exceed the
long-term annual inflation rate of the country or region.
Discount rates
Discount rates are the weighted average cost of capital which reflect the returns
on government bonds and an equity risk premium adjusted for the drinks
industry specific to the cash-generating units. The group applies post-tax
discount rates to post-tax cash flows as the valuation calculated using this
method closely approximates to applying pre-tax discount rates to pre-tax cash
flows.
For goodwill, these assumptions are based on the cash-generating unit or group
of units to which the goodwill is attributed. For brands, they are based on a
weighted average taking into account the country or countries where sales are
made.
168 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
are as follows:
2026 | 2025 | |||
Pre-tax discount rate % | Terminal growth rate % | Pre-tax discount rate % | Terminal growth rate % | |
North America | ||||
United States | ||||
Europe | ||||
United Kingdom | ||||
Türkiye(1) | ||||
Asia Pacific | ||||
India | ||||
Greater China | ||||
Latin America and Caribbean | ||||
Mexico | ||||
(1)The post-tax discount rates applied for calculating the recoverable amount of Türkiye
CGU varied by forecasted periods between 29 % to 18 %, primarily reflecting increases
in market interest rates, country risk premiums and inflation expectations in the
periods.
The key assumptions used in fair value less costs of disposal calculations are as
follows:
Earnings multiple
The earnings multiple represents a market-based valuation multiple applied to
the earnings of the CGU or brand. The multiple is determined with reference to
observable multiples derived from comparable companies. In selecting the
appropriate multiple, management consider the comparability of the underlying
businesses and transactions, including their size, geographic exposure and
operating characteristics.
Share price
For listed investments, the quoted share price in an active market is used to
determine the recoverable value.
In the year ended 30 June 2026, an impairment charge of $786 million was
recognised in exceptional operating items in respect of the Türkiye cash-
generating unit that included the goodwill from the Mey İçki acquisition in the
amount of $466 million, the Yenì Raki brand in the amount of $280 million and
other 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 the future. The
recoverable amount was estimated based on fair value less costs of disposal.
The impairment reduced the deferred tax liability by $187 million resulting in a
net exceptional loss of $599 million. The recoverable amount is $689 million
for Türkiye cash-generating unit.
In the year ended 30 June 2026, an impairment charge of $287 million in
respect of the Don Papa brand was recognised in exceptional operating items.
The charge is driven by the decline of the rum category in Europe which
impacted the brand’s long-term growth outlook. The recoverable amount was
estimated based on value in use. The impairment reduced the deferred tax
liability by $71 million resulting in a net exceptional loss of $216 million. The
recoverable amount of the brand is $103 million.
In the year ended 30 June 2026, an impairment charge of $44 million in respect
of the Aviation American Gin brand was recognised in exceptional operating
items, driven by the softening category trends. The recoverable amount was
estimated based on value in use. The impairment reduced the deferred tax
liability by $10 million resulting in a net exceptional loss of $34 million. The
recoverable amount is $nil.
In the year ended 30 June 2026, an impairment charge of $41 million in respect
of Ypióca brand and related fixed assets was recognised in exceptional
operating items. The charge is driven by the declining category trend and
increasing competitive pressure. The recoverable amount was estimated based
on value in use. The recoverable amount is $38 million.
In the year ended 30 June 2026, an impairment charge of $138 million in
respect of various brands sold predominantly in the US was recognised in
exceptional operating items, driven by the softening category and changes in
consumer demand trends. The recoverable amount was estimated based on
value in use. The impairment reduced the deferred tax liability by $36 million
resulting in a net exceptional loss of $102 million. The recoverable amount is
$46 million.
In the year ended 30 June 2025, an impairment charge of $231 million in
respect of the Aviation American Gin brand and related tangible fixed assets
was recognised in exceptional operating items based on its value in use. The
impairment reduced the tax liability by $55 million.
In the year ended 30 June 2025, an impairment charge of $170 million in
respect of various US brands, tangible fixed assets and inventory was
recognised in exceptional operating items, based on their value in use. The
brand impairment reduced the deferred tax liability by $40 million.
In the year ended 30 June 2025, an impairment charge of $51 million in respect
of the Bell’s whisky brand was recognised in exceptional operating items based
on its value in use. The brand impairment reduced the deferred tax liability by
$13 million.
(e) Sensitivity to change in key assumptions
Impairment testing for the year ended 30 June 2026 has identified the Greater China cash-generating unit and Yenì Raki brand as being sensitive to reasonably
possible changes in assumptions. The tables below shows the headroom at 30 June 2026 and the impairment charge that would be required if the assumptions in the
calculation of their value in use or in the fair value less costs of disposal were changed:
Valuation method | Carrying value of CGU $ million | Headroom $ million | share price $ million | |
Greater China | FVLCD | ( |
Valuation method | Carrying value of CGU $ million | Headroom $ million | discount rate $ million | terminal growth rate $ million | cash flows $ million | |
Yenì Raki | Value in use | ( | ( | ( |
169 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Accounting policies | ||
Land and buildings are stated at cost less accumulated depreciation. Freehold land is not depreciated. Leaseholds are generally depreciated over the unexpired period of the lease. Other property, plant and equipment are depreciated on a straight-line basis to estimated residual values over their expected useful lives, and these values and lives are reviewed each year. Subject to these reviews, the estimated useful lives fall within the following ranges: buildings – years; casks and containers within plant and equipment – returnable bottles, kegs and crates – Reviews are carried out if there is an indication that assets may be impaired, to ensure that property, plant and equipment are not carried at above their recoverable amounts. | ||
Government grants | ||
Government grants are not recognised until there is reasonable assurance that the group will comply with the conditions pursuant to which they have been granted and that the grants will be received. Government grants in respect of property, plant and equipment are deducted from the asset that they relate to, reducing the depreciation expense charged to the income statement. | ||
Land and buildings $ million | Plant and equipment $ million | Fixtures and fittings $ million | Returnable bottles, kegs and crates $ million | Under construction $ million | Total $ million | |
Cost | ||||||
At 30 June 2024 | ||||||
Hyperinflation adjustment | ||||||
Exchange differences | ||||||
Acquisitions | ||||||
Additions | ||||||
Borrowing costs capitalised | ||||||
Disposals | ( | ( | ( | ( | ( | ( |
Transfers | ( | ( | ||||
Reclassification to assets held for sale | ( | ( | ( | ( | ( | ( |
At 30 June 2025 | ||||||
Hyperinflation adjustment | ||||||
Exchange differences | ( | ( | ( | ( | ( | |
Additions | ||||||
Borrowing costs capitalised | ||||||
Disposals | ( | ( | ( | ( | ( | ( |
Transfers | ( | |||||
Reclassification to assets held for sale | ( | ( | ( | ( | ( | ( |
At 30 June 2026 | ||||||
Accumulated depreciation | ||||||
At 30 June 2024 | — | |||||
Exchange differences | — | |||||
Depreciation charge for the year | — | |||||
Exceptional accelerated depreciation and impairment | — | |||||
Disposals | ( | ( | ( | ( | — | ( |
Reclassification to assets held for sale | ( | ( | ( | ( | — | ( |
At 30 June 2025 | — | |||||
Exchange differences | ( | ( | ( | ( | — | ( |
Depreciation charge for the year | — | |||||
Exceptional accelerated depreciation and impairment | — | |||||
Disposals | ( | ( | ( | ( | — | ( |
Reclassification to assets held for sale | ( | ( | ( | ( | — | ( |
At 30 June 2026 | — | |||||
Carrying amount | ||||||
At 30 June 2026 | ||||||
At 30 June 2025 | ||||||
At 30 June 2024 |
The net book value of land and buildings comprises freeholds of $2,710 million (2025 – $2,340 million), long leaseholds of $1 million (2025 – $2 million) and short
leaseholds of $581 million (2025 – $559 million). Depreciation was not charged on $228 million (2025 – $216 million) of land. Property, plant and equipment is net of
a government grant of $185 million (2025 – $185 million) received in prior years in respect of the construction of a rum distillery in the US Virgin Islands.
Exceptional accelerated depreciation and impairment of $352 million (2025 – $152 million), primarily related to impairment charges associated with restructuring
programmes, was charged to exceptional operating items. For further information see note 3.
170 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Accounting policies | ||
Biological assets held by the group consist of agave (Agave Azul Tequilana Weber) plants. The harvested plants are used during the production of tequila. The maturity cycle of agave ranges between six and eight years; based on this, biological assets are classified as mature and immature. Mature biological assets are measured at fair value less costs to sell on initial recognition and at the end of each reporting period based on the present value of future cash flows discounted at an appropriate rate for Mexico (income approach as per IFRS 13). Immature biological assets are plants that have not reached the point of maturity because their sugar content yield and weight is not enough to be harvested and there is no active market for such plants; consequently the company accounts for these assets by applying fair valuation using the cost approach | ||
Biological assets $ million | |
Fair value | |
At 30 June 2024 | |
Exchange differences | ( |
Transferred to inventories | ( |
Fair value change | |
Farming cost capitalised | |
At 30 June 2025 | |
Exchange differences | |
Transferred to inventories | ( |
Fair value change | ( |
Farming cost capitalised | |
At 30 June 2026 |
At 30 June 2026, the number of agave plants was approximately 29 million
(2025 – 25 million), ranging from new plantations up to eight-year -old plants.
Accounting policies | ||
Where the group is the lessee, all leases are recognised on the balance sheet as right-of-use assets as part of property, plant and equipment, and depreciated on a straight-line basis with the charge recognised in cost of sales or in other operating items depending on the nature of the costs. The liability, recognised as part of net borrowings, is measured at a discounted value and any interest is charged to finance charges. The group recognises services associated with a lease as other operating items. Payments associated with leases where the value of the asset when it is new is lower than $5,000 (leases of low value assets) and leases with a lease term of 12 months or less (short-term leases) are recognised as other operating items. A judgement in calculating the lease liability at initial recognition includes determining the lease term where extension or termination options exist. In such instances, any economic incentive to retain or end a lease are considered and extension periods are only included when it is considered reasonably certain that an option to extend a lease will be exercised. | ||
The company principally leases warehouses, office buildings, plant
and machinery, cars and distribution vehicles in the ordinary course of business.
Land and buildings $ million | Plant and equipment $ million | Total $ million | |
At 30 June 2024 | |||
Exchange differences | |||
Additions | |||
Reclassification within property, plant and equipment | ( | ( | |
Reclassification to assets held for sale | ( | ( | ( |
Depreciation | ( | ( | ( |
At 30 June 2025 | |||
Exchange differences | ( | ( | ( |
Additions | |||
Reclassification to assets held for sale | ( | ( | ( |
Depreciation | ( | ( | ( |
At 30 June 2026 |
2026 $ million | 2025 $ million | |
Current lease liabilities | ( | ( |
Non-current lease liabilities | ( | ( |
( | ( |
The future cash outflows, which are not included in lease liabilities on the
balance sheet, in respect of extension and termination options which are not
reasonably expected to be exercised are estimated at $201 million (2025 –
$211 million).
(c) Amounts recognised in the consolidated income statement
In the year ended 30 June 2026, other external charges (within other operating
items) included $38 million (2025 – $43 million) in respect of leases of low
value assets and short-term leases and $24 million (2025 – $23 million) in
respect of variable lease payments. See note 5 for further information relating to
the interest expense on lease liabilities.
The total cash outflow for leases in the year ended 30 June 2026 was $222
million (2025 – $212 million).
171 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Accounting policies | ||
Loans receivable are non-derivative financial assets that are not classified as equity investments. They are subsequently measured either at amortised cost using the effective interest method less allowance for impairment or at fair value with gains and losses arising from changes in fair value recognised in the income statement or in other comprehensive income that are recycled to the income statement on the de-recognition of the asset. Allowances for expected credit losses are made based on the risk of non-payment taking into account ageing, previous experience, economic conditions and forward-looking data. Such allowances are measured as either 12-months expected credit losses or lifetime expected credit losses depending on changes in the credit quality of the counterparty. Other investments are equity investments that are not classified as investments in associates or joint arrangements nor investments in subsidiaries. They are included in non-current assets. Subsequent to initial measurement, other investments are stated at fair value. Gains and losses arising from the changes in fair value are recognised in the income statement or in other comprehensive income. Accumulated gains and losses included in other comprehensive income are not recycled to the income statement. Dividends from other investments are recognised in the consolidated income statement. | ||
Loans $ million | Other investments $ million | Total $ million | |
Cost less allowances or fair value | |||
At 30 June 2024 | |||
Exchange differences | |||
Additions | |||
Repayments and disposals | ( | — | ( |
Capitalised interest | — | ||
Impairment charged during the year | ( | ( | ( |
Provision movement | |||
Transfer to associates/fair value adjustment | ( | ( | ( |
At 30 June 2025 | |||
Additions | — | ||
Repayments and disposals | ( | — | ( |
Impairment charged during the year | ( | — | ( |
Transfer from associates/fair value adjustment | ( | ( | |
At 30 June 2026 |
At 30 June 2026, loans comprise $15 million (2025 – $11 million; 2024 – $6
million) of loans to customers and other third parties, after allowances of $136
million (2025 – $137 million; 2024 – $138 million), and $2 million (2025 – $nil ;
2024 – $57 million) of loans to associates.
Following a strategic review in March 2025, Diageo decided it would no longer
be bringing any new brands into the Distill Ventures programme and exit several
businesses, resulting in an impairment charge of $72 million in exceptional
operating expenses for the year ended 30 June 2025.
Accounting policies | ||
The group’s principal post-employment funds are defined benefit plans. In addition, the group has defined contribution plans, unfunded post- employment medical benefit liabilities and other unfunded defined benefit post-employment liabilities. For post-employment plans other than defined contribution plans, the amount charged to operating profit is the cost of accruing pension benefits promised to employees over the year, administration costs (other than costs of managing plan assets), plus any changes arising on benefits granted to members by the group during the year. Net finance charges/income comprise the net deficit/ surplus on the plans at the beginning of the year, adjusted for cash flows in the year, multiplied by the discount rate for plan liabilities. The differences between the fair value of the plans’ assets and the present value of the plans’ liabilities are disclosed as an asset or liability on the consolidated balance sheet. Any differences due to changes in assumptions or experience are recognised in other comprehensive income. The amount of any pension fund asset recognised on the balance sheet is limited to any future refunds from the plan or the present value of reductions in future contributions to the plan. Contributions payable by the group in respect of defined contribution plans are charged to operating profit as incurred. | ||
Critical accounting estimates and judgements | ||
Application of IAS 19 requires the exercise of estimates and judgement in relation to various assumptions. Diageo determines the assumptions on a country-by-country basis in conjunction with its actuaries. Estimates are required in respect of uncertain future events, including the life expectancy of members of the plans, salary and pension increases, future inflation rates, discount rates and employee and pensioner demographics. The application of different assumptions could have a significant effect on the amounts reflected in the income statement, other comprehensive income and the balance sheet. There may be interdependencies between the assumptions. Where there is an accounting surplus on a defined benefit plan, management judgement is necessary to determine whether the group can obtain economic benefits through a refund of the surplus or by reducing future contributions to the plan. | ||
(a) Post-employment benefit plans
The group operates a number of pension plans throughout the world, devised in
accordance with local conditions and practices. Diageo's most significant plans
are defined benefit plans and are funded by payments to separately administered
trusts or insurance companies. The group also operates a number of plans that
are generally unfunded, primarily in the United States, which provide to
employees post-employment medical benefits.
The principal plans are in the United Kingdom, Ireland and the United States
where benefits are based on employees’ length of service and salary. All
valuations were performed by independent actuaries using the projected unit
credit method to determine pension costs.
172 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
carried out as follows:
Principal plans | Date of valuation |
United Kingdom(1) | 1 April 2024 |
Ireland(2) | 31 December 2024 |
United States | 1 January 2025 |
(1)The Diageo Pension Scheme (DPS, the UK Scheme) closed to new members in
November 2005. Employees who joined Diageo in the United Kingdom between
November 2005 and January 2018, were eligible to become members of the Diageo
Lifestyle Plan (a cash balance defined benefit plan) which was merged into the DPS in
July 2023. Since January 2018, new employees have been eligible to become members
of a master trust defined contribution plan.
(2)The Guinness Ireland Group Pension Scheme (GIGPS, the Irish Scheme) closed to
new members in May 2013. Employees who have joined Diageo in Ireland since the
defined benefit scheme closed have been eligible to become members of a master trust
The assets of the UK and Irish pension plans are held in separate trusts
administered by trustees who are required to act in the best interests of the
plans’ beneficiaries. For DPS, the trustee is Diageo Pension Trust Limited. As
required by legislation, one-third of the directors of the Trust are nominated by
the members of the DPS, member nominated directors are appointed from both
the pensioner member community and the active member community. For the
Irish Scheme, Diageo Ireland makes three nominations and appoints three
further candidates nominated by representative groupings.
comprehensive income for the group’s defined benefit plans for the three years
ended 30 June 2026 are as follows:
2026 $ million | 2025 $ million | 2024 $ million | |
Current service cost and administrative expenses | ( | ( | ( |
Past service (losses)/gains – ordinary activities | ( | ||
Past service losses – exceptional(1) | ( | ||
Charge to operating profit | ( | ( | ( |
Net finance income in respect of post- employment plans | |||
Charge before taxation(2) | ( | ( | ( |
Actual returns less amounts included in finance income | ( | ( | ( |
Experience (losses)/gains | ( | ( | |
Changes in financial assumptions | |||
Changes in demographic assumptions | ( | ||
Other comprehensive loss | ( | ( | ( |
Changes in the surplus restriction | ( | ( | |
Total other comprehensive loss | ( | ( | ( |
(1)Includes a one-off discretionary increase of $38 million in pension benefits to GIGPS
pensioners.
(2)The (charge)/income before taxation is in respect of the following countries:
2026 $ million | 2025 $ million | 2024 $ million | |
United Kingdom | ( | ||
Ireland | ( | ||
United States | ( | ( | ( |
Other | ( | ( | ( |
( | ( | ( |
In addition to the charge in respect of defined benefit post-employment plans,
contributions to the group’s defined contribution plans were $72 million (2025 –
$70 million; 2024 – $62 million).
2026 are set out below:
Plan assets $ million | Plan liabilities $ million | Net surplus $ million | |
At 30 June 2024 | ( | ||
Exchange differences | ( | ||
Disposal of businesses | |||
Reclassification to liabilities held for sale | |||
Income/(charge) before taxation | ( | ( | |
Other comprehensive (loss)/income(1) | ( | ( | |
Contributions by the group | |||
Employee contributions | ( | ||
Benefits paid | ( | ||
At 30 June 2025 | ( | ||
Exchange differences | ( | ( | |
Income/(charge) before taxation | ( | ( | |
Other comprehensive (loss)/income(1) | ( | ( | |
Contributions by the group | |||
Employee contributions | ( | ||
Benefits paid | ( | ||
At 30 June 2026 | ( |
(1)Excludes surplus restriction.
are as follows:
2026 | 2025 | |||
Plan assets $ million | Plan liabilities $ million | Plan assets $ million | Plan liabilities $ million | |
Pensions | ||||
United Kingdom | ( | ( | ||
Ireland | ( | ( | ||
United States | ( | ( | ||
Other | ( | ( | ||
Post-employment medical | ( | ( | ||
Other post-employment | ( | ( | ||
( | ( | |||
2026 | 2025 | |||
Non- current assets(1) $ million | Non- current liabilities $ million | Non- current assets(1) $ million | Non- current liabilities $ million | |
Funded plans | ( | ( | ||
Unfunded plans | — | ( | — | ( |
( | ( | |||
173 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
The disclosures have been prepared in accordance with IFRIC 14 IAS 19. In
particular, where the calculation for a plan results in a surplus, the recognised
asset is limited to the present value of any available future refunds from the plan
or reductions in future contributions to the plan, and any additional liabilities are
recognised as required. At 30 June 2026, the DPS had a net surplus of $517
million (2025 – $608 million; 2024 – $689 million) and the GIGPS had a net
surplus of $366 million (2025 – $417 million; 2024 – $332 million) and other
schemes in a surplus totalled $123 million (2025 – $136 million; 2024 –
$125 million). The DPS and GIGPS surpluses have been recognised with no
provision made against them as they are expected to be recoverable through a
combination of a reduction in future cash contributions or ultimately via a cash
refund when the last member’s obligations have been met.
(b) Principal risks and assumptions
The material post-employment plans are not exposed to any unusual, entity-
specific or scheme-specific risks but there are general risks:
Inflation – The majority of the plans’ obligations are linked to inflation. Higher
inflation will lead to increased liabilities which is partially offset by the plans
holding inflation linked gilts, swaps and caps against the level of inflationary
increases.
Interest rate – The plan liabilities are determined using discount rates derived
from yields on AA-rated corporate bonds. A decrease in corporate bond yields
will increase plan liabilities though this will be partially offset by an increase in
the value of the bonds held by the post-employment plans.
Mortality – The majority of the obligations are to provide benefits for the life
of the members and their partners, so any increase in life expectancy will result
in an increase in the plans’ liabilities.
Asset returns – Assets held by the pension plans are invested in a diversified
portfolio including equities, bonds and other assets. Volatility in asset values
will lead to movements in the net deficit/surplus reported in the consolidated
balance sheet for post-employment plans which in addition will also impact the
post-employment expense in the consolidated income statement.
group’s deficit/surplus in the main post-employment plans at
30 June in the relevant year. The assumptions used to calculate the charge/credit
in the consolidated income statement for the year ending 30 June are based on
the assumptions disclosed as at the previous 30 June.
United Kingdom | Ireland | United States(1) | |||||||
2026 % | 2025 % | 2024 % | 2026 % | 2025 % | 2024 % | 2026 % | 2025 % | 2024 % | |
Rate of general increase in salaries(2) | |||||||||
Rate of increase to pensions in payment | |||||||||
Rate of increase to deferred pensions | |||||||||
Discount rate for plan liabilities | |||||||||
Inflation – CPI | |||||||||
Inflation – RPI | — | — | — | — | — | — | |||
(1)The salary increase assumption in the United States is not a significant assumption as only a minimal amount of members’ pension entitlement is dependent on the member’s projected
final salary.
who is currently aged 45 and subsequently retires at the age of 65:
United Kingdom(1) | Ireland(2) | United States | |||||||
2026 Age | 2025 Age | 2024 Age | 2026 Age | 2025 Age | 2024 Age | 2026 Age | 2025 Age | 2024 Age | |
Retiring currently at age 65 | |||||||||
Male | |||||||||
Female | |||||||||
Currently aged 45, retiring at age 65 | |||||||||
Male | |||||||||
Female | |||||||||
(1)Based on the CMI’s S4 mortality tables with scaling factors based on the experience of the plan and where people live, with suitable future improvements.
2027 and on the plan liabilities at 30 June 2026:
United Kingdom | Ireland | United States | |||||||
Benefit/(cost) | Operating profit $ million | Profit after taxation $ million | Plan liabilities(1) $ million | Operating profit $ million | Profit after taxation $ million | Plan liabilities(1) $ million | Operating profit $ million | Profit after taxation $ million | Plan liabilities(1) $ million |
Effect of | |||||||||
Effect of | ( | ( | ( | ( | ( | ( | ( | ( | ( |
Effect of | ( | ( | ( | ( | ( | ( | ( | ||
Effect of | |||||||||
Effect of | ( | ( | ( | ( | ( | ( | |||
(1)The estimated effect on the liabilities excludes the impact of any interest rate and inflation swaps held by the pension plans.
(i) The sensitivity analyses above have been determined based on reasonably possible changes of the respective assumptions and may not be representative of the actual change. Each
sensitivity is calculated on a change in the key assumption while holding all other assumptions constant. The sensitivity to inflation includes the impact on all inflation-linked
174 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
(c) Investment and hedging strategy
The investment strategy for the group’s funded post-employment plans is determined locally by the trustees of the plan and/or Diageo, as appropriate, and it takes
account of the relevant statutory requirements. The objective of the investment strategy is to achieve a target rate of return in excess of the movement on the liabilities,
whilst taking an acceptable level of investment risk relative to the liabilities. This objective is implemented by using the funds of the plans to invest in a variety of
asset classes that are expected over the long-term to deliver a target rate of return. The majority of the investment strategies have significant amounts allocated to
bonds in order to provide protection against adverse movements in the liabilities of the plans. This includes corporate bonds and bonds held under sale and repurchase
agreements (repos) whereby the bond is provided as security for bank funding to enable the acquisition of additional bonds to increase the level of protection provided.
Repos are fully collateralised short-term agreements (typically up to 12 months in duration) and are a well-recognised investment practice as part of a risk management
programme against interest rate or inflation risks. Under the UK Scheme, a significant amount of the repos are less than three months in duration. At 30 June 2026,
approximately 97 % and 100 % (2025 – 96 % and 100 %) of the UK Scheme’s liabilities measured on the Trustee's funding basis (gilts+50bps) were protected against
future adverse movements in inflation and interest rates respectively through the combined effect of bonds and swaps. At 30 June 2026, approximately 93 % and 75 %
(2025 – 93 % and 109 %) of the Irish plans’ liabilities measured on the Trustee's funding basis (euro-swaps+50bps) were protected against future adverse movements in
interest rates and inflation respectively through the combined effect of bonds and swaps.
The discount rates used are based on the yields of high-quality fixed income investments. For the UK plans, which represent approximately 65 % of total plan
liabilities, the discount rate is determined by reference to the yield curves of AA-rated corporate bonds for which the timing and amount of cash outflows are similar to
those of the plans. A similar process is used to determine the discount rates used for the non-UK plans.
2026 | |||||||||
United Kingdom $ million | Ireland $ million | United States and other $ million | Total $ million | ||||||
Quoted | Unquoted | Quoted | Unquoted | Quoted | Unquoted | Quoted | Unquoted | Total | |
Equities(1) | |||||||||
Bonds | |||||||||
Fixed-interest government | |||||||||
Inflation-linked government | |||||||||
Investment grade corporate | |||||||||
Non-investment grade | |||||||||
Loan securities | |||||||||
Liability Driven Investment (LDI) | |||||||||
Property | |||||||||
Hedge funds | |||||||||
Interest rate and inflation swaps | ( | ( | ( | ||||||
Cash, short-term and other investments | |||||||||
Total bid value of assets | |||||||||
2025 | |||||||||
United Kingdom $ million | Ireland $ million | United States and other $ million | Total $ million | ||||||
Quoted | Unquoted | Quoted | Unquoted | Quoted | Unquoted | Quoted | Unquoted | Total | |
Equities(1) | |||||||||
Bonds | |||||||||
Fixed-interest government | |||||||||
Inflation-linked government | |||||||||
Investment grade corporate | |||||||||
Non-investment grade | |||||||||
Loan securities | |||||||||
Liability Driven Investment (LDI) | |||||||||
Property | |||||||||
Hedge funds | |||||||||
Interest rate and inflation swaps | ( | ( | ( | ||||||
Cash, short-term and other investments | |||||||||
Total bid value of assets | |||||||||
(1)Equities include limited partnerships that invest primarily in loan securities.
(i)The asset classes include some cash holdings that are temporary. This cash is likely to be invested imminently and so has been included in the asset class where it is anticipated to be
invested in the long-term.
(ii)For the year ended 30 June 2026, the analyses of asset categories above include $1,590 million (2025 - $1,431 million) in the United Kingdom, $1,102 million (2025 - $1,147 million) in
Ireland and $625 million (2025 - $598 million) in the United States held in unquoted pooled investment vehicles.
Total cash contributions by the group to all post-employment plans in the year ending 30 June 2027 are estimated to be approximately $59 million.
175 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
(d) Deficit funding arrangements
UK plans
In the year ended 30 June 2011, the group established a Pension Funding Partnership (PFP) in respect of the UK Scheme. Whisky inventory was transferred into the
partnership but the group retains control over the partnership which at 30 June 2026 held inventory with a book value of $739 million (2025 – $926 million). The
partnership is fully consolidated in the group financial statements. The UK Scheme has a limited interest in the partnership and, as a partner, is entitled to a distribution
from the profits of the partnership. The arrangement is expected to cease in 2030, and contributions to the UK scheme in any year will be dependent on the funding
position of the UK scheme at the previous 31 March. Given the surplus funding position in the DPS, there were no contributions to the DPS in the years ended 30 June
2026 and 30 June 2025.
In 2030, the group will be required, dependent upon the funding position of the UK Scheme at that time, to pay an amount not greater than the actuarial deficit at that
time, up to a maximum of £430 million ($569 million) in cash, to purchase the UK Scheme’s interest in the partnership. If the UK Scheme is in surplus at an actuarial
triennial valuation excluding the value of the PFP, then the group can exit the PFP with the agreement of the Trustee.
Irish plans
The triennial actuarial valuation as at 31 December 2024 showed that the Scheme is fully funded on the Trustee’s ongoing funding basis and the statutory minimum
funding standard basis. Given the fully funded position, no deficit contributions were payable in the years ended 30 June 2026 and 30 June 2025. The company has
agreed with the Trustee on conditional contributions if there is a deficit in the Scheme on either of the next two valuation dates. These conditional contributions shall
be payable over the three years following the valuation and the aggregate payment will be equal to the ongoing deficit disclosed, subject to the caps set out below:
Valuation date | ||||
31 December 2027 | 31 December 2030 | |||
€ million | $ million | € million | $ million | |
Maximum conditional contribution | ||||
(e) Timing of benefit payments
timing of benefit payments:
United Kingdom | Ireland | United States | ||||
2026 $ million | 2025 $ million | 2026 $ million | 2025 $ million | 2026 $ million | 2025 $ million | |
Maturity analysis of benefits expected to be paid | ||||||
Within one year | ||||||
Between 1 to 5 years | ||||||
Between 6 to 15 years | ||||||
Between 16 to 25 years | ||||||
Beyond 25 years | ||||||
Total | ||||||
years | years | years | years | years | years | |
Average duration of the defined benefit obligation | ||||||
The projected benefit payments are based on the assumptions underlying the assessment of the obligations, including inflation. They are disclosed undiscounted and
therefore appear large relative to the discounted value of the plan liabilities recognised on the consolidated balance sheet. They are in respect of benefits that have
accrued at the balance sheet date and make no allowance for any benefits to be accrued subsequently.
(f) Related party disclosures
176 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Accounting policies | ||
Inventories are stated at the lower of cost and net realisable value. Cost includes raw materials, direct labour and expenses, an appropriate proportion of production and other overheads, but not borrowing costs. Cost is calculated at the weighted average cost incurred in acquiring inventories. All maturing inventories and raw materials are classified as current assets, as they are expected to be realised in the normal operating cycle which can be a period of several years. | ||
Trade and other receivables are initially recognised at fair value less transaction costs and subsequently carried at amortised cost less any allowance for discounts and doubtful debts. Trade receivables arise from contracts with customers, and are recognised when performance obligations are satisfied, and the consideration due is unconditional as only the passage of time is required before the payment is received. Allowance losses are calculated by reviewing lifetime expected credit losses using historic and forward-looking data on credit risk. | ||
Trade and other payables are initially recognised at fair value including transaction costs and subsequently carried at amortised costs. Contingent considerations recognised in business combinations are subsequently measured at fair value through income statement. The group evaluates supplier arrangements against a number of indicators to assess if the liability has the characteristics of a trade payable or should be classified as borrowings. This assessment considers the commercial purpose of the facility, whether payment terms are similar to customary payment terms, whether the group is legally discharged from its obligation towards suppliers before the end of the original payment term, and the group’s involvement in agreeing terms between banks and suppliers. | ||
Provisions are liabilities of uncertain timing or amount. A provision is recognised if, as a result of a past event, the group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are calculated on a discounted basis. The carrying amounts of provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. | ||
2026 $ million | 2025 $ million | |
Raw materials and consumables | ||
Work in progress | ||
Maturing inventories | ||
Finished goods and goods for resale | ||
The following amounts of inventories can be utilised only after more than one
year:
2026 $ million | 2025 $ million | |
Raw materials and consumables | ||
Maturing inventories | ||
which is as follows:
2026 $ million | 2025 $ million | 2024 $ million | |
Balance at beginning of the year | |||
Exchange differences | ( | ( | ( |
Income statement charge(1) | |||
Utilised | ( | ( | ( |
Sale of businesses | ( | ||
Balance at the end of the year |
(1)The increase in the income statement charge for the year ended 30 June 2026 is
primarily driven by a provision recognised in respect of maturing inventory in North
America.
2026 | 2025 | |||
Current assets $ million | Non-current assets $ million | Current assets $ million | Non-current assets $ million | |
Trade receivables | ||||
Interest receivable | ||||
VAT recoverable and other prepaid taxes | ||||
Other receivables | ||||
Prepayments | ||||
Accrued income | ||||
At 30 June 2026, approximately 18 %, 14 % and 15 % of the group’s trade
receivables of $2,596 million are due from counterparties based in the United
States, India and the United Kingdom, respectively. Accrued income primarily
represents amounts receivable from customers in respect of performance
obligations satisfied but not yet invoiced.
as follows:
2026 $ million | 2025 $ million | |
Not overdue | ||
Overdue 1 – 30 days | ||
Overdue 31 – 60 days | ||
Overdue 61 – 90 days | ||
Overdue 91 – 180 days | ||
Overdue more than 180 days | ||
Balances overdue more than 180 days on 30 June 2026 are primarily due from
institutional customers in certain countries with low credit risk.
for doubtful debts, an analysis of which is as follows:
2026 $ million | 2025 $ million | 2024 $ million | |
Balance at beginning of the year | |||
Exchange differences | ( | ( | |
Reclassification to assets held for sale | ( | ||
Income statement charge | |||
Utilised | ( | ( | ( |
Balance at the end of the year |
177 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
2026 | 2025 | |||
Current liabilities $ million | Non-current liabilities $ million | Current liabilities $ million | Non-current liabilities $ million | |
Trade payables | ||||
Interest payable | ||||
Tax and social security excluding income tax | ||||
Other payables | ||||
Accruals | ||||
Deferred income | ||||
Dividend payable | ||||
Dividend payable to non-controlling interests | ||||
Interest payable at 30 June 2026 includes interest on non-derivative financial instruments of $409 million (2025 – $352 million). Accruals at 30 June 2026 include
$823 million (2025 – $839 million) accrued discounts attributed to sales recognised. Deferred income represents amounts paid by customers in respect of performance
obligations not yet satisfied. The amount of contract liabilities recognised as revenue in the current year is $82 million (2025 – $84 million). Non-current liabilities
include the net present value of contingent consideration in respect of prior acquisitions of $27 million (2025 – $107 million).
Together with the group’s partner banks, supply chain financing (SCF) facilities are provided to suppliers in certain countries. These arrangements enable suppliers to
receive funding earlier than the invoice due date at their discretion and at their own cost. Payment terms continue to be agreed directly between the group and
suppliers, independently from the availability of SCF facilities. Liabilities are settled in accordance with the original due date of invoices. The group does not incur
any fees or receive any rebates where the suppliers choose to utilise these facilities. The group has determined that it is appropriate to present amounts outstanding
subject to SCF arrangements as trade payables. Consistent with this classification, cash flows are presented either as operating cash flows or cash flows from investing
activities, when related to the acquisition of non-current assets.
2026 | 2025 | |
Current liabilities $ million | Current liabilities $ million | |
Carrying amount that has been subject to SCF and presented in trade and other payables | ||
— of which suppliers have received payment from finance provider |
Range of payment due dates were as follows:
2026 | 2025 | |||
Minimum Days after invoice date(1) | Maximum Days after invoice date(1) | Minimum Days after invoice date(1) | Maximum Days after invoice date(1) | |
Trade and other payables subject to SCF arrangements | ||||
Comparable trade and other payables that are not part of the arrangements(2) | ||||
(1)Suppliers are subject to various payment due dates depending on the jurisdiction and standard practices. The group's payment terms commence from the invoice date. However, for
certain categories of external suppliers and in alignment with industry standards, payment terms begin from the date a valid invoice is received. In Greater China, the range of payment
due dates are between 0 -240 days, which is in line with local market practice.
178 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Restructuring $ million | Thalidomide $ million | Other $ million | Total $ million | |
At 30 June 2024 | ||||
Exchange differences | ( | |||
Income statement charge | ||||
Utilised | ( | ( | ( | |
Transfers from other payables | ||||
Unwinding of discounts | ||||
At 30 June 2025 | ||||
Exchange differences | ( | ( | ( | |
Income statement charge/(credit) | ( | |||
Utilised | ( | ( | ( | ( |
Transfers from other payables | ||||
Unwinding of discounts | ||||
At 30 June 2026 | ||||
Current liabilities | ||||
Non-current liabilities | ||||
Provisions have been established in respect of the discounted value of the group’s commitment to the UK and Australian Thalidomide Trusts. These provisions will be
utilised over the period of the commitments up to 2037. Income statement charges are primarily driven by the translation of foreign currency liability.
The largest item in other provisions at 30 June 2026 is $56 million (2025 - $53 million) in respect of deferred employee compensation plans which will be utilised
179 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Risk management and capital structure
This section sets out the policies and procedures applied to manage the group’s capital structure and the financial risks the group is exposed to. Diageo considers the
following components of its balance sheet to be capital: borrowings and equity. Diageo manages its capital structure to achieve capital efficiency, provide flexibility to
invest through the economic cycle and give efficient access to debt markets at attractive cost levels.
Accounting policies | ||
Financial assets and liabilities are initially recorded at fair value including, where permitted by IFRS 9, any directly attributable transaction costs. For those financial assets that are not subsequently held at fair value, the group assesses whether there is evidence of impairment at each balance sheet date. The group classifies its financial assets and liabilities into the following categories: financial assets and liabilities at amortised cost, financial assets and liabilities at fair value through profit and loss and financial assets at fair value through other comprehensive income. The accounting policies for other investments and loans are described in note 13, for trade and other receivables and payables in note 15 and for cash and cash equivalents in note 17. Financial assets and liabilities at fair value through profit and loss include derivative assets and liabilities. Where financial assets or liabilities are eligible to be carried at either amortised cost or fair value through other comprehensive income, the group does not apply the fair value option. Derivative financial instruments are carried at fair value using a discounted cash flow model based on market data applied consistently for similar types of instruments. Gains and losses on derivatives that do not qualify for hedge accounting treatment are taken to the income statement as they arise. Other financial liabilities are carried at amortised cost unless they are part of a fair value hedge relationship when the amortised cost of the financial liabilities is adjusted with the fair value change attributable to the risk being hedged from the inception of the hedge relationship. The difference between the initial carrying amount of the financial liabilities and their redemption value is recognised in the income statement over the contractual terms using the effective interest rate method. | ||
Hedge accounting | ||
The group designates and documents certain derivatives as hedging instruments against changes in fair value of recognised assets and liabilities (fair value hedges), commodity price risk of highly probable forecast transactions, as well as the cash flow risk from changes in exchange or interest rates (cash flow hedges) and hedges of net investments in foreign operations (net investment hedges). Derivative instruments designated in hedge relationship are included in other financial assets and liabilities on the consolidated balance sheet. The effectiveness of such hedges is assessed at inception and at least on a quarterly basis, using prospective testing. Methods used for testing effectiveness include critical terms, regression analysis and hypothetical derivative models. Fair value hedges are used to manage the currency and/or interest rate risks to which the fair value of certain assets and liabilities is exposed. Changes in the fair value of the derivatives are recognised in the income statement, along with any changes in the relevant fair value of the underlying hedged asset or liability. If such a hedge relationship no longer meets hedge accounting criteria, fair value movements on the derivative continue to be taken to the income statement while any fair value adjustments made to the underlying hedged item to that date are amortised through the income statement over its remaining life using the effective interest rate method. Cash flow hedges are used to hedge the foreign currency risk of highly probable future foreign currency cash flows, the commodity price risk of highly probable future transactions, as well as the cash flow risk from changes in exchange or interest rates. The effective portion of the gain or loss on the hedges is recognised in other comprehensive income, while any ineffective part is recognised in the income statement. Amounts recorded in other comprehensive income are recycled to the income statement in the same period in which the underlying foreign currency, commodity or interest exposure affects the income statement. When a hedge relationship no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity is either transferred to the income statement or amortised over its remaining life using the effective interest rate method. Net investment hedges utilise either foreign currency borrowings or derivatives as hedging instruments. Foreign exchange differences arising on translation of net investments are recorded in other comprehensive income and included in the exchange reserve. Liabilities used as hedging instruments are revalued at closing exchange rates and the resulting gains or losses are also recognised in other comprehensive income to the extent that they are effective, with any ineffectiveness taken to the income statement. Foreign currency derivative contracts hedging net investments are carried at fair value. Effective fair value movements are recognised in other comprehensive income, with any ineffectiveness taken to the income statement. Cost of hedging model is applied in case of cross-currency interest rate swaps, forwards and options in net investment hedges. The fair value changes attributable to the spot component of the hedging instruments are designated to offset foreign exchange differences of net investments and therefore taken to net investment hedge reserve. The fair value changes attributable to the forward component of the hedging instruments (including currency basis) are taken to the cost of hedging reserve and amortised to the consolidated income statement. | ||
180 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
The group uses a range of financial instruments to manage the group’s funding,
liquidity and exposure to foreign currency, interest rate and commodity price risk
in line with Board-approved hedging policies and guidelines. Initially, all
transactions in derivative financial instruments are undertaken to manage the
risks arising from underlying business activities. The group purchases insurance
for commercial or, where required, for legal or contractual reasons. In addition,
the group retains insurable risk where external insurance is not considered an
economic means of mitigating these risks.
The group presents its consolidated financial statements in US dollar and
conducts business in many currencies. As a result, it is subject to foreign
currency risk due to exchange rate movements, which affects the group’s
transactions and the translation of the results and underlying net assets of its
operations. To manage the currency risk, the group uses certain financial
instruments. Where hedge accounting is applied, hedges are documented and
tested for effectiveness on an ongoing basis.
Hedge of net investment in foreign operations
The group hedges a certain portion of its exposure to fluctuations in the US
dollar value of its foreign operations by designating borrowings held in foreign
currencies and using foreign currency forwards, swaps and other financial
derivatives.
At 30 June 2026, foreign currency borrowings (euro, sterling) and financial
derivatives (Chinese yuan, Canadian dollar, Indian rupee) were designated in net
investment hedge relationships.
Hedge of foreign currency debt
The group uses cross currency interest rate swaps and foreign currency forwards
to hedge the foreign currency risk associated with certain foreign currency
denominated borrowings.
Transaction exposure hedging
The group hedges transactional foreign currency risk on major currency
exposures up to 36 months and on other currency exposures up to 18 months.
The group’s exposure to foreign currency risk arising principally on forecasted
sales transactions is managed using forward agreements and options.
The group has an exposure to interest rate risk, arising principally on changes in
US dollar, euro and sterling interest rates. To manage interest rate risk, the group
manages its proportion of fixed to floating rate borrowings within limits
approved by the Board, primarily through issuing fixed and floating rate
borrowings, and by utilising interest rate swaps. These practices aim to minimise
the group’s net finance charges with acceptable year-on-year volatility. The
majority of the group’s existing interest rate derivatives are designated as fair
value hedge and are expected to be effective. Fair value of these derivatives is
recognised in the income statement, along with any changes in the relevant fair
value of the underlying hedged asset or liability.
2026 | 2025 | |
$ million | $ million | |
Fixed rate | ||
Floating rate(1) | ||
Impact of financial derivatives and fair value adjustments | ( | ( |
Lease liabilities | ||
Net borrowings |
(1)The floating rate portion of net borrowings includes cash and cash equivalents, floating
interest rate:
Average monthly net borrowings | Effective interest rate | ||||
2026 $ million | 2025 $ million | 2024 $ million | 2026 % | 2025 % | 2024 % |
(i)For this calculation, net interest charge includes interest capitalised and excludes fair
value adjustments to derivative financial instruments and average monthly net
borrowings include the impact of interest rate swaps that are no longer in a hedge
relationship but exclude the market value adjustment for cross currency interest
Commodity price risk is managed in line with the principles approved by the
Board either through long-term purchase contracts with suppliers or, where
appropriate, derivative contracts. Where derivative contracts are used, the
commodity price risk exposure is hedged up to 36 months of forecast volume
through exchange-traded and over-the-counter contracts (futures, forwards and
swaps) and cash flow hedge accounting is applied.
exchange rates. All hedges are expected to be highly effective for this analysis
and it considers the impact of all financial instruments. The sensitivity analysis
excludes the impact of market risk on the net post-employment benefit assets and
liabilities, and corporate tax payable. The results of the sensitivity analysis
should not be considered as projections of likely future events as actual gains or
losses in the future may differ materially due to fluctuations in interest and
exchange rates to vary from the hypothetical amounts disclosed in the table
below.
Impact on income statement gain/(loss) | Impact on consolidated comprehensive income gain/(loss)(1) | |||
2026 $ million | 2025 $ million | 2026 $ million | 2025 $ million | |
( | ( | ( | ( | |
( | ( | ( | ( | |
(1)The impact on the consolidated statement of comprehensive income includes the impact
Credit risk refers to the risk that a counterparty will default on its contractual
obligations resulting in financial loss to the group. Credit risk arises on cash
balances (including bank deposits and cash and cash equivalents), derivative
financial instruments and credit exposures to customers, including outstanding
loans, trade and other receivables, financial guarantees and committed
transactions.
The carrying amount of financial assets of $5,505 million (2025 – $6,543
million) represents the group’s exposure to credit risk at the balance sheet date as
disclosed in section (i), excluding the impact of any collateral held or other credit
enhancements. A financial asset is in default when the counterparty fails to pay
its contractual obligations. Financial assets are written off when there is no
reasonable expectation of recovery.
Credit risk is managed separately for financial and business related credit
exposures.
181 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
According to the enforceable master netting agreements with counterparties, in
the event of default, derivative financial instruments with the same counterparty
can be settled net. The table below shows the group’s financial assets and
liabilities that could be subject to offset in the balance sheet and the impact of a
trigger for the enforcement of the master netting agreement after applying any
existing collaterals.
Gross amount $ million | Right of asset offset $ million | Right of liability offset $ million | Net amount $ million | |
2026 | ||||
Derivative financial assets | ( | ( | ||
Derivative financial liabilities | ( | ( | ||
2025 | ||||
Derivative financial assets | ( | ( | ||
Derivative financial liabilities | ( | ( |
Financial credit risk
Diageo aims to minimise its financial credit risk through the application of risk
management policies approved and monitored by the Board. Counterparties are
predominantly limited to investment-grade banks and financial institutions, and
the policy restricts the exposure to any one counterparty by setting credit limits
taking into account the credit quality of the counterparty. The credit risk arising
through the use of financial instruments for currency, interest rate and
commodity price risk management is estimated with reference to the fair value of
contracts. Diageo annually reviews the credit limits applied and regularly
monitors the counterparties’ credit quality reflecting market credit conditions.
Business related credit risk
Exposures from loans, trade and other receivables are managed locally in the
operating units where they arise and active risk management is applied, focusing
on country risk, credit limits, ongoing credit evaluation and monitoring
procedures. There is no significant concentration of credit risk with respect to
loans, trade and other receivables as the group has a large number of customers
that are internationally dispersed.
Liquidity risk is the risk of Diageo encountering difficulties in meeting its
obligations associated with financial liabilities that are settled by delivering cash
or other financial assets. The group uses short-term commercial paper to finance
its day-to-day operations. The group maintains backstop facilities with
relationship banks to support commercial paper obligations.
The following tables provide an analysis of the anticipated contractual cash
flows including interest payable for the group’s financial liabilities and
derivative instruments on an undiscounted basis. Where interest payments are
calculated at a floating rate, rates of each cash flow until maturity of the
instruments are calculated based on the forward yield curve prevailing at the
respective year ends. Financial assets and liabilities are presented gross in the
consolidated balance sheet although, in practice, the group uses netting
arrangements to reduce its liquidity requirements on these instruments.
Due within 1 year $ million | Due between 1 and 3 years $ million | Due between 3 and 5 years $ million | Due after 5 years $ million | Total $ million | Carrying amount at balance sheet date $ million | |
2026 | ||||||
Borrowings(1)(2)(3) | ( | ( | ( | ( | ( | ( |
Leases(3) | ( | ( | ( | ( | ( | ( |
Trade and other financial liabilities(4) | ( | ( | ( | ( | ( | ( |
Non-derivative financial liabilities | ( | ( | ( | ( | ( | ( |
Derivative financial instruments | ||||||
Receivable | ||||||
Payable | ( | ( | ( | ( | ( | |
Derivative instruments(2)(5) | ( | ( | ( | |||
2025 | ||||||
Borrowings(1)(2)(3) | ( | ( | ( | ( | ( | ( |
Leases(3) | ( | ( | ( | ( | ( | ( |
Trade and other financial liabilities(4) | ( | ( | ( | ( | ( | ( |
Non-derivative financial liabilities | ( | ( | ( | ( | ( | ( |
Derivative financial instruments | ||||||
Receivable | ||||||
Payable | ( | ( | ( | ( | ( | |
Derivative instruments(2)(5) | ( | ( |
(1)For the purposes of these tables, borrowings are defined as gross borrowings excluding lease liabilities and fair value of derivative instruments as disclosed in note 17.
(2)Carrying amount of interest on borrowings, interest on derivatives and interest on other payables is included within interest payable in note 15.
(3)Including both principal and interest.
(4)Primarily consists of trade and other payables that meet the definition of financial liabilities under IAS 32.
(5)Derivative financial instruments consist of foreign currency swaps and forwards, cross currency swaps, interest rate swaps and commodity trades.
2026 $ million | 2025 $ million | |
Expiring within one year | ||
Expiring after one year | ||
The facilities can be used for general corporate purposes and, together with cash
182 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Fair value measurements of financial instruments are presented through the use
of a three-level fair value hierarchy that prioritises the valuation techniques used
in fair value calculations.
The group maintains policies and procedures to value instruments using the most
relevant data available. If multiple inputs that fall into different levels of the
hierarchy are used in the valuation of an instrument, the instrument is categorised
on the basis of the least observable input.
Foreign currency forwards and swaps, cross currency swaps and interest rate
swaps are valued using discounted cash flow techniques. These techniques
incorporate inputs at levels 1 and 2, such as foreign exchange rates and interest
rates. These market inputs are used in the discounted cash flow calculation
incorporating the instrument’s term, notional amount and discount rate, and
taking credit risk into account. As significant inputs to the valuation are
observable in active markets, these instruments are categorised as level 2 in the
hierarchy.
Other financial liabilities include a put option, which does not have an expiry
date, held by Industrias Licoreras de Guatemala (ILG) to sell the remaining 50 %
equity stake in Rum Creation & Products Inc., the owner of the Zacapa rum
brand, to Diageo. The liability is fair valued using the discounted cash flow
method and as at 30 June 2026, an amount of $112 million (30 June 2025 –
$101 million) is recognised as a liability with changes in the fair value of the put
option included in retained earnings. As the valuation of this option uses
assumptions not observable in the market, it is categorised as level 3 in the
hierarchy. As at 30 June 2026, because it is unknown when or if ILG will
exercise the option, the liability is measured as if the exercise date is the last day
of the next financial year considering forecast future performance. The put
option is not sensitive to reasonably possible changes in assumptions. If the
option was to be exercised as at 30 June 2028, the fair value of the liability
would increase by approximately $5 million.
There were no significant changes in the measurement and valuation techniques,
or significant transfers between the levels of the financial assets and liabilities in
the year ended 30 June 2026.
as follows:
2026 $ million | 2025 $ million | |
Derivative assets | ||
Derivative liabilities | ( | ( |
Valuation techniques based on observable market input (Level 2) | ||
Financial assets - other | ||
Financial liabilities - other | ( | ( |
Valuation techniques based on unobservable market input (Level 3) | ( | ( |
Financial liabilities - other (level 3) | Financial liabilities - other (level 3) | |
2026 $ million | 2025 $ million | |
At the beginning of the year | ( | ( |
Net gains included in the income statement | ||
Net gains/(losses) included in exchange in other comprehensive income | ( | |
Net (losses)/gains included in retained earnings | ( | |
Acquisitions | ( | |
Settlement of liabilities | ||
At the end of the year | ( | ( |
183 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
The group targets a one-to-one hedge ratio. The strength of the economic relationship between the hedged items and the hedging instruments is analysed on an
ongoing basis. Ineffectiveness can arise from changes in hedged balance sheet positions, group net investment positions, or subsequent changes in the forecast
transactions as a result of differences in timing, cash flows or values except when the critical terms of the hedging instrument and hedged item are closely aligned.
Where applicable, the change in the credit risk of the hedging instruments or the hedged items is not expected to be the primary factor in the economic relationship.
hedging instruments designated in hedging relationships by the main risk categories are as follows:
Notional amounts $ million | Maturity | Range of hedged rates | |
2026 | |||
Net investment hedges | |||
Derivatives in net investment hedges of foreign operations | August 2026 - October 2027 | Canadian dollar Chinese yuan Indian rupees | |
Foreign currency borrowings in net investment hedges | June 2029 - August 2044 | sterling euro | |
Cash flow hedges | |||
Derivatives in cash flow hedge (foreign currency debt)(1) | October 2027 - June 2034 | euro sterling | |
Derivatives in cash flow hedge (foreign currency risk)(2) | September 2026 - August 2028 | sterling Mexican peso | |
Derivatives in cash flow hedge (commodity price risk)(2) | July 2026 - September 2028 | Wheat: Natural Gas: | |
Fair value hedges | |||
Derivatives in fair value hedge(3) | March 2027 - June 2038 | EURIBOR SOFR SONIA | |
2025 | |||
Net investment hedges | |||
Derivatives in net investment hedges of foreign operations | August 2025 - October 2027 | euro Canadian dollar Chinese yuan | |
Foreign currency borrowings in net investment hedges | May 2026 - August 2044 | sterling euro | |
Cash flow hedges | |||
Derivatives in cash flow hedge (foreign currency debt)(1) | September 2028 - June 2034 | euro | |
Derivatives in cash flow hedge (foreign currency risk)(2) | September 2025 - January 2028 | sterling Mexican peso | |
Derivatives in cash flow hedge (commodity price risk)(2) | July 2025 - June 2027 | Aluminium: Natural Gas: | |
Fair value hedges | |||
Derivatives in fair value hedge(3) | September 2025 - April 2035 | EURIBOR SOFR |
(1)For cash flow hedges in respect of foreign currency debt, the notional amount of hedged items recognised in the consolidated balance sheet equals the notional value of the hedging
instruments at 30 June 2026 and is included within borrowings. Exchange retranslation and the interest on the hedged bonds are expected to offset those on the cross currency swaps in
the income statement in each of the years.
(2)In case of derivatives in cash flow hedges (commodity price risk and foreign currency risk), the range of the most significant contract’s hedged rates are presented.
(3)In case of derivatives in fair value hedges, the range of the floating interest rates of the derivatives are presented.
For cash flow hedges of forecast transactions at 30 June 2026, based on year end interest and exchange rates, a gain to the income statement of $88 million in the year
ending 30 June 2027 and a gain of $14 million in the year ending 30 June 2028 is expected to be recognised.
The amount relating to the hedges of foreign currency borrowings that are no longer applicable at 30 June 2026 is $116 million (2025 – $114 million). In the year
ended 30 June 2026, the income statement included a gain of $7 million (2025 – $5 million) from amortisation of fair value of financial derivatives.
From the total net investment hedge reserve of $3,127 million (2025 – $3,333 million), $2,543 million (2025 – $2,665 million) is attributable to net investment hedges
for which hedge accounting no longer applies.
184 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
and other comprehensive income:
Other comprehensive income | ||||||
At the beginning of the year $ million | Consolidated income statement $ million | Recognised in other comprehensive income $ million | Recycled to income statement $ million | Other(2) $ million | At the end of the year $ million | |
2026 | ||||||
Net investment hedges(1) | ||||||
Derivatives in net investment hedges of foreign operations(3) | ( | ( | ( | ( | ||
Foreign currency borrowings in net investment hedges | ( | ( | ( | |||
Cash flow hedges(1) | ||||||
Derivatives in cash flow hedge (foreign currency debt) | ( | ( | ||||
Derivatives in cash flow hedge (foreign currency risk) | ( | ( | ||||
Derivatives in cash flow hedge (commodity price risk) | ( | ( | ||||
Fair value hedges(1) | ||||||
Derivatives in fair value hedge (interest rate risk) | ( | — | — | — | ( | |
Borrowings in fair value hedge | ( | — | — | — | ||
Instruments in fair value hedge relationship | ( | — | — | — | ( | |
2025 | ||||||
Net investment hedges(1) | ||||||
Derivatives in net investment hedges of foreign operations | ( | ( | ( | |||
Foreign currency borrowings in net investment hedges | ( | — | ( | — | ( | ( |
Cash flow hedges(1) | ||||||
Derivatives in cash flow hedge (foreign currency debt) | ( | ( | ||||
Derivatives in cash flow hedge (foreign currency risk) | ( | ( | ||||
Derivatives in cash flow hedge (commodity price risk) | ( | ( | ( | ( | ||
Fair value hedges(1) | ||||||
Derivatives in fair value hedge (interest rate risk) | ( | — | — | — | ( | |
Borrowings in fair value hedge | ( | — | — | — | ||
Instruments in fair value hedge relationship | ( | — | — | — | ( | |
(1)There was no significant ineffectiveness on net investment, cash flow and fair value hedges during the years ended 30 June 2026 and 2025, accordingly the fair value movement of the
hedged items was materially similar and offsetting the movement of the hedges.
(2)Other movements include cash flows on result of matured derivatives, notional of bonds designated in or de-designated from net investment hedges and reclassification of hedging
instruments between hedge portfolios and de-designation of hedging instruments.
(3)In respect of derivatives in net investment hedges, in the year ended 30 June 2026 a loss of $22 million (2025 - $77 million) was recognised in net investment hedge reserve, a loss of $12
million (2025 - a gain of $101 million) was recognised in cost of hedging and a gain of $9 million (2025 - a gain of $26 million) was transferred out of other comprehensive income to
185 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
2026 | 2025 | ||||||
Category | Current $ million | Non-current $ million | Total $ million | Current $ million | Non-current $ million | Total $ million | |
Other investments and loans(1) | a/b | — | — | ||||
Trade and other receivables(2) | b/c | ||||||
Cash and cash equivalents | b | — | — | ||||
Derivatives | a | ||||||
Mutual fund | b | ||||||
Receivable from share trusts | b | ||||||
Total other financial assets | |||||||
Total financial assets | |||||||
Borrowings(3) | b | ( | ( | ( | ( | ( | ( |
Trade and other payables(2) | b/c | ( | ( | ( | ( | ( | ( |
Derivatives | a | ( | ( | ( | ( | ( | ( |
Put option | a | ( | — | ( | ( | — | ( |
Leases | b | ( | ( | ( | ( | ( | ( |
Total other financial liabilities | ( | ( | ( | ( | ( | ( | |
Total financial liabilities | ( | ( | ( | ( | ( | ( | |
Total net financial liabilities | ( | ( | ( | ( | ( | ( | |
(1)Other investments and loans include those in respect of associates. Out of the total balance, $51 million (2025 - $75 million) is measured at fair value through profit or loss and $2
million (2025 - $1 million) at amortised cost.
(2)Trade receivables comprise $2,922 million (2025 - $3,120 million) measured at amortised cost and $419 million (2025 - $422 million) relating to items not categorised as financial
instruments. Trade payables include balances measured at amortised cost of $5,572 million (2025 - $5,979 million), at fair value through profit or loss of $28 million (2025 - $125
million) and item not categorised as financial instruments of $975 million (2025 - $1,040 million).
(3)Borrowings are defined as gross borrowings excluding lease liabilities and the fair value of derivative instruments.
a.Financial instruments at fair value through profit or loss.
b.Financial instruments measured at amortised cost.
c.Not categorised as a financial instrument.
At 30 June 2026 and 30 June 2025, the carrying values of cash and cash
equivalents, other financial assets and liabilities approximate fair values. At 30
June 2026, the fair value of borrowings, based on unadjusted quoted market data,
(j) Capital management
The group’s management is committed to enhancing shareholder value in the
long-term, both by investing in the business and brands so as to deliver continued
improvement in the return from those investments and by managing the capital
structure. Diageo manages its capital structure to achieve capital efficiency,
provide flexibility to invest through the economic cycle and give efficient access
to debt markets at attractive cost levels. This is achieved by targeting an adjusted
net borrowings (net borrowings aggregated with post-employment benefit
liabilities) to adjusted EBITDA leverage of 2.5 –3.0 times, this range for Diageo
being currently broadly consistent with an A-band credit rating. Diageo would
consider operating outside of this range in order to effect strategic initiatives
within its stated goals, which could have an impact on its rating. If Diageo’s
leverage was to be negatively impacted by the financing of an acquisition, it
would seek over time to return to the range of 2.5 –3.0 times. The group regularly
assesses its debt and equity capital levels against its stated policy for capital
structure. As at 30 June 2026, the adjusted net borrowings of $20,869 million
(2025 – $22,263 million) to adjusted EBITDA ratio was 3.1 (2025 – 3.4 ) times.
For this calculation, net borrowings are adjusted by post-employment benefit
liabilities before tax of $387 million (2025 – $409 million) whilst adjusted
EBITDA of $6,650 million (2025 – $6,645 million) comprises operating profit
excluding exceptional operating items and depreciation, amortisation and
impairment and includes share of after-tax results of associates and joint
ventures.
On 24 February 2026 the Board decided to move to a new dividend policy to
strengthen the balance sheet and manage liquidity. This decision supports the
company’s long term financial resilience. The Board decided to move to a
the business. The Board has also set a minimum floor for the dividend of 50
cents per annum. Subject to approval by shareholders, a final dividend of 30
cents per share (2025 – 62.98 cents per share) will be paid to holders of ordinary
shares and US ADRs on register as of 16 October 2026. The ex-dividend date is
15 October 2026 for holders of ordinary shares and 16 October 2026 for holders
of US ADRs. Holders of ordinary shares will receive their dividends in sterling
unless they elect to receive their dividends in US dollars by 6 November 2026.
The dividend per share in pence to be paid to ordinary shareholders will be
announced on 19 November 2026 and will be determined by the actual foreign
exchange rates achieved by Diageo buying forward contracts for sterling, entered
into during the three trading days preceding the sterling equivalent
announcement of the final dividend. A dividend reinvestment plan is available to
holders of ordinary shares in respect of the final dividend and the plan notice
date is 6 November 2026.
186 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Accounting policies | ||
Borrowings are initially recognised at fair value net of transaction costs and are subsequently reported at amortised cost. Certain bonds are designated in fair value hedge relationship. In these cases, the amortised cost is adjusted for the fair value of the risk being hedged, with changes in value recognised in the income statement. The fair value adjustment is calculated using a discounted cash flow technique based on unadjusted market data. Bank overdrafts form an integral part of the group’s cash management and are included as a component of net cash and cash equivalents in the consolidated statement of cash flows. Cash and cash equivalents comprise cash in hand and deposits which are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value and have an original maturity of three months or less, including money market deposits, commercial paper and investments. Net borrowings are defined as gross borrowings (short-term borrowings and long-term borrowings plus lease liabilities plus interest rate hedging instruments, cross currency interest rate swaps and foreign currency forwards and swaps used to manage borrowings) less cash and cash | ||
2026 $ million | 2025 $ million | |
Bank overdrafts | ||
Bank and other loans | ||
$ | ||
$ | ||
€ | ||
€ | ||
£ | ||
$ | ||
€ | ||
Fair value adjustment to borrowings | ( | ( |
Borrowings due within one year | ||
£ | ||
$ | ||
€ | ||
€ | ||
$ | ||
$ | ||
£ | ||
€ | ||
£ | ||
€ | ||
$ | ||
$ | ||
$ | ||
€ | ||
€ | ||
€ | ||
$ | ||
€ | ||
£ | ||
$ | ||
$ | ||
€ | ||
$ | ||
€ |
2026 $ million | 2025 $ million | |
$ | ||
$ | ||
€ | ||
£ | ||
$ | ||
$ | ||
€ | ||
Bank and other loans | ||
Fair value adjustment to borrowings | ( | ( |
Borrowings due after one year | ||
Total borrowings before leases and derivative financial instruments | ||
Fair value of cross currency interest rate swaps | ( | ( |
Fair value of foreign currency swaps and forwards | ||
Fair value of interest rate hedging instruments | ||
Lease liabilities | ||
Gross borrowings | ||
Less: Cash and cash equivalents | ( | ( |
Net borrowings |
(1)SEC-registered debt issued on an unsecured basis by Diageo Investment Corporation,
a 100 % owned subsidiary of Diageo plc and fully and unconditionally guaranteed by
Diageo plc. No other subsidiary of Diageo plc guarantees the security.
(2)SEC-registered debt issued on an unsecured basis by Diageo Capital plc, a 100 %
owned subsidiary of Diageo plc and fully and unconditionally guaranteed by
Diageo plc. No other subsidiary of Diageo plc guarantees the security.
(i)The interest rates shown are those contracted on the underlying borrowings before
taking into account any interest rate hedges (see note 16).
(ii)Bonds are stated net of unamortised finance costs of $90 million (2025 – $103
million).
(iii)All bonds, medium-term notes and commercial paper issued on an unsecured basis by
the group’s 100 % owned subsidiaries are fully and unconditionally guaranteed on an
unsecured basis by Diageo plc and no other subsidiary of Diageo plc guarantees
expected to mature as follows:
2026 $ million | 2025 $ million | |
Within one year | ||
Between one and three years | ||
Between three and five years | ||
Beyond five years | ||
2026 $ million | 2025 $ million | 2024 $ million | |
Issued | |||
€ denominated | |||
$ denominated | |||
Repaid | |||
€ denominated | ( | ( | ( |
$ denominated | ( | ( | ( |
( |
187 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
2026 $ million | 2025 $ million | |
At beginning of the year | ||
Net decrease/(increase) in cash and cash equivalents | ( | |
Net (decrease)/increase in bonds and other borrowings | ( | |
Net decrease in net borrowings from cash flows | ( | ( |
Exchange differences on net borrowings | ( | |
Other non-cash items(1) | ||
Net borrowings at the end of the year |
(1)In the year ended 30 June 2026, other non-cash items are principally in respect of an
increase in lease liabilities of $188 million, fair value loss of net borrowings of
$9 million and bond finance cost amortisation of $18 million and reclassification to
assets held for sale of $18 million. In the year ended 30 June 2025, other non-cash
items are principally in respect of fair value losses on borrowings of $182 million and
an increase in lease liabilities of $147 million partially offset by gains of cross
currency interest rate swaps and interest rate swaps of $183 million and
reclassification from assets held for sale of $45 million.
2026 | 2025 | |||
Cash and cash equivalents $ million | Gross borrowings(1) $ million | Cash and cash equivalents $ million | Gross borrowings(1) $ million | |
US dollar | ( | ( | ||
Euro(2) | ( | ( | ||
Sterling | ( | ( | ||
Canadian dollar(3) | ( | ( | ||
Kenyan shilling | ( | ( | ||
Indian rupee | ( | ( | ||
Mexican peso | ||||
Chinese yuan | ( | ( | ||
Other | ( | |||
Total | ( | ( | ||
(1)Includes foreign currency forwards and swaps and leases.
(2)Includes $16 million cash and cash equivalents in cash-pooling arrangements (2025 –
$15 million).
(3)Mainly net investment hedge in Canadian dollar at 30 June 2026.
Accounting policies | ||
Own shares represent shares and share options of Diageo plc that are held in treasury or by employee share trusts for the purpose of fulfilling obligations in respect of various employee share plans or were acquired as part of a share buyback programme. Own shares are treated as a deduction from equity until the shares are cancelled, reissued or disposed of and when vest are transferred from own shares to retained earnings at their weighted average cost. | ||
Share-based payments include share awards and options granted to directors and employees. The fair value of equity settled share options and share grants is initially measured at grant date based on Monte Carlo and Black Scholes models and is charged to the income statement over the vesting period. For equity settled shares, the credit is included in retained earnings. | ||
Dividends are recognised in the financial statements in the year in which | ||
28101⁄108 pence each
Number of shares million | Nominal value $ million | |
At 30 June 2024 | ||
Shares cancelled | ||
At 30 June 2025 | ||
Shares cancelled | ||
At 30 June 2026 |
Hedging reserve $ million | Exchange reserve $ million | Total $ million | |
At 30 June 2023 | ( | ( | |
Other comprehensive loss | ( | ( | ( |
At 30 June 2024 | ( | ( | |
Other comprehensive income | |||
At 30 June 2025 | ( | ( | |
Other comprehensive loss | ( | ( | ( |
At 30 June 2026 | ( | ( |
Out of the total hedging reserve, a loss of $24 million (2025 – $3 million)
represents the cost of hedging arising from derivatives in net investment hedges.
Number of shares million | Purchase consideration $ million | |
At 30 June 2023 | ||
Share trust arrangements | ( | ( |
Shares used to satisfy options | ( | ( |
Shares purchased – share buyback programme | ||
Shares cancelled | ( | ( |
At 30 June 2024 | ||
Share trust arrangements | ( | ( |
Shares used to satisfy options | ( | ( |
At 30 June 2025 | ||
Share trust arrangements | ( | ( |
Shares used to satisfy options | ( | ( |
At 30 June 2026 |
188 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Share trust arrangements
At 30 June 2026, the employee share trusts owned 2 million of ordinary shares
in Diageo plc at a cost of $63 million and market value of $50 million (2025 –
receivable by the employee share trusts on the shares are waived and the trustee
abstains from voting.
Purchase of own shares
Authorisation was given by shareholders on 6 November 2025 to purchase a
maximum of 222,565,850 ordinary shares at a minimum price of 28101/108 pence
and a maximum price of the higher of (a) 105 % of the average market value of
the company's ordinary shares for the five business days prior to the day the
purchase is made and (b) the higher of the price of the last independent trade
and the highest current independent bid on the trading venue where the purchase
is carried out. The programme expires at the conclusion of the next Annual
General Meeting or 15 months from the passing of this resolution, if earlier.
During the year ended 30 June 2024, the group purchased 28 million ordinary
shares, representing approximately 1.1 % of the issued ordinary share capital at
an average price of 2918 pence (3644 cents) per share, and an aggregate cost of
$987 million, including transaction costs under the share buyback programme.
The shares purchased under the share buyback programmes were cancelled.
2026 $ million | 2025 $ million | 2024 $ million | |
Amounts recognised as distributions to equity shareholders in the year | |||
Final dividend for the year ended 30 June 2025 – | |||
Interim dividend for the year ended 30 June 2026 | |||
A final dividend of $668 million (30 cents per share; 2025 – 62.98 cents per share)
was recommended by a duly authorised committee of the Board of Directors on
6 August 2026 for approval by shareholders at the Annual General Meeting
scheduled to be held on 5 November 2026 bringing the recommended full year
dividend to 50 cents per share for the year ended 30 June 2026. As this was after the
balance sheet date and the dividend is subject to approval by shareholders at the
Annual General Meeting, this dividend has not been included as a liability in these
consolidated financial statements. There are no corporate tax consequences arising
from this treatment.
Dividends are waived on all treasury shares owned by the company and all
shares owned by the employee share trusts.
Diageo consolidates USL, a company incorporated in India, with a 42.79 % non-controlling interest, Sichuan Shuijingfang Company Limited, a company incorporated in
China, with a 36.35 % non-controlling interest and has a 50 % controlling interest in Ketel One Worldwide B.V. (Ketel One), a company incorporated in the Netherlands.
are as follows:
2026 | 2025 | 2024 | |||
USL $ million | Other $ million | Total $ million | Total $ million | Total $ million | |
Income statement | |||||
Sales | |||||
Net sales | |||||
Profit for the year(1) | |||||
Other comprehensive loss(2) | ( | ( | ( | ( | ( |
Total comprehensive income | |||||
Attributable to non-controlling interests | |||||
Balance sheet | |||||
Non-current assets(3) | |||||
Current assets | |||||
Non-current liabilities | ( | ( | ( | ( | ( |
Current liabilities | ( | ( | ( | ( | ( |
Net assets | |||||
Attributable to non-controlling interests | |||||
Cash flow | |||||
Net cash inflow from operating activities | |||||
Net cash (outflow)/inflow from investing activities | ( | ( | ( | ( | |
Net cash outflow from financing activities | ( | ( | ( | ( | ( |
Net increase/(decrease) in cash and cash equivalents | ( | ( | |||
Exchange differences | ( | ( | ( | ( | |
Dividends payable to non-controlling interests | ( | ( | ( | ( | ( |
(1)Profit for the year includes exceptional operating items attributable to non-controlling interests.
(2)Other comprehensive loss is principally in respect of exchange on translating the subsidiaries to US dollar.
(3)Non-current assets include the global distribution rights for Ketel One vodka products worldwide. The carrying value of the distribution right at 30 June 2026 was $1,800 million (2025 –
$1,800 million; 2024 – $1,800 million).
On 24 March 2026, Diageo announced the sale of its shareholding in Royal Challengers Sports Pvt Limited to a consortium comprising Aditya Birla Group, The
Times of India Group, Bolt Ventures and Blackstone's.
On 3 July 2025, Diageo completed the sale of its 80.4 % shareholding in Guinness Ghana Breweries PLC to Castel Group.
On 1 July 2025, Diageo completed the sale of its 54.4 % shareholding in Seychelles Breweries Limited to Phoenix Beverages.
On 30 September 2024, Diageo completed the sale of its 58.02 % shareholding in Guinness Nigeria PLC to N-Seven Nigeria Ltd., part of the Tolaram group.
189 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
The group uses a number of share award and option plans to grant to its
directors and employees.
years ended 30 June 2026 is as follows:
2026 $ million | 2025 $ million | 2024 $ million | |
Executive share award plans | |||
Executive share option plans | |||
Savings plans | ( | ||
Executive share awards have been granted under the Diageo 2014 Long-Term
Incentive Plan (DLTIP) from September 2014 until September 2023 and are
granted under the replacement plan, the Diageo 2023 Long-Term Incentive Plan
from March 2024 onwards to some employees below the Board and from
September 2024 to Executive Directors. Awards are granted as conditional
awards in the form of performance shares, performance share options, time-
vesting restricted stock units (RSUs) and/or time-vesting share options (or cash-
based equivalents in certain locations for regulatory reasons). Share options are
granted at market value at the time of grant. In the case of Executive Directors,
conditional awards of time-vesting RSUs or forfeitable shares may be awarded
under the 2020 Deferred Bonus Share Plan (DBSP), with vesting not subject to
any performance conditions and not subject to a post-vesting retention period.
Share awards normally vest on the third anniversary of the grant date.
Participants do not make a payment to receive the award at grant. Executive
Directors are required to hold any vested shares awarded under the DLTIP for a
further two-year post-vesting holding period. Share options may normally be
exercised between three and ten years after the grant date. Executives in North
America and Latin America and Caribbean are granted awards over the
company’s ADRs (one ADR is equivalent to four ordinary shares).
For Executive Directors, performance shares under the DLTIP (for awards
granted in 2023 and 2024) are subject to the achievement of three performance
measures: 1) compound annual growth in profit before exceptional items over
three years; 2) compound annual growth in organic net sales over three years;
and 3) environmental, social and governance (ESG) priorities, weighted 40 %,
DLTIP for awards granted in 2025 are subject to the achievement of four
performance measures: 1) compound annual growth in profit before exceptional
items over three years; 2) compound annual growth in organic net sales over
three years; 3) adjusted return on invested capital; and 4) ESG priorities,
weighted 28.3 %, 28.3 %, 28.3 % and 15 % of the maximum respectively.
Performance share options under the DLTIP are subject to the achievement of
two equally weighted performance measures: 1) a comparison of Diageo’s
three-year TSR against a relevant peer group; 2) cumulative free cash flow over
a three-year period, measured at constant exchange rates. Performance measures
and targets are set annually by the Remuneration Committee and disclosed
within the relevant Directors' Remuneration Report. The vesting range is 20 %
for Executive Directors and 25 % for other participants, for achieving minimum
performance targets, up to 100 % for achieving the maximum target level.
Retesting of the performance measures is not permitted.
For performance shares under the DLTIP, dividends are accrued on awards and
are released to participants to the extent that the awards vest at the end of the
performance period. Dividend equivalents are normally paid out in the form of
shares.
Savings plans are provided in the form of a savings-related share option plan in
the UK and Republic of Ireland (ROI) and in the form of savings-related share
purchase plan in the US. Employees participating in these plans agree to make
regular monthly savings to buy options over Diageo shares or American
Depositary Receipts (ADRs) at a discounted price.
There are other all-employee share incentive plans available within the group,
including the UK Share Incentive Plan, the ROI Profitshare Plan and the One
World Share Incentive Plan introduced in the year ended 30 June 2025.
executive share awards used the Monte Carlo and Black Scholes pricing model
and the following assumptions:
2026 | 2025 | 2024 | |
Risk free interest rate | |||
Expected life of the awards | |||
Dividend yield | |||
Weighted average share price | |||
Weighted average fair value of awards granted in the year(1) | |||
Number of awards granted in the year | |||
Fair value of all awards granted in the year | $ | $ | $ |
(1)Based on transaction rate at grant date of the awards.
Transactions on schemes
June 2026 were as follows:
2026 million | 2025 million | 2024 million | |
Number of awards outstanding at 1 July | |||
Granted | |||
Awarded | ( | ( | ( |
Forfeited | ( | ( | ( |
Number of awards outstanding at 30 June |
The exercise price of share options outstanding at 30 June 2026 was in the range
of 1466 pence – 3763 pence (2025 – 1709 pence – 3763 pence; 2024 – 1709
pence – 3854 pence).
At 30 June 2026, 3.6 million (2025 – 4.6 million, 2024 – 3.3 million) share
options were exercisable at a weighted average exercise price of 2885 pence
(2025 – 2512 pence, 2024 – 2639 pence). Weighted average remaining
contractual life of share options was 6 years at 30 June 2026 (2025 – 6 years,
2024 – 6 years).
190 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Other financial statements disclosures
Introduction
This section includes additional financial information that are either required by the relevant accounting standards or management considers these to be material
information for shareholders.
Accounting policies | ||
Provision is made for the anticipated settlement costs of legal or other disputes against the group where it is considered to be probable that a liability exists and a reliable estimate can be made of the likely outcome. Where it is possible that a settlement may be reached or it is not possible to make a reliable estimate of the estimated financial effect, appropriate disclosure is made but no provision is created. | ||
Critical accounting judgements and estimates | ||
Judgement is necessary in assessing the likelihood that a claim will succeed, or a liability will arise, and an estimate to quantify the possible range of any settlement. Due to the inherent uncertainty in this evaluation process, actual losses may be different from the liability originally estimated. The group may be involved in legal proceedings in respect of which it is not possible to make a reliable estimate of any expected settlement. In such cases, appropriate disclosure is provided but | ||
(a) Guarantees and related matters
As of 30 June 2026, the group has no material unprovided guarantees or
indemnities in respect of liabilities of third parties.
(b) Acquisition of USL shares from UBHL and related
proceedings in relation to the USL transaction
On 4 July 2013, Diageo completed its acquisition, under a share purchase
agreement with United Breweries (Holdings) Limited (UBHL) and various
other sellers (the SPA), of shares representing 14.98 % in USL, including shares
representing 6.98 % from UBHL. The SPA was signed on 9 November 2012as
part of the transaction announced by Diageo in relation to USL on that day (the
Original USL Transaction). Following a series of further transactions, as of 30
June 2026, Diageo has a 55.88 % investment in USL (excluding 2.38 % owned
by the USL Benefit Trust).
Prior to the acquisition from UBHL on 4 July 2013, the High Court of
Karnataka (High Court) had granted leave to UBHL under the Indian
Companies Act 1956 (the Leave Order) to enable the sale by UBHL to Diageo
to take place (the UBHL Share Sale) notwithstanding the continued existence of
certain winding-up petitions that were pending against UBHL on the date of the
SPA. At the time of the completion of the UBHL Share Sale, the Leave Order
remained subject to review on appeal. However, as stated by Diageo at the time
of closing, it was considered unlikely that any appeal process in respect of the
Leave Order would definitively conclude on a timely basis and, accordingly,
Diageo waived the conditionality under the SPA relating to the absence of
insolvency proceedings in relation to UBHL and acquired the 6.98 % stake in
USL from UBHL at that time.
Following appeal and counter-appeal in respect of the Leave Order, this matter
is now before the Supreme Court of India which has issued an order that the
status quo be maintained with regard to the UBHL Share Sale pending a hearing
on the matter before it. Following a number of adjournments, the next date for a
substantive hearing is yet to be fixed.
In separate proceedings, the High Court passed a winding-up order against
UBHL on 7 February 2017, and appeals filed by UBHL against that order have
since been dismissed, initially by a division bench of the High Court and
subsequently by the Supreme Court of India.
Diageo continues to believe that the acquisition price of INR 1,440 per share
paid to UBHL for the USL shares is fair and reasonable as regards UBHL,
UBHL’s shareholders and UBHL’s secured and unsecured creditors. However,
adverse results for Diageo in the proceedings referred to above could, absent
leave or relief in other proceedings, ultimately result in Diageo losing title to the
of its rights under USL’s articles of association to nominate USL’s CEO and
CFO and the right to appoint, through USL, a majority of the directors on the
boards of USL’s subsidiaries as well as its ability as promoter to nominate for
appointment up to two-thirds of USL’s directors for so long as the chairperson
of USL is an independent director, that it would remain in control of USL and
would continue to be able to consolidate USL as a subsidiary for accounting
purposes regardless of the outcome of this litigation.
There can be no certainty as to the outcome of the existing or any further related
legal proceedings or the time frame within which they would be concluded.
(c) Continuing matters relating to Dr Vijay Mallya and
affiliates
On 25 February 2016, Diageo and USL each announced that they had entered
into arrangements with Dr Mallya under which he had agreed to resign from his
position as a director and as chair of USL and from his positions in USL’s
subsidiaries.
Diageo’s agreement with Dr Mallya (the February 2016 Agreement) provided
for a payment of $75 million to Dr Mallya over a five-year period of which
$40 million was paid on the signing of the February 2016 Agreement with the
balance being payable in equal instalments of $7 million a year over five years
(2017-2021). All payments were subject to and conditional on Dr Mallya’s
compliance with the agreement. The February 2016 Agreement also provided
for the release of Dr Mallya’s personal obligations to indemnify Diageo
Holdings Netherlands B.V. (DHN) in respect of its earlier liability ($141
million) under a backstop guarantee of certain borrowings of Watson Limited
(Watson) (a company affiliated with Dr Mallya).
On account of various breaches and other provisions of agreements between Dr
Mallya and persons connected with him and Diageo and/or USL, Diageo did not
make the five instalment payments due during the five-year period between
2017 and 2021. In addition, Diageo has also demanded that Dr Mallya repay the
$40 million paid by Diageo in February 2016 and sought compensation for
various losses incurred by the relevant members of the Diageo group.
On 16 November 2017, Diageo and other relevant members of the Diageo group
commenced claims in the High Court of Justice in England and Wales (the
English High Court) against Dr Mallya in relation to these matters. At the same
time DHN also commenced claims in the English High Court against Dr
Mallya, his son Sidhartha Mallya, Watson and Continental Administration
Services Limited (CASL) (a company affiliated with Dr Mallya and understood
to hold assets on trust for him and certain persons affiliated with him) for in
excess of $142 million (plus interest) in relation to Watson’s liability to DHN in
respect of its borrowings referred to above and the breach of associated security
documents. Dr Mallya, Sidhartha Mallya and the relevant affiliated companies
filed a defence to these claims, and Dr Mallya also filed a counterclaim for
payment of the two instalment payments that had by that time been withheld as
described above.
As part of these proceedings, Diageo and the other relevant members of its
group filed an application for strike out and/or summary judgement in respect of
certain aspects of the defence filed by Dr Mallya and the other defendants,
including their defence in relation to Watson and CASL’s liability to repay
DHN. The application was successful resulting in Watson being ordered to pay
approximately $135 million plus various amounts in respect of interest to DHN,
with CASL being held liable as co-surety for 50 % of any such amount unpaid
by Watson. These amounts were, contrary to the relevant orders, not paid by the
relevant deadlines and Watson and CASL’s remaining defences in the
proceedings were struck out. Diageo and DHN have accordingly sought asset
disclosure and are considering further enforcement steps against Watson and
CASL, both in the United Kingdom and in other jurisdictions where they are
present or hold assets, including actively taking steps to retain the right to
enforcement against Watson in Mauritius.
A trial of the remaining elements of these claims was due to commence on 21
November 2022. However, on 26 July 2021 Dr Mallya was declared bankrupt by
the English High Court pursuant to a bankruptcy petition presented by a
consortium of Indian banks. Dr Mallya’s appeal against his bankruptcy was
dismissed in April 2025 and it is understood that an application by Dr Mallya to
annul his bankruptcy has subsequently been discontinued. The trial of Diageo’s
claim has been deferred and is currently awaiting rescheduling.
191 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
At this stage, it is not possible to assess the extent to which the various ongoing
proceedings related to the bankruptcy will affect the remaining elements of the
claims by Diageo and the relevant members of its group.
Upon completion of an initial inquiry in April 2015 into past improper
transactions which identified references to certain additional parties and matters,
USL carried out an additional inquiry into these transactions (Additional
Inquiry) which was completed in July 2016. The Additional Inquiry, prima
facie, identified transactions indicating actual and potential diversion of funds
from USL and its Indian and overseas subsidiaries to, in most cases, entities that
appeared to be affiliated or associated with Dr Mallya. All amounts identified in
the Additional Inquiry have been provided for or expensed in the financial
statements of USL or its subsidiaries in the respective prior periods. USL has
filed recovery suits against relevant parties identified pursuant to the Additional
Inquiry.
Further, at this stage, it is not possible for the management of USL to estimate the
financial impact on USL, if any, arising out of potential non-compliance with
applicable laws in relation to such fund diversions.
(d) Other matters in relation to USL
In respect of the Watson backstop guarantee arrangements, the Securities and
Exchange Board of India (SEBI) issued a notice to Diageo on 16 June 2016 that
if there is any net liability incurred by Diageo (after any recovery under relevant
security or other arrangements, which matters remain pending) on account of
the Watson backstop guarantee, such liability, if any, would be considered to be
part of the price paid for the acquisition of USL shares under the SPA which
formed part of the Original USL Transaction and that, in that case, additional
equivalent payments would be required to be made to those shareholders
(representing 0.04 % of the shares in USL) who tendered in the open offer made
as part of the Original USL Transaction. Diageo believes that the Watson
backstop guarantee arrangements were not part of the price paid or agreed to be
paid for any USL shares under the Original USL Transaction and that therefore
SEBI's decision was not consistent with applicable law, and Diageo appealed
against it before the Securities Appellate Tribunal, Mumbai (SAT). On 1
November 2017, SAT issued an order in respect of Diageo’s appeal in which,
amongst other things, it observed that the relevant officer at SEBI had neither
considered Diageo’s earlier reply nor provided Diageo with an opportunity to be
heard, and accordingly directed SEBI to pass a fresh order after giving Diageo an
opportunity to be heard. Following SAT’s order, Diageo made its further
submissions in the matter, including at a personal hearing before a Deputy
General Manager of SEBI. On 26 June 2019, SEBI issued an order reiterating the
directions contained in its previous notice dated 16 June 2016. As with the
previous SEBI notice, Diageo believes that SEBI's latest order is not consistent
with applicable law. Diageo appealed against this order before SAT and, after a
hearing in March 2023, SAT allowed Diageo’s appeal on 26 July 2023.
Accordingly, SEBI’s order dated 26 June 2019 stands quashed at present. While
SEBI has filed an appeal against SAT’s order before the Supreme Court of India,
the next date for a substantive hearing is yet to be fixed. There can be no certainty
as to the outcome or the timeframe within which such appeal will be concluded.
(e) USL’s dispute with IDBI Bank Limited
Prior to the acquisition by Diageo of a controlling interest in USL, USL had
prepaid a term loan taken through IDBI Bank Limited (IDBI), an Indian bank,
which was secured on certain fixed assets and brands of USL, as well as by a
pledge of certain shares in USL held by the USL Benefit Trust (of which USL is
the sole beneficiary). The maturity date of the loan was 31 March 2015. IDBI
disputed the prepayment, following which USL filed a writ petition in
November 2013 before the High Court of Karnataka (the High Court)
challenging the bank’s actions.
Following the original maturity date of the loan, USL received notices from
IDBI seeking to recall the loan, demanding a further sum of INR 459 million
($5 million) on account of the outstanding principal, accrued interest and other
amounts, and also threatening to enforce the security in the event that USL did
not make these further payments. Pursuant to an application filed by USL before
the High Court in the writ proceedings, the High Court directed that, subject to
USL depositing such further amount with the bank (which amount was duly
deposited by USL), the bank should hold the amount in a suspense account and
not deal with any of the secured assets including the shares until disposal of the
original writ petition filed by USL before the High Court.
On 27 June 2019, a single judge bench of the High Court issued an order
dismissing the writ petition filed by USL, amongst other things, on the basis that
the matter involved an issue of breach of contract by USL and was therefore not
maintainable in exercise of the court’s writ jurisdiction. USL filed an appeal
against this order before a division bench of the High Court, which on 30 July
2019 issued an interim order directing the bank to not deal with any of the
secured assets until the next date of hearing. On 13 January 2020, the division
bench of the High Court admitted the writ appeal and extended the interim stay.
This appeal is currently pending. Based on the assessment of USL’s
management supported by external legal opinions, USL continues to believe
that it has a strong case on the merits and therefore continues to believe that the
secured assets will be released to USL and the aforesaid amount of INR 459
million ($5 million) remains recoverable from IDBI.
(f) Tax
The international tax environment has seen increased scrutiny and rapid change
over recent years bringing with it greater uncertainty for multinationals. Against
this backdrop, Diageo has been monitoring developments and continues to
engage transparently with the tax authorities in the countries where it operates
to ensure that the group manages its arrangements on a sustainable basis.
The group operates in a large number of markets with complex tax and
legislative regimes that are open to subjective interpretation. In the context of
these operations, it is possible that tax exposures which have not yet
materialised (including those which could arise as part of tax assessments) may
result in losses to the group. Where the potential tax exposures are known to us
and may lead to a possible material outflow, the group assesses the disclosure of
such matters as contingent liabilities, taking into account both assessed and
unassessed amounts (if any), their size and nature, relevant regulatory
requirements and potential prejudice of the future resolution or assessment
thereof.
Diageo has a large number of ongoing tax cases in Brazil, for which contingent
liabilities are disclosed on the basis of the current known possible exposure
from tax assessment values. While not all of these cases are individually
significant, the current aggregate known possible exposure from tax assessment
values is up to approximately $1,032 million for Brazil. The group believes that
the likelihood that the tax authorities will ultimately prevail is lower than
probable but higher than remote. Due to the fiscal environment in Brazil, the
possibility of further tax assessments related to the same matters cannot be ruled
out and the judicial processes may take extended periods to conclude. Based on
its current assessment, Diageo believes that no provision is required in respect
of these issues.
(g) Other
The group has extensive international operations and routinely makes judgements
on a range of legal, customs and tax matters which are incidental to the group's
operations. Some of these judgements are or may become the subject of challenges
and involve proceedings, the outcome of which cannot be foreseen. In particular, the
group is currently a defendant in various customs proceedings that challenge the
declared customs value of products imported by certain Diageo companies. Diageo
continues to defend its position vigorously in these proceedings.
Save as disclosed above, neither Diageo, nor any member of the Diageo group,
is or has been engaged in, nor (so far as Diageo is aware) is there pending or
threatened by or against it, any legal or arbitration proceedings which may have
a significant effect on the financial position of the Diageo group.
192 | Diageo Form 20-F 2026 |
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(a) Capital commitments
Commitments for expenditure on intangibles and property, plant and equipment
not provided for in these consolidated financial statements are estimated at $481
million (2025 – $550 million; 2024 – $783 million).
(b) Other commitments
The future minimum lease rentals payable in the year ended 30 June 2026 for
short-term leases and leases of low-value assets are estimated at $13 million
(2025 – $19 million; 2024 – $23 million). The total future cash outflows for
leases that had not yet commenced, and not recognised as lease liabilities at 30
June 2026, are estimated at $12 million (2025 –
$1 million; 2024 – $3 million).
Transactions between the group and its related parties are made on terms
equivalent to those that prevail in arm’s length transactions.
(a) Subsidiaries
Transactions between the company and its subsidiaries are eliminated on
consolidation and therefore are not disclosed. Details of the principal group
companies are given in note 22.
(b) Associates and joint ventures
Sales and purchases to and from associates and joint ventures are principally in
respect of premium drink products but also include the provision of
management services.
table below:
2026 | 2025 | 2024 | |
$ million | $ million | $ million | |
Income statement items | |||
Sales | |||
Purchases | |||
Balance sheet items | |||
Group payables | |||
Group receivables | |||
Loans receivable | |||
Cash flow items | |||
Loans and equity contributions, net |
Reduction in loans receivable in the year ended 30 June 2025 was primarily due to
Diageo's decision to exit several Distill Ventures businesses.
Other disclosures in respect of associates and joint ventures are included in note
The key management of the group comprises the Executive and Non-Executive
Directors, the members of the Executive Committee and the Company
Secretary. They are listed under ‘Board of Directors’ and ‘Executive
Committee’.
2026 | 2025 | 2024 | |
$ million | $ million | $ million | |
Salaries and short-term employee benefits | |||
Annual incentive plan | |||
Non-Executive Directors’ fees | |||
Share-based payments(1) | |||
Post-employment benefits | |||
Termination payments | |||
(1)Time-apportioned fair value of unvested options and share awards.
Non-Executive Directors do not receive share-based payments or post-
employment benefits.
There were no transactions with these related parties during the year ended 30
June 2026 on terms other than those that prevail in arm’s length transactions.
(d) Pension plans
The Diageo pension plans are recharged with the cost of administration services
provided by the group to the pension plans and with professional fees paid by
the group on behalf of the pension plans. The total amount recharged for the
year was $0.4 million (2025 – $0.2 million; 2024 – $0.1 million).
(e) Directors’ remuneration
2026 | 2025 | 2024 | |
$ million | $ million | $ million | |
Salaries and short-term employee benefits | |||
Annual incentive plan | |||
Non-Executive Directors' fees | |||
Shares vesting(1) | |||
(1)Gains on options realised in the year and the benefit from share awards, calculated by
using the share price applicable on the date of exercise of the share options and release
193 | Diageo Form 20-F 2026 |
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described in the countries listed in conjunction with their subsidiaries and other group companies.
Country of incorporation | Country of operation | Percentage of equity owned(1) | Business description | ||
Subsidiaries | |||||
Diageo Finance plc(2) | |||||
Diageo Great Britain Limited | |||||
United Spirits Limited(3) | |||||
Diageo Ireland Unlimited Company | |||||
Diageo Brands B.V. | |||||
Diageo Capital B.V.(2) | |||||
Diageo Capital plc(2) | |||||
Diageo Scotland Limited | |||||
Mey İçki Sanayi ve Ticaret A.Ş. | |||||
Diageo Investment Corporation | |||||
Diageo North America, Inc. | |||||
Associates | |||||
Moët Hennessy(4) |
(1)All percentages, unless otherwise stated, are in respect of holdings of ordinary share capital and are equivalent to the percentages of voting rights held by the group.
(2)Directly owned by Diageo plc.
(3)Percentage ownership excludes 2.38 % owned by the USL Benefit Trust.
(4)Diageo’s principal associate is Moët Hennessy of which Diageo owns 34 % through two legal entities; Moët Hennessy, SAS and Moët Hennessy International.
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Additional information
Additional
information
Contents | |
Unaudited financial information | 205 |
Cautionary statement concerning forward-looking statements | 213 |
Other additional information | 217 |
205 | Diageo Form 20-F 2026 |
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Unaudited financial information
1. Definitions and reconciliation of non-GAAP
measures to GAAP measures
Diageo’s strategic planning process is based on certain non-GAAP measures,
including organic movements. These non-GAAP measures are chosen for
planning and reporting, and some of them are used for incentive purposes. The
group’s management believes that these measures provide valuable additional
information for users of the financial statements in understanding the group’s
performance. These non-GAAP measures should be viewed as complementary
to, and not replacements for, the comparable GAAP measures and reported
movements therein.
It is not possible to reconcile the forecast tax rate before exceptional items,
forecast free cash flow, forecast effective interest rate, forecast organic net sales
growth and forecast organic operating profit growth to the most comparable
GAAP measure as it is not possible to predict, without unreasonable effort, with
reasonable certainty, the future impact of changes in exchange rates,
acquisitions and disposals, and potential exceptional items.
Volume
Volume is a performance indicator that is measured on an equivalent units basis to
nine-litre cases of spirits. An equivalent unit represents one nine-litre case of
spirits, which is approximately 272 servings. A serving comprises 33ml of spirits,
165ml of wine, or 330ml of ready-to-drink or beer. Therefore, to convert volume of
products other than spirits to equivalent units, the following guide has been used:
beer in hectolitres, divide by 0.9; wine in nine-litre cases, divide by five; ready-to-
drink and certain pre-mixed products that are classified as ready-to-drink in nine-
litre cases, divide by ten. As part of the move to an asset-light beer operating
model, calculation of volume for Guinness flavour extract and other concentrate
sales has been amended to represent the equivalent finished goods volume.
Comparatives for prior periods have been restated.
Organic movements
Organic information is presented using US dollar amounts on a constant
currency basis excluding the impact of exceptional items, certain fair value
remeasurements, hyperinflation, and acquisitions and disposals. Organic
measures enable users to focus on the performance of the business which is
common to both years and which represents those measures that local managers
are most directly able to influence.
Calculation of organic movements
The organic movement percentage is the amount in the row titled ‘Organic
movement’ in the tables below, expressed as a percentage of the relevant
absolute amount in the row titled ‘Year ended 30 June 2025 adjusted’. Organic
operating margin is calculated by dividing operating profit before exceptional
items by net sales after excluding the impact of exchange rate movements,
certain fair value remeasurements, hyperinflation and acquisitions and
disposals.
(a) Exchange rates
Exchange in the organic movement calculation reflects the adjustment to
recalculate the reported results as if they had been generated at the prior period
weighted average exchange rates.
Exchange impacts in respect of the external hedging of intergroup sales by the
markets in a currency other than their functional currency and the intergroup
recharging of services are also translated at prior period weighted average
exchange rates and are allocated to the geographical segment to which they
relate. Residual exchange impacts are reported as part of the Corporate segment.
Results from hyperinflationary economies are translated at forward-looking
rates.
(b) Acquisitions and disposals
For acquisitions in the current period, the post-acquisition results are excluded from
the organic movement calculations. For acquisitions in the prior period, post-
acquisition results are included in full in the prior period but are included in the
organic movement calculation from the anniversary of the acquisition date in the
current period. The acquisition row also eliminates the impact of transaction costs
that have been charged to operating profit in the current or prior period in respect of
acquisitions that, in management’s judgement, are expected to be completed.
Where a business, brand, brand distribution right or agency agreement was
disposed of or terminated in the reporting period, the group, in the organic
movement calculations, excludes the results for that business from the current
and prior period. In the calculation of operating profit, the overheads included in
disposals are only those directly attributable to the businesses disposed of, and
do not result from subjective judgements of management.
(c) Exceptional items
Exceptional items are those that in management’s judgement need to be disclosed
separately. Such items are included in the income statement caption to which they
relate, and form part of the segmental reporting, and are excluded from the organic
movement calculations. Management believes that separate disclosure of
exceptional items and the classification between operating and non-operating
further helps investors to understand the performance of the group. Changes in
estimates and reversals in relation to items previously recognised as exceptional are
presented consistently as exceptional in the current year.
Exceptional operating items are those that are unusual or non-recurring in
nature, considered to be of a size that could distort performance and are part of
the operating activities of the group, such as one-off global restructuring
programmes which can be multi-year, impairment of intangible assets and fixed
assets, indirect tax settlements, property disposals and changes in post-
employment plans.
Gains and losses on the sale or directly attributable to a prospective sale of
businesses, brands or distribution rights, step up gains and losses that arise when
an investment becomes an associate or an associate becomes a subsidiary and
other unusual non-recurring items, that are considered to be of a size that could
distort performance and not in respect of the production, marketing and
distribution of premium drinks, are disclosed as exceptional non-operating items
below operating profit in the income statement.
Exceptional finance incomes/charges are those that are unusual or non-recurring
in nature, considered to be of a size that could distort the performance and are
part of the financing activity of the group.
Exceptional current and deferred tax items comprise unusual or non-recurring
items, that are considered to be of a size that could distort performance.
Examples include direct tax provisions and settlements in respect of prior years
and the remeasurement of deferred tax assets and liabilities following tax rate
changes.
(d) Fair value remeasurements
Fair value remeasurements in the organic movement calculation reflect an
adjustment to eliminate the impact of fair value changes in biological assets,
earn-out arrangements that are accounted for as remuneration and fair value
changes relating to contingent consideration liabilities and equity options that
arose on acquisitions recognised in the income statement.
Adjustment in respect of hyperinflation
The group's experience is that hyperinflationary conditions result in price increases
that include both normal pricing actions reflecting changes in demand, commodity
and other input costs or considerations to drive commercial competitiveness, as
well as hyperinflationary elements and that for the calculation of organic
movements, the distortion from hyperinflationary elements should be excluded.
Cumulative inflation over 100% (2% per month compounded) over three years
is one of the key indicators within IAS 29 to assess whether an economy is
deemed to be hyperinflationary. As a result, the definition of 'Organic
movements' includes price growth in markets deemed to be hyperinflationary
economies, up to a maximum of 2% per month while also being on a constant
currency basis. Corresponding adjustments have been made to all income
statement related lines in the organic movement calculations.
In the tables presenting the calculation of organic movements, 'hyperinflation' is
included as a reconciling item between reported and organic movements and that also
includes the relevant IAS 29 adjustments.
206 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Organic movement calculations for the year ended 30 June 2026 were as follows:
North America million | Europe million | Asia Pacific million | Latin America and Caribbean million | Africa million | Corporate million | Total million | |
Volume (equivalent units) | |||||||
Year ended 30 June 2025 reported(1) | 49.5 | 48.9 | 77.7 | 22.9 | 30.8 | — | 229.8 |
Reclassification(2) | — | 0.2 | — | — | (0.2) | — | — |
Disposals(3) | (0.5) | (0.6) | — | (0.3) | (4.1) | — | (5.5) |
Year ended 30 June 2025 adjusted | 49.0 | 48.5 | 77.7 | 22.6 | 26.5 | — | 224.3 |
Organic movement | (3.3) | — | (1.9) | 0.7 | 3.7 | — | (0.8) |
Acquisitions and disposals(3) | 0.4 | 0.4 | — | 0.1 | 2.7 | — | 3.6 |
Year ended 30 June 2026 reported | 46.1 | 48.9 | 75.8 | 23.4 | 32.9 | — | 227.1 |
Organic movement % | (7) | — | (2) | 3 | 14 | — | — |
North America $ million | Europe $ million | Asia Pacific $ million | Latin America and Caribbean $ million | Africa $ million | Corporate $ million | Total $ million | |
Sales | |||||||
Year ended 30 June 2025 reported | 8,636 | 8,037 | 6,082 | 2,390 | 2,684 | 135 | 27,964 |
Exchange | (8) | (213) | (28) | (8) | (140) | (2) | (399) |
Reclassification(2) | — | 7 | — | — | (7) | — | — |
Disposals(3) | (102) | (63) | (10) | (11) | (340) | — | (526) |
Hyperinflation | — | (196) | — | (33) | (15) | — | (244) |
Year ended 30 June 2025 adjusted | 8,526 | 7,572 | 6,044 | 2,338 | 2,182 | 133 | 26,795 |
Organic movement | (570) | 419 | (201) | 303 | 252 | 19 | 222 |
Acquisitions and disposals(3) | 25 | 33 | 2 | 11 | 22 | — | 93 |
Exchange | 10 | 288 | (137) | (381) | 66 | 10 | (144) |
Hyperinflation | — | 270 | — | 526 | — | — | 796 |
Year ended 30 June 2026 reported | 7,991 | 8,582 | 5,708 | 2,797 | 2,522 | 162 | 27,762 |
Organic movement % | (7) | 6 | (3) | 13 | 12 | 14 | 1 |
North America $ million | Europe $ million | Asia Pacific $ million | Latin America and Caribbean $ million | Africa $ million | Corporate $ million | Total $ million | |
Net sales | |||||||
Year ended 30 June 2025 reported | 7,973 | 4,821 | 3,635 | 1,847 | 1,834 | 135 | 20,245 |
Exchange | (7) | (105) | (25) | 1 | (123) | (2) | (261) |
Reclassification(2) | — | 7 | — | 29 | (7) | — | 29 |
Disposals(3) | (92) | (51) | (8) | (11) | (296) | — | (458) |
Hyperinflation | — | (82) | — | (20) | (13) | — | (115) |
Year ended 30 June 2025 adjusted | 7,874 | 4,590 | 3,602 | 1,846 | 1,395 | 133 | 19,440 |
Organic movement | (659) | 154 | (228) | 143 | 185 | 19 | (386) |
Acquisitions and disposals(3) | 25 | 30 | 2 | 10 | 22 | — | 89 |
Exchange | 9 | 219 | (43) | (182) | 40 | 10 | 53 |
Hyperinflation | — | 104 | — | 343 | — | — | 447 |
Year ended 30 June 2026 reported | 7,249 | 5,097 | 3,333 | 2,160 | 1,642 | 162 | 19,643 |
Organic movement % | (8) | 3 | (6) | 8 | 13 | 14 | (2) |
207 | Diageo Form 20-F 2026 |
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North America $ million | Europe $ million | Asia Pacific $ million | Latin America and Caribbean $ million | Africa $ million | Corporate $ million | Total $ million | |
Marketing | |||||||
Year ended 30 June 2025 reported | 1,616 | 898 | 630 | 304 | 192 | 22 | 3,662 |
Exchange | (1) | (12) | (3) | — | (9) | — | (25) |
Disposals(3) | (43) | (1) | (1) | — | (15) | — | (60) |
Hyperinflation | — | (9) | — | (4) | (1) | — | (14) |
Year ended 30 June 2025 adjusted | 1,572 | 876 | 626 | 300 | 167 | 22 | 3,563 |
Organic movement | (214) | (151) | (102) | 1 | (2) | 1 | (467) |
Acquisitions and disposals(3) | 3 | — | — | — | 1 | — | 4 |
Exchange | 6 | 38 | — | — | 7 | (2) | 49 |
Hyperinflation | — | 10 | — | 24 | — | — | 34 |
Year ended 30 June 2026 reported | 1,367 | 773 | 524 | 325 | 173 | 21 | 3,183 |
Organic movement % | (14) | (17) | (16) | — | (1) | 5 | (13) |
North America $ million | Europe $ million | Asia Pacific $ million | Latin America and Caribbean $ million | Africa $ million | Corporate $ million | Total $ million | |
Operating profit before exceptional items | |||||||
Year ended 30 June 2025 reported | 3,053 | 1,302 | 930 | 528 | 283 | (392) | 5,704 |
Exchange(4) | 4 | (47) | (15) | (1) | 13 | 26 | (20) |
Reclassification(2) | — | 3 | — | — | (3) | — | — |
Fair value remeasurement of contingent considerations, equity option and earn-out arrangements | (124) | (15) | — | — | — | — | (139) |
Fair value remeasurement of biological assets | — | — | — | (11) | — | — | (11) |
Acquisitions and disposals(3) | (4) | (23) | (4) | (2) | (65) | — | (98) |
Hyperinflation | — | 45 | — | 6 | 11 | — | 62 |
Year ended 30 June 2025 adjusted | 2,929 | 1,265 | 911 | 520 | 239 | (366) | 5,498 |
Organic movement | (293) | 198 | (49) | 82 | 104 | 70 | 112 |
Acquisitions and disposals(3) | (12) | 12 | 1 | 3 | 12 | — | 16 |
Fair value remeasurement of contingent considerations, equity option and earn-out arrangements | 6 | 83 | — | — | — | — | 89 |
Fair value remeasurement of biological assets | — | — | — | (38) | — | — | (38) |
Exchange(4) | (29) | 100 | (17) | 122 | 1 | (23) | 154 |
Hyperinflation | — | (46) | — | (102) | — | — | (148) |
Year ended 30 June 2026 reported | 2,601 | 1,612 | 846 | 587 | 356 | (319) | 5,683 |
Organic movement % | (10) | 16 | (5) | 16 | 44 | 19 | 2 |
Organic operating margin %(5) | |||||||
Year ended 30 June 2026 | 36.5 | 30.8 | 25.5 | 30.3 | 21.7 | n/a | 29.4 |
Year ended 30 June 2025 | 37.2 | 27.6 | 25.3 | 28.2 | 17.1 | n/a | 28.3 |
Organic operating margin movement (bps) | (66) | 328 | 26 | 210 | 458 | n/a | 116 |
(1)Comparative volume for prior periods have been restated as part of the move to an asset-light beer operating model.
(2)Reclassifications relate to accounting treatment change in Latin America and the transfer of the Réunion business from Africa to Europe.
(3)Acquisitions and disposals that had an effect on organic volume, sales, net sales, marketing and operating profit growth in the year ended 30 June 2026, are detailed on page 208.
(4)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.
(5)Organic operating margin calculated by dividing Operating profit before exceptional items by net sales.
For the reconciliation of sales to net sales, see page 30.
Percentages and margin movements are calculated on rounded figures.
208 | Diageo Form 20-F 2026 |
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In the year ended 30 June 2026, the acquisitions and disposals that affected volume, sales, net sales, marketing and operating profit were as follows, as per footnote (3)
on the previous page:
Volume EU million | Sales $ million | Net sales $ million | Marketing $ million | Operating profit $ million | |
Year ended 30 June 2025 | |||||
Acquisitions | |||||
Ritual Beverage Company LLC | — | — | — | — | 6 |
— | — | — | — | 6 | |
Disposals | |||||
Guinness Nigeria PLC | (1.5) | (69) | (67) | (3) | (17) |
Guinness Ghana Breweries PLC | (2.5) | (220) | (190) | (10) | (40) |
Cîroc LLC | (0.5) | (100) | (89) | (43) | (8) |
Sheridan's brand | (0.4) | (45) | (41) | (1) | (20) |
Seychelles Breweries Limited | (0.2) | (51) | (39) | (3) | (8) |
Pampero brand | (0.2) | (15) | (11) | — | (3) |
Cacique brand | (0.2) | (16) | (12) | — | (4) |
UDL brand | — | (7) | (6) | — | (3) |
Ruski brand | — | (2) | (2) | — | (1) |
Safari brand | — | (1) | (1) | — | — |
(5.5) | (526) | (458) | (60) | (104) | |
Acquisitions and disposals | (5.5) | (526) | (458) | (60) | (98) |
Year ended 30 June 2026 | |||||
Acquisitions | |||||
Ritual Beverage Company LLC | — | 3 | 3 | 3 | (9) |
— | 3 | 3 | 3 | (9) | |
Disposals | |||||
Guinness Nigeria PLC | 1.0 | 4 | 4 | — | 3 |
Guinness Ghana Breweries PLC | 1.7 | 17 | 17 | 1 | 9 |
Cîroc LLC | 0.4 | 22 | 22 | — | (3) |
Sheridan's brand | 0.4 | 37 | 34 | — | 14 |
Pampero brand | 0.1 | 7 | 6 | — | 3 |
Cacique brand | — | 1 | 1 | — | (2) |
UDL brand | — | 1 | 1 | — | 1 |
Ruski brand | — | 1 | 1 | — | — |
3.6 | 90 | 86 | 1 | 25 | |
Acquisitions and disposals | 3.6 | 93 | 89 | 4 | 16 |
209 | Diageo Form 20-F 2026 |
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Earnings per share before exceptional items
Earnings per share before exceptional items is calculated by dividing profit attributable to equity shareholders of the parent company before exceptional items by the
weighted average number of shares in issue.
Earnings per share before exceptional items for the years ended 30 June 2026 and 30 June 2025 are set out in the table below:
2026 | 2025 | |
$ million | $ million | |
Profit attributable to equity shareholders of the parent company | 1,737 | 2,354 |
Exceptional operating and non-operating items | 2,521 | 1,589 |
Exceptional finance income | — | (58) |
Exceptional tax items and tax in respect of exceptional operating and non-operating items and finance income | (575) | (214) |
Exceptional items attributable to non-controlling interests | (6) | (23) |
Profit attributable to equity shareholders of the parent company before exceptional items | 3,677 | 3,648 |
Weighted average number of shares | million | million |
Shares in issue excluding own shares | 2,224 | 2,222 |
Dilutive potential ordinary shares | 7 | 6 |
Diluted shares in issue excluding own shares | 2,231 | 2,228 |
cents | cents | |
Basic earnings per share before exceptional items | 165.3 | 164.2 |
Diluted earnings per share before exceptional items | 164.8 | 163.7 |
Free cash flow and adjusted operating cash flow
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 that is included in net cash flow from investing activities.
The remaining components of net cash flow from investing activities that do not form part of free cash flow, as defined by the group’s management, are in respect of
the acquisition and sale of businesses and loans to associates and other investments that do not meet the definition of cash and cash equivalents.
The group’s management regards a portion of the purchase and disposal of property, plant and equipment and computer software as ultimately non-discretionary since
ongoing investment in plant, machinery and technology is required to support the day-to-day operations, whereas acquisition and sale of businesses are discretionary.
Where appropriate, separate explanations are given for the impacts of acquisition and sale of businesses, dividends paid and the purchase of own shares, each of which
arises from decisions that are independent from the running of the ongoing underlying business.
In the year ended 30 June 2026, adjusted operating cash flow replaced operating cash conversion within the annual incentive plans of employees, to elevate the focus
on absolute free cash flow delivery across the business. Adjusted operating cash flow is calculated by adjusting free cash flow to exclude borrowing costs capitalised
included in net cash expenditure paid for property, plant and equipment and computer software, taxation and net interest payments, dividends received, restructuring
and other non-operating spend, the variance between actual and planned movement of maturing inventories, hyperinflation adjustment and the effects of exchange rate
fluctuations.
Free cash flow and adjusted operating cash flow reconciliations for the years ended 30 June 2026 and 30 June 2025 are set out in the table below:
2026 | 2025 | |
$ million | $ million | |
Net cash inflow from operating activities | 4,392 | 4,297 |
Disposal of property, plant and equipment and computer software | 16 | 63 |
Purchase of property, plant and equipment and computer software | (1,197) | (1,612) |
Free cash flow | 3,211 | 2,748 |
Borrowing costs capitalised on property, plant and equipment and computer software | 55 | 44 |
Taxation paid | 817 | 1,114 |
Net interest paid | 752 | 799 |
Dividends received | (116) | (175) |
Restructuring and other non-operating spend | 184 | 45 |
Maturing stock neutralisation | (212) | (185) |
Hyperinflation adjustment | 13 | 27 |
Retranslation to budgeted exchange rates | (41) | (15) |
Adjusted operating cash flow | 4,663 | 4,402 |
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Return on average invested capital
Return on average invested capital is used by management to assess the return obtained from the group’s asset base and is calculated to aid evaluation of the
performance of the business.
The profit used in assessing the return on average invested capital reflects operating profit before exceptional items attributable to equity shareholders of the parent
company after applying the tax rate before exceptional items, plus share of tax results of associates and joint ventures for the fiscal year. Average invested capital is
calculated using the average derived from the consolidated balance sheets at the beginning, middle and end of the year. Average capital employed comprises average
net assets attributable to equity shareholders of the parent company for the year, excluding net post-employment benefit assets/liabilities (net of deferred tax) and
average net borrowings.
Calculations for the return on average invested capital for the years ended 30 June 2026 and 30 June 2025 are set out in the table below:
2026 | 2025 | |
$ million | $ million | |
Operating profit | 3,156 | 4,335 |
Exceptional operating items | 2,527 | 1,369 |
Profit before exceptional operating items attributable to non-controlling interests | (227) | (207) |
Tax at the tax rate before exceptional items of 24.3% (2025 – 24.9%) | (1,381) | (1,420) |
Share of after-tax results of associates and joint ventures | 218 | 193 |
4,293 | 4,270 | |
Average net assets (excluding net post-employment benefit assets/liabilities) | 12,738 | 12,006 |
Average non-controlling interests | (2,088) | (2,082) |
Average net borrowings | 21,336 | 21,182 |
Average invested capital | 31,986 | 31,106 |
Return on average invested capital | 13.4% | 13.7% |
Adjusted net borrowings to adjusted EBITDA
Diageo manages its capital structure with the aim of achieving capital efficiency, providing flexibility to invest through the economic cycle and giving efficient access
to debt markets at attractive cost levels. The group regularly assesses its debt and equity capital levels to enhance its capital structure by reviewing the ratio of adjusted
net borrowings (net borrowings plus post-employment benefit liabilities before tax) to adjusted EBITDA (earnings before exceptional operating items, non-operating
items, interest, tax, depreciation, amortisation and impairment).
Calculations for the ratio of adjusted net borrowings to adjusted EBITDA as at 30 June 2026 and 30 June 2025 are set out in the table below:
2026 | 2025 | |
$ million | $ million | |
Borrowings due within one year | 2,449 | 2,928 |
Borrowings due after one year | 19,062 | 20,820 |
Fair value of foreign currency derivatives and interest rate hedging instruments | (194) | (347) |
Lease liabilities | 685 | 653 |
Less: Cash and cash equivalents | (1,520) | (2,200) |
Net borrowings | 20,482 | 21,854 |
Post-employment benefit liabilities before tax | 387 | 409 |
Adjusted net borrowings | 20,869 | 22,263 |
Profit for the year | 1,958 | 2,538 |
Taxation | 606 | 999 |
Net finance charges | 816 | 771 |
Depreciation, amortisation and impairment (excluding exceptional accelerated depreciation and impairment) | 749 | 748 |
Exceptional accelerated depreciation and impairment | 1,731 | 970 |
Exceptional operating items (excluding accelerated depreciation and impairment) | 796 | 399 |
Non-operating items | (6) | 220 |
Adjusted EBITDA | 6,650 | 6,645 |
Adjusted net borrowings to adjusted EBITDA | 3.1 | 3.4 |
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Tax rate before exceptional items
Tax rate before exceptional items is calculated by dividing the total tax charge before tax charges and credits in respect of exceptional items, by profit before taxation
adjusted to exclude share of after-tax results of associates and joint ventures and the impact of exceptional operating and non-operating items, expressed as a
percentage. The measure is used by management to assess the rate of tax applied to the group’s operations before tax on exceptional items.
The tax rates from operations before exceptional and after exceptional items for the years ended 30 June 2026 and 30 June 2025 are set out in the table below:
2026 | 2025 | |
$ million | $ million | |
Taxation on profit (a) | 606 | 999 |
Tax credit in respect of exceptional items | 575 | 214 |
Tax before exceptional items (b) | 1,181 | 1,213 |
Profit before taxation | 2,564 | 3,537 |
Less: Share of after-tax results of associates and joint ventures | (218) | (193) |
Profit excluding share of after-tax results of associates and joint ventures (c) | 2,346 | 3,344 |
Exceptional finance income | — | (58) |
Exceptional operating items | 2,527 | 1,369 |
Exceptional non-operating items | (6) | 220 |
Profit before taxation and exceptional items excluding share of after-tax results of associates and joint ventures (d) | 4,867 | 4,875 |
Tax rate after exceptional items (a/c) | 25.8% | 29.9% |
Tax rate before exceptional items (b/d) | 24.3% | 24.9% |
Other definitions
Volume share is a brand’s retail volume expressed as a percentage of the retail
volume of all brands in its segment. Value share is a brand’s retail sales value
expressed as a percentage of the retail sales value of all brands in its segment.
Unless otherwise stated, share refers to value share.
Net sales are sales less excise duties. Diageo incurs excise duties throughout the
world. In the majority of countries, excise duties are effectively a production tax
which becomes payable when the product is removed from bonded premises
and is not directly related to the value of sales. It is generally not included as a
separate item on external invoices; increases in excise duties are not always
passed on to the customer and where a customer fails to pay for a product
received, the group cannot reclaim the excise duty. The group therefore
recognises excise duty as a cost to the group.
Price/mix is the number of percentage points difference between the organic
movement in net sales and the organic movement in volume. The difference
arises because of changes in the composition of sales between higher and lower
priced variants/markets or as price changes are implemented.
Shipments comprise the volume of products sold to Diageo’s immediate (first
tier) customers. Depletions are the estimated volume of the onward sales made
by Diageo's immediate customers. Both shipments and depletions are measured
on an equivalent units basis.
References to emerging markets include Central and Eastern Europe (excluding
Benelux, Greece and Nordics), Türkiye, Middle East and North Africa
(MENA), Latin America and Caribbean, Africa and Asia Pacific (excluding
Australia, Korea and Japan).
References to ready-to-drink also include ready-to-serve products, such as pre-
mixed cans in some markets.
References to beer include cider, flavoured malt beverages and some non-
alcoholic products such as Guinness 0.0 and Malta Guinness.
The results of Hop House 13 Lager are included in the Guinness figures.
There is no industry-agreed definition for price tiers and for data providers such
as IWSR, definitions can vary by market. Diageo bases price tier definitions on
a methodology that uses external metrics (including market pricing data from
Nielsen, IRI etc., as well as the IWSR segmentation) for benchmarking and
internal pricing metrics for a consistent segmentation.
References to the group include Diageo plc and its consolidated subsidiaries.
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Cautionary statement concerning forward-looking statements
This document contains 'forward-looking' statements. These
statements can be identified by the fact that they do not relate only to historical
or current facts and may generally, but not always, be identified by the use of
words such as 'will', 'anticipates', 'should', 'could', 'would', 'targets', 'aims', 'may',
'expects', 'intends' or similar expressions statements. In this document, such
statements include those that express forecasts, expectations, plans, outlook,
objectives and projections with respect to future matters, including information
related to Diageo’s fiscal 27 outlook, Diageo’s medium-term guidance,
Diageo’s Accelerate programme, the impact of tariffs and any other statements
relating to Diageo’s performance for the year ending 30 June 2027 or thereafter.
Forward-looking statements involve risk and uncertainty because they relate to
events and depend on 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 that are outside Diageo's control, which include
(but are not limited to): (i) economic, political, social or other developments in
countries and markets in which Diageo operates, including geopolitical
instability as a result of Russia's invasion of Ukraine and the conflicts in the
Middle East and macroeconomic events that may affect Diageo’s customers,
suppliers and/or financial counterparties; (ii) the effects of climate change, or
legal, regulatory or market measures intended to address climate change; (iii)
changes in consumer preferences and tastes, including as a result of disruptive
market forces, changes in demographics and evolving social trends (including
any shifts in consumer tastes towards at-home occasions, premiumisation,
small-batch craft alcohol, lower or non-alcoholic products or THC and hemp-
based THC beverages, increased use of GLP-1 medications, and/or
developments in e-commerce); (iv) changes in the domestic and international
tax environment that could lead to uncertainty around the application of existing
and new tax laws and unexpected tax exposures; (v) changes in the cost of
production, including as a result of increases in the cost of commodities, labour
and/or energy due to inflation and/or supply chain disruptions; (vi) any litigation
or other similar proceedings (including with tax, customs, competition,
environmental, anti-corruption or other regulatory authorities); (vii) legal and
regulatory developments, including changes in regulations relating to
environmental issues and/or e-commerce; (viii) the consequences of any failure
of internal controls; (ix) the consequences of any failure by Diageo or its
associates to comply with anti-corruption, sanctions, trade restrictions or similar
laws and regulations, or any failure of Diageo’s related internal policies and
procedures to comply with applicable law or regulation; (x) Diageo’s ability to
make sufficient progress against or achieve its ESG ambitions; (xi) cyber-
attacks and IT threats or any other disruptions to core business operations; (xii)
contamination, counterfeiting or other circumstances which could harm the
level of customer support for Diageo’s brands and adversely impact its sales;
(xiii) Diageo’s ability to maintain its brand image and corporate reputation or to
adapt to a changing media environment; (xiv) fluctuations in exchange rates
and/or interest rates; (xv) Diageo’s ability to successfully execute its strategic
business transformation projects; (xvi) Diageo’s ability 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; (xvii) Diageo's ability to consistently deliver
value, service performance, commercial execution and suitable portfolio choices
to its customers; (xviii) increased competitive product and pricing pressures,
including as a result of introductions of new products or categories that compete
with Diageo’s products and consolidations by competitors and retailers; (xix)
increased costs for, or shortages of, talent, as well as labour strikes or disputes;
(xx) movements in the value of the assets and liabilities related to Diageo’s
pension plans; (xxi) Diageo’s ability to renew supply, distribution,
manufacturing or licence agreements (or related rights) and licences on
favourable terms, or at all, when they expire; or (xxii) any failure by Diageo to
protect its intellectual property rights.
In preparing the ESG-related information contained in this document, Diageo
has made a number of key judgements, estimations and assumptions and the
processes and issues involved are complex. The ESG-related forward-looking
statements should be treated with special caution, as ESG and climate data,
models and methodologies are often relatively new, are rapidly evolving and are
not of the same standard as those available in the context of other financial
information, nor are they subject to the same or equivalent disclosure standards,
historical reference points, benchmarks, market consensus or globally accepted
accounting principles. In particular, it is not possible to rely on historical data as
a strong indicator of future trajectories in the case of climate change and its
evolution. Outputs of models, processed data and methodologies are also likely
to be affected by underlying data quality, which can be hard to assess and we
expect industry guidance, market practice, and regulations in this field to
continue to change. There are also challenges faced in relation to the ability to
access data on a timely basis and the lack of consistency and comparability
between data that is available. This means the ESG-related forward-looking
statements and ESG metrics discussed in this document carry an additional
degree of inherent risk and uncertainty, and therefore, our actual results and
developments could differ materially from those expressed or implied by the
ESG-related forward-looking statements in this document.
In light of the uncertainty as to the nature of future policy and market responses
to climate change, including between regions, and the effectiveness of any such
responses, Diageo may have to re-evaluate its progress and adapt its approach
towards its ESG ambitions, commitments and targets in the future, update the
methodologies it uses or alter its approach to ESG and climate analysis and may
be required to amend, update and recalculate its ESG disclosures and
assessments in the future, as market practice and data quality and availability
develop rapidly.
All oral and written forward-looking statements made on or after the date of this
document and attributable to Diageo are expressly qualified in their entirety by
the cautionary statements contained or referred to in this section. Further details
of potential risks and uncertainties affecting Diageo are described in our filings
with the London Stock Exchange and the US Securities and Exchange
Commission (SEC), including in our Annual Report on Form 20-F for the year
ended 30 June 2026.
Any forward-looking statements made by or on behalf of Diageo speak only as
of the date they are made. Diageo expressly disclaims any obligation or
undertaking to publicly update or revise these forward-looking statements other
than as required by applicable law. The reader should, however, consult any
additional disclosures that Diageo may make in any documents which it
publishes and/or files with the SEC.
All readers, wherever located, should take note of these disclosures. This
document 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. All rights reserved. © Diageo plc 2026.
The information in this document does not constitute an offer to sell or an
invitation to buy shares in Diageo plc or an invitation or inducement to engage
in any other investment activities.
This document may include information about Diageo’s target debt rating. A
security rating is not a recommendation to buy, sell or hold securities and may
be subject to revision or withdrawal at any time by the assigning rating
organisation. Each rating should be evaluated independently of any other rating.
Past performance cannot be relied upon as a guide to future performance.
References in this document to information on websites are included as an aid to
their location and such information is not incorporated in, and does not form
part of, this document unless otherwise noted.
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Other additional information
Other additional
information
Spirits and investments
Spirits are produced in distilleries located worldwide. The group owns 31
Scotch whisky distilleries in Scotland, two whisky distilleries in Canada, five in
the United States and one in China. Diageo produces Smirnoff internationally.
Ketel One vodka is a joint venture product, distributed by Diageo from the
manufacturing base of the Nolet Group in the Netherlands. Cîroc grape-based
vodka liquids are purchased from Maison Villevert in France and packed by
both NewPrinces S.p.A. and Maison Villevert. Gin distilleries are in Scotland
(Cameronbridge) and in Canada (Valleyfield). Baileys is produced in the
Republic of Ireland and Northern Ireland. Irish whiskey is distilled at the Roe &
Co distillery in Dublin. Rum is distilled in the US Virgin Islands, in Australia
and Guatemala and is blended and bottled in the United States, Canada, United
Kingdom and Guatemala. Raki is produced in Türkiye, Chinese white spirits are
produced in Chengdu, in the Sichuan province of China, cachaça is produced in
Ceará State in Brazil and tequila in Mexico.
The breakdown of the group's maturing inventory is as follows:
2026 | 2025 | |
Category | $ million | $ million |
Whisk(e)y | 7,123 | 7,232 |
– From this attributable to scotch | 5,592 | 5,659 |
Other | 1,387 | 1,445 |
Total maturing inventory | 8,510 | 8,677 |
Diageo’s maturing Scotch whisky is stored in warehouses in Scotland
(Clackmannanshire area between Blackgrange, Cambus West and Menstrie,
where we are holding approximately 43% of the group’s maturing Scotch
whisky), its maturing Canadian whisky in Valleyfield and Gimli in Canada, its
maturing American whiskey in Kentucky and Tennessee in the United States
and maturing Chinese white spirits in Chengdu, China.
Expansion of our warehousing facilities at Midtown in Clackmannanshire was
recently completed. Additional land has also been secured at the nearby Garvel
Farm site, which will allow warehouse capacity expansion in future. Alongside
the new warehouses being built, there is also investment in state-of-the-art
automation of warehousing.
In North America, Diageo officially opened its new 360,000-square-foot
manufacturing and warehousing facility in Montgomery, Alabama, bringing the
company’s iconic beverage alcohol brands closer to customers across the
Southern United States. Strategically located at the heart of the company’s
Southern U.S. region, and with a multi-million case annual production capacity,
‘Diageo Montgomery’ will build greater resilience and agility into the
company’s supply chain footprint in North America, while making its
operations more sustainable.
In China, the Eryuan malt whisky distillery fully opened in mid-2024. It aims to
develop the highest quality China single origin whisky, placing China firmly on
the global whisky producer’s map.
Diageo’s end-to-end tequila production is based in Mexico. We have invested
more than $500 million to expand our manufacturing footprint through new
facilities in the state of Jalisco, supporting the continued growth of the category.
As part of this expansion, we are implementing a range of digital transformation
initiatives across our tequila operations. During fiscal 26, we began
commissioning operations at our new distillery in La Barca. As our most
advanced production site, it will double our current production capacity while
enabling end-to-end, real-time process traceability and improved operational
efficiency.
Diageo owns a controlling equity stake in United Spirits Limited (USL) which
is one of the leading alcoholic beverage companies in India, selling close to 64
million equivalent units in fiscal 26 of Indian-Made Foreign Liquor (IMFL) and
imported liquors. USL has a significant market presence across India and
operates nine owned sites, as well as a network of leased and third-party
manufacturing facilities. USL owns several Indian brands, such as McDowell’s
(Indian whisky, rum, and brandy), Black Dog (scotch), Signature (Indian
whisky), Royal Challenge (Indian whisky), Godawan (Indian single malt) and
Antiquity (Indian whisky).
Beer and investments
Diageo’s principal brewing facility is at the St James’s Gate brewery in Dublin,
Ireland. Additionally, at the end of fiscal 26 Diageo owned breweries in several
African countries: Kenya, Tanzania, and Uganda. On 17 December 2025,
Diageo announced the sale of its shareholding in East African Breweries PLC
and its shareholding in the Kenyan spirits business to Asahi Group Holdings,
Ltd; for more information see note 8 to the consolidated financial statements.
Guinness flavour extract is shipped from Ireland to all overseas Guinness
brewing operations, which use the flavour extract to brew beer locally. Guinness
is transported from Ireland in bulk to the Belfast facility in Northern Ireland for
canning and to Great Britain in bulk to the Runcorn facility, where the kegging,
bottling and canning of Guinness Draught takes place.
To support beer growth, the new €300 million brewery expansion in
Littleconnell is fully on stream since May 2026. In addition, a new Guinness 0.0
plant is being constructed in Littleconnell to double the total capacity of
Guinness 0.0, with this plant expected to come on stream in early 2028. In May
2026, Diageo announced plans to more than double the capacity in Littleconnell
as part of a wider €400 million investment to include brewing expansion, and a
new roasting facility. This new capacity should come on stream at the end of
2028. This brings the total investment in capacity expansion in Littleconnell to
approximately €700 million.
The Diageo Beer Category Third-Party Operations Team provide technical
services to facilitate the delivery of over 7 million hectolitres of beer and ready-
to-drink products supplied through over 50 partner breweries and beverage
packaging facilities worldwide. A shift towards an asset-light strategy in Africa
and the associated divestments, including the sales of Guinness Nigeria and
Guinness Cameroun, have driven a significant pivot to third-party production
and distribution.
The Beer Category TPO team's focus is on maintaining secure supply solutions
through partners while assuring the consistent quality of Diageo brands
produced at third-party facilities and enhancing Diageo value through
supporting the start-up of new partnerships and delivery of innovation projects.
In addition to supporting Guinness and beer, the team has an expanding role in
supporting the third-party manufacturing of ready to drink and spirits in Asia-
Pacific and Africa.
Flavoured malt beverages (FMB) are made from an original base containing
malt, but then stripped of malt character, and flavoured. This product segment is
implemented mainly in the United States, Canada and the Caribbean.
Ready-to-drink (RTD)
Diageo produces a range of ready-to-drink products mainly in the United
Kingdom, across Africa, Australia, Brazil, the United States and Canada.
Raw materials and supply agreements
The group has several long-term contracts for purchasing raw materials,
including glass, other packaging, spirits, cream, rum and grapes. Forward
contracts are in place for the purchase of cereals and packaging materials to
minimise the effects of short-term price fluctuations. Our long-term hedging
means there is a lag in cost of sales benefit generated from a commodity price
decrease. The continued geopolitical tensions, weather patterns with volatile
consumer demand, are the key drivers of constraints we are managing.
Cereals, including barley, wheat, corn and sorghum, are used in our scotch and
beer production and in our spirits brands through purchased neutral spirit.
Agave, a key raw material for our tequila brands, is sourced from Mexico.
Cream, the principal raw material for Irish cream liqueur, is sourced from
Ireland. Grapes and aniseed are used in the production of raki and are sourced
from suppliers in Türkiye. Other raw materials purchased in significant
quantities to produce spirits and beer are molasses, sugar, and several flavours
(such as juniper berries, agave, chocolate and herbs). These are sourced from
suppliers across the globe.
Many products are supplied to customers in glass bottles. Glass is purchased
from a variety of multinational and local suppliers. The largest suppliers are
Ardagh Packaging in the United Kingdom and Owens-Illinois in the United
States.
Like other consumer goods companies, we maintain stocks in markets to
compensate for extended lead times and demand volatility. Diageo is managing
well through the current levels of uncertainty and constraints in our supply
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Other additional information continued
chain by expanding our supplier base and maintaining agility in our logistics
networks.
Competition
Diageo’s brands compete primarily on the basis of quality and price. Our
business is built on getting the right product to the right consumer for the right
occasion, and at the right price, including through taking into account ever
evolving shopper landscapes, technologies and consumer preferences. Diageo
also seeks to recruit and re-recruit consumers to its portfolio of brands,
including through meaningful consumer engagement, sustainable innovation
and investment in brands.
In spirits, Diageo’s major global competitors are Pernod Ricard, Suntory Global
Spirits, Bacardi, Campari and Brown-Forman, each of which has several brands
that compete directly with Diageo’s brands. In addition, Diageo faces
competition from regional and local companies in the countries in which it
operates.
In beer, Diageo also competes globally, as well as on a regional and local basis
(with the profile varying between regions) with several competitors, including
AB InBev, Asahi, Molson Coors, Heineken, Constellation Brands and
Carlsberg.
Research and development
Innovation forms an important part of Diageo’s growth strategy, playing a key
role in positioning its brands for continued growth in both developed and
emerging markets. The strength and depth of Diageo’s brand range also
provides a solid platform from which to drive sustainable innovation that leads
to new products and experiences for consumers, whether or not they choose to
drink alcohol. Diageo focuses its innovation on its strategic priorities and the
most significant consumer opportunities, including the development of global
brand extensions and new-to-world products, and continuously invests to
deepen its understanding of evolving trends and consumer socialising occasions
to inform product and packaging development, ranging from global brand
redesigns to cutting edge innovations. Supporting this, the group has ongoing
programmes to develop new beverage products which are managed internally
by the innovation and research and development functions.
Trademarks and other intellectual property
Diageo produces, sells and distributes branded goods, and is therefore
substantially dependent on the maintenance and protection of its trademarks. All
brand names mentioned in this document are protected by trademarks. The
group also holds trade secrets, as well as has substantial trade knowledge related
to its products. The group believes that its significant trademarks are registered
and/or otherwise protected (insofar as legal protection is available) in all
material respects in its most important markets. Diageo also owns valuable
patents and trade secrets for technology and takes all reasonable steps to protect
these rights.
Seasonality
The beverage alcohol industry is subject to seasonality in each major category.
Our spirits sales are typically highest during the second quarter of our fiscal
year, primarily due to seasonal holiday buying in our largest markets.
Employees
Many of our employees are represented by unions, with a variety of collective
bargaining agreements in place. We believe our relationships with the unions
that represent our employees are satisfactory in all material respects.
Compliance with US corporate governance rules
Under applicable SEC rules and the NYSE’s corporate governance rules for
listed companies, Diageo must disclose any significant ways in which its
corporate governance practices differ from those followed by US companies
under NYSE listing standards. Diageo believes the following to be the
significant areas in which there are differences between its corporate
governance practices and NYSE corporate governance rules applicable to US
companies. This information is also provided on the company’s website at
https://www.diageo.com/en/our-business/corporate-governance.
•Basis of regulation: UK listed companies are required to include in their annual
report a narrative statement of (i) how they have applied the principles of the
Code and (ii) whether or not they have complied with the best practice
provisions of the Code. NYSE listed companies must adopt and disclose their
corporate governance guidelines. UK listed companies are required to include in
their annual report statements as to (i) how directors have complied with Section
172 of the Act, which requires directors to promote the success of the company
for the benefit of its members as a whole, having regard to the interests of
stakeholders and (ii) how directors have engaged with and taken account of the
views of the company’s workforce and other stakeholder groups. Diageo
complied throughout the year with the best practice provisions of the Code and
the disclosure requirements noted above.
•Director independence: The Code requires at least half the Board (excluding
the Chair) to be independent non-executive directors, as determined by
affirmatively concluding that a director is independent in character and
judgement and determining whether there are relationships and circumstances
which are likely to affect, or could appear to affect, the director’s judgement.
The Code requires the Board to state its reasons if it determines that a director
is independent notwithstanding the existence of relationships or circumstances
which may appear relevant to its determination. NYSE rules require a majority
of independent directors, according to the NYSE’s own 'brightline' tests and
an affirmative determination by the Board that the director has no material
relationship with the listed company. Diageo’s Board has determined that, in
its judgement and without taking into account the NYSE brightline tests, all
of the Non-Executive Directors are independent. As such, currently seven of
Diageo’s directors are independent. Further details of this determination are
set out below.
•Chair and Chief Executive: The Code requires these roles to be separate.
There is no corresponding requirement for US companies. Diageo has a
separate Chair and Chief Executive.
•Non-Executive Director meetings: NYSE rules require non-management
directors to meet regularly without management present and independent
directors to meet separately at least once a year. The Code requires non-
executive directors to meet without the Chair present at least annually to
appraise the Chair’s performance. During the year, Diageo has complied with
these requirements with independent Non-Executive Directors, including the
Chair, meeting without the Executive Directors present seven times and
independent Non-Executive Directors meeting without the Chair or
Executive Directors present once.
•Board committees: Diageo has a number of Board committees that are similar
in purpose and constitution to those required by NYSE rules. Diageo’s Audit,
Remuneration and Nomination Committees consist entirely of independent
non-executive directors. Under NYSE standards, companies are required to
have a nominating/corporate governance committee, which develops and
recommends a set of corporate governance principles and is composed
entirely of independent directors. The terms of reference for Diageo’s
Nomination Committee, which comply with the Code, do not contain such a
requirement. In accordance with the requirements of the Code, Diageo has
disclosed on page 85 the results and means of its annual evaluation of the
Board, its Committees and the directors, and it provides extensive
information regarding the Directors’ compensation in the Directors’
remuneration report on pages 100-129.
•Code of ethics: NYSE rules require a code of business conduct and code of
ethics to be adopted for directors, executive officers and employees and
disclosure of any waivers for executive directors or officers. Diageo has
adopted a Code of Business Conduct for all directors, officers and employees,
as well as a Code of Ethics for Senior Financial Officers in accordance with
the requirements of SOx. See page 94 for further details.
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•Compliance certification: NYSE rules require chief executives to certify
to the NYSE their awareness of any NYSE corporate governance
violations. Diageo is exempt from this as a foreign private issuer but is
required to notify the NYSE if any executive officer becomes aware of
any non-compliance with NYSE corporate governance standards. No
such notification was necessary during the period covered by this report.
Regulations and taxes
Diageo’s worldwide operations are subject to extensive regulatory requirements
relating to production, product liability, distribution, importation, marketing,
promotion, sales, pricing, labelling, packaging, advertising, antitrust, labour,
pensions, compliance and control systems and environmental issues.
In the United States, the beverage alcohol industry is subject to strict federal and
state government regulations. At the federal level, the Alcohol and Tobacco Tax
and Trade Bureau, or TTB, of the US Treasury Department oversees the US
beverage alcohol industry, including through regulating and collecting taxes on
the production of alcohol within the United States and regulating trade
practices. In addition, individual US states, as well as some local authorities in
US jurisdictions in which Diageo sells or produces its products, administer and
enforce industry-specific regulations and may apply additional excise taxes and,
in many states, sales taxes. Federal, state and local regulations cover virtually
every aspect of Diageo's US operations, including production, importation,
distribution, marketing, promotion, sales, pricing, labelling, packaging and
advertising.
Spirits and beer are subject to national import and excise duties in many markets
around the world. Most countries impose excise duties on beverage alcohol
products, although the form of such taxation varies significantly from a simple
application to units of alcohol by volume, to advanced systems based on the
imported or wholesale value of the product. Several countries impose additional
import duty on distilled spirits, often discriminating between categories (such as
Scotch whisky or bourbon) in the rate of such tariffs. Within the European
Union, such products are subject to different rates of excise duty in each
country, but within the overall European Union framework there are minimum
rates of excise duties that must first be applied to each relevant category of
beverage alcohol. The UK's current alcohol duty system charges duty based on
alcohol by volume (rather than by product type). Rates of UK alcohol duty were
increased in line with inflation, effective from 1 February 2026. This regime
remains relatively new in its application and subject to ongoing developments;
for example, on 13 July 2026, draft legislation was published proposing that
penalties for late filing and late payment of UK alcohol duty be brought within
the existing points-based penalty regime. As such, the impact of this regime on
Diageo's business continues to be assessed.
Import and excise duties can have a significant impact on the final pricing of
Diageo’s products to consumers. These duties can affect a product’s revenue or
margin, both by reducing consumption and/or by encouraging consumers to
switch to lower-taxed categories of beverages. The group devotes resources to
encouraging the equitable taxation treatment of all beverage alcohol categories
and to reducing government imposed barriers to fair trading.
The advertising, marketing and sale of alcohol are subject to various restrictions
in markets around the world. These range from a complete prohibition of
alcohol in certain cultures and jurisdictions, such as in certain states in India, to
the prohibition of the import into a certain jurisdiction of spirits and beer, and to
restrictions on the advertising style, media and content. In a number of
countries, television is a prohibited medium for the marketing of spirits brands,
while in other countries, television advertising, while permitted, is carefully
regulated. Many countries also strictly regulate the use of internet-based
advertising and social media in connection with alcohol sales. Any further
prohibitions imposed on advertising or marketing, particularly within Diageo’s
most significant markets, could have an adverse impact on beverage alcohol
sales.
Labelling of beverage alcohol products is also regulated in many markets,
varying from the required inclusion of health warning labels to manufacturer or
importer identification, alcohol strength and other consumer information. As
well as producer, importer or bottler identification, specific warning statements
related to the risks of drinking beverage alcohol products are required to be
included on all beverage alcohol products sold in the US, in certain countries
within the EU, and in a number of other jurisdictions in which Diageo operates.
Spirits and beer are also regulated in distribution. In many countries, alcohol
may only be sold through licenced outlets, both on- and off-trade, varying from
government- or state-operated monopoly outlets (for example, in the off-trade
channel in Norway, certain Canadian provinces, and certain US states) to the
system of licenced on-trade outlets (for example, licenced bars and restaurants)
which prevails in much of the Western world, including in the majority of US
states, in the UK and in much of the EU. In a number of states in the US,
wholesalers of alcoholic beverages must publish price lists periodically and/or
must file price changes in some instances up to three months before they
become effective. In a response to public health concerns, some governments
have imposed or are considering imposing minimum pricing on beverage
alcohol products and may consider raising the legal drinking age, further
limiting the number, type or opening hours of retail outlets and/or expanding
retail licencing requirements.
Regulatory decisions and changes in the legal and regulatory environment could
also increase Diageo’s costs and liabilities and/or impact on its business
activities.
Taxation
This section provides a descriptive summary of certain US federal income tax and
UK tax consequences that are likely to be material to the holders of the ordinary
shares or ADSs, but only those who hold their ordinary shares or ADSs as capital
assets for tax purposes. It does not purport to be a complete technical analysis or a
listing of all potential tax effects relevant to the ownership of the ordinary shares or
ADSs, and does not address the potential application of the provisions of the
Internal Revenue Code of 1986, as amended, known as the Medicare contribution
tax. This section does not apply to any holder who is subject to special rules,
including:
•certain financial institutions;
•a dealer in securities or foreign currency;
•a trader in securities that elects to use a mark-to-market method of tax
accounting for securities holdings;
•a tax-exempt organisation;
•an insurance company;
•a person liable for alternative minimum tax;
•a person that actually or constructively owns 10% or more of the combined
voting power of voting stock of Diageo or of the total value of stock of
Diageo;
•a person that holds ordinary shares or ADSs as part of a straddle or a hedging
or conversion transaction;
•a person that holds ordinary shares or ADSs as part of a wash sale for tax
purposes; or
•a US holder (as defined below) whose functional currency is not US
dollar.
If an entity or arrangement treated as a partnership for US federal income tax
purposes holds ordinary shares or ADSs, the US federal income tax treatment of
a partner will generally depend on the status of the partner and the tax treatment
of the partnership. A partner in a partnership holding ordinary shares or ADSs
should consult its tax advisor with regard to the US federal income tax treatment
of an investment in ordinary shares or ADSs.
For UK tax purposes, this section applies only to persons who are the absolute
beneficial owners of ordinary shares or ADSs and who hold their ordinary
shares or ADSs as investments. It assumes that holders of ADSs will be treated
as holders of the underlying ordinary shares. In addition to those persons
mentioned above, this section does not apply to holders that are banks, regulated
investment companies, other financial institutions, or to persons who have or are
deemed to have acquired their ordinary shares or ADSs in the course of an
employment or trade. This summary applies to persons who are treated as
resident in the United Kingdom for the purposes of UK tax law but not those to
whom special rules relating to residence apply (including qualifying new
residents, temporary non-residents or those to whom 'split year' treatment
applies).
This section is based on the Internal Revenue Code of 1986, as amended, its
legislative history, existing and proposed regulations, published rulings and
court decisions, the laws of the United Kingdom and the practice of His
Majesty’s Revenue and Customs (HMRC), all as currently in effect, as well as
on the Convention Between the Government of the United Kingdom of Great
Britain and Northern Ireland and the Government of the United States of
America for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with Respect to Taxes on Income and Capital Gains (the Treaty). These
laws are subject to change, possibly on a retroactive basis.
In addition, this section is based in part upon the representations of the
Depositary and the assumption that each obligation in the Deposit Agreement
and any related agreement will be performed in accordance with its terms. In
general, and taking into account this assumption, for US federal income tax
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purposes and for the purposes of the Treaty, holders of ADRs evidencing ADSs
should be treated as the owner of the shares represented by those ADSs.
Exchanges of shares for ADRs, and ADRs for shares, generally will not be
subject to US federal income tax or to UK tax on profits or gains.
A US holder is a beneficial owner of ordinary shares or ADSs that is for US
federal income tax purposes:
•a citizen or resident for tax purposes of the United States and who is not and
has at no point been resident in the United Kingdom;
•a US domestic corporation, or other US entity taxable as a corporation;
•an estate whose income is subject to US federal income tax regardless of its
source; or
•a trust if a US court can exercise primary supervision over the trust’s
administration and one or more US persons are authorised to control all
substantial decisions of the trust.
This section is not intended to provide specific advice and no action should be taken
or omitted in reliance upon it. This section addresses only certain aspects of US
federal income tax and UK income tax, corporation tax, capital gains tax,
inheritance tax and stamp taxes. Holders of the ordinary shares or ADSs are urged to
consult their own tax advisors regarding the US federal, state and local, and UK and
other tax consequences of owning and disposing of the shares or ADSs in their
respective circumstances. In particular, holders are encouraged to confirm with their
advisor whether they are US holders eligible for the benefits of the Treaty.
Dividends
UK taxation
The company will not be required to withhold tax at source when paying a
dividend.
All dividends received by an individual shareholder or ADS holder who is
resident in the UK for tax purposes will, except to the extent that they are
earned through an ISA or other regime which exempts the dividends from tax,
form part of that individual’s total income for income tax purposes and will
represent the highest part of that income.
A nil rate of income tax will apply to the first £500 of taxable dividend income
received by an individual shareholder in the 2026/2027 tax year (the Nil Rate
Amount), regardless of what tax rate would otherwise apply to that dividend
income.
Any taxable dividend income in excess of the Nil Rate Amount will be subject
to income tax at the following special rates (for the 2026/2027 tax year):
•at the rate of 10.75%, to the extent that the relevant dividend income falls
below the threshold for the higher rate of income tax;
•at the rate of 35.75%, to the extent that the relevant dividend income falls
above the threshold for the higher rate of income tax but below the threshold
for the additional rate of income tax; and
•at the rate of 39.35%, to the extent that the relevant dividend income
falls above the threshold for the additional rate of income tax.
In determining whether and, if so, to what extent the relevant dividend income
falls above or below the threshold for the higher rate of income tax or, as the
case may be, the additional rate of income tax, the individual’s total taxable
dividend income for the tax year in question (including the part within the Nil
Rate Amount) will, as noted above, be treated as the highest part of that
individual’s total income for income tax purposes.
Shareholders within the charge to UK corporation tax which are small companies
(for the purposes of the UK taxation of dividends) will not generally be subject to
tax on dividends from the company. Other shareholders within the charge to UK
corporation tax will not be subject to tax on dividends from the company so long
as the dividends fall within an exempt class and certain conditions are met. In
general, dividends paid on shares that are ordinary share capital for UK tax
purposes and are not redeemable and dividends paid to a person holding less than
10% of the issued share capital of the payer (or any class of that share capital) are
examples of dividends that fall within an exempt class.
US taxation
Under the US federal income tax laws, and subject to the passive foreign
investment company (PFIC) rules discussed below, the gross amount of any
distribution (other than certain pro-rata distribution of ordinary shares) paid to a
US holder by Diageo in respect of its ordinary shares or ADSs out of its current
or accumulated earnings and profits (as determined for US federal income tax
purposes) will be treated as a dividend that is subject to US federal income
taxation.
Dividends paid to certain non-corporate US holders that constitute qualified dividend
income will be taxed at the preferential rates applicable to long-term capital
gains, provided that the ordinary shares or ADSs are held for more than 60 days
during the 121-day period beginning 60 days before the ex-dividend date and the
holder meets other holding period requirements. Dividends paid by Diageo with
respect to its ordinary shares or ADSs generally will be qualified dividend
income to US holders that meet the holding period requirement, provided that, in
the year that they receive the dividend, we are eligible for the benefits of the Treaty.
We believe that we are currently eligible for the benefits of the Treaty and we
therefore expect that dividends on the ordinary shares or ADSs will be qualified
dividend income, but there can be no assurance that we will continue to be
eligible for the benefits of the Treaty. Under UK law, dividends paid by the
company are not subject to UK withholding tax. Therefore, the US holder will
include in income for US federal income tax purposes the amount of the
dividend received, and the receipt of a dividend will not entitle the US holder to
a foreign tax credit.
The dividend must be included in income when the US holder, in the case of
ordinary shares, or the Depositary, in the case of ADSs, receives the dividend,
actually or constructively. The dividend will not be eligible for the dividends-
received deduction generally allowed to US corporations in respect of dividends
received from other US corporations. Dividends will generally be income from
sources outside the United States and will generally be ‘passive’ income for
purposes of computing the foreign tax credit allowable to a US holder.
Distributions in excess of current and accumulated earnings and profits, as
determined for US federal income tax purposes, will be treated as a non-taxable
return of capital to the extent of the holder’s basis in the ordinary shares or
ADSs and thereafter as capital gain. However, Diageo does not expect to
calculate earnings and profits in accordance with US federal income tax
principles. Accordingly, a US holder should expect to generally treat
distributions Diageo makes as dividends.
Taxation of capital gains
UK taxation
A citizen or resident (for tax purposes) of the United States who has at no time
been resident in the United Kingdom will not be liable for UK tax on capital
gains realised or accrued on the sale or other disposal of ordinary shares or
ADSs, unless the ordinary shares or ADSs are held in connection with a trade or
business carried on by the holder in the United Kingdom through a UK branch,
agency or a permanent establishment. A disposal (or deemed disposal) of shares
or ADSs by a holder who is resident in the United Kingdom may, depending on
the holder’s particular circumstances, and subject to any available exemption or
relief, give rise to a chargeable gain or an allowable loss for the purposes of UK
tax on capital gains.
US taxation
Subject to the PFIC rules discussed below, a US holder who sells or otherwise
disposes of ordinary shares or ADSs will recognise capital gain or loss for US
federal income tax purposes equal to the difference between the US dollar value
of the amount that is realised and the tax basis, determined in US dollars, in the
ordinary shares or ADSs. Capital gain of a non-corporate US holder is generally
taxed at preferential rates where the property is held for more than one year. The
gain or loss will generally be income or loss from sources within the United
States for foreign tax credit limitation purposes. The deductibility of capital
losses is subject to limitations.
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PFIC rules
Diageo believes that ordinary shares and ADSs should not currently be treated
as stock of a PFIC for US federal income tax purposes, and we do not expect to
become a PFIC in the foreseeable future. However this conclusion is a factual
determination that is made annually and thus may be subject to change. It is
therefore possible that we could become a PFIC in a future taxable year.
If treated as a PFIC, gain realised on the sale or other disposition of ordinary
shares or ADSs would in general not be treated as capital gain. Instead, unless a
US holder elects to be taxed annually on a mark-to-market basis with respect to
the ordinary shares or ADSs, US holders would be treated as if the holder had
realised such gain and certain ‘excess distributions’ pro-rated over the holder’s
holding period for the ordinary shares or ADSs. To the extent gain is allocated
to the taxable year of the sale or other disposition of ordinary shares or ADSs
and to any year before Diageo became a PFIC, it would be taxed as ordinary
income. The amount allocated to each other taxable year would be taxed at the
highest tax rate in effect (for individuals or corporations, as applicable) for each
such year to which the gain was allocated, together with an interest charge in
respect of the tax attributable to each such year. With certain exceptions, a
holder’s ordinary shares or ADSs will be treated as stock in a PFIC if Diageo
were a PFIC at any time during the holding period in a holder’s ordinary shares
or ADSs. In addition, dividends received from Diageo will not be eligible for
the special tax rates applicable to qualified dividend income if Diageo is a PFIC
(or is treated as a PFIC with respect to the holder) either in the taxable year of
the distribution or the preceding taxable year, but instead will be taxable at rates
applicable to ordinary income. If any investor owns our shares or ADSs during
any year that we are a PFIC with respect to them, they may be required to file
IRS Form 8621.
UK inheritance tax
Subject to certain provisions relating to trusts or settlements, an ordinary share or
ADS held by an individual shareholder who is domiciled in the United States for
the purposes of the Convention between the United States and the United
Kingdom relating to estate and gift taxes (the Convention) and who is neither
domiciled in the United Kingdom nor (where certain conditions are met) a UK
national (as defined in the Convention), will generally not be subject to UK
inheritance tax on the individual’s death (whether held on the date of death or
gifted during the individual’s lifetime) except where the ordinary share or ADS is
part of the business property of a UK permanent establishment of the individual or
pertains to a UK fixed base of an individual who performs independent personal
services. In a case where an ordinary share or ADS is subject both to UK
inheritance tax and to US federal gift or estate tax, the Convention generally
provides for inheritance tax paid in the United Kingdom to be credited against
federal gift or estate tax payable in the United States, or for federal gift or estate
tax paid in the United States to be credited against any inheritance tax payable in
the United Kingdom, based on priority rules set forth in the Convention.
Effective from 6 April 2025, UK inheritance tax is charged based on long-term
residence (and not domicile). Particularly in view of this reform, UK inheritance
tax and its interaction with the Convention is complex. Any person who is in
doubt about the application of UK inheritance tax in relation to their ordinary
shares or ADSs, or the effect of the Convention, should consult appropriately
qualified tax advisers.
UK stamp duty and stamp duty reserve tax
No stamp duty or stamp duty reserve tax (SDRT) will arise upon the deposit of
an underlying ordinary share with the Depositary if that deposit is effected by
(a) the issue of that share or (b) a transfer of that share in the course of (i)
capital-raising arrangements or (ii) qualifying listing arrangements. Otherwise,
stamp duty or SDRT applies at the higher rate of 1.5% of the amount or value of
the consideration payable or, in certain circumstances, the value of the ordinary
shares (rounded up to the nearest multiple of £5 in the case of stamp duty). The
Depositary will pay the stamp duty or SDRT but will recover an amount in
respect of such tax from the initial holders of ADSs.
No UK stamp duty will be payable on the acquisition or transfer of ADRs.
Furthermore, an agreement to transfer ADSs in the form of ADRs will not give
rise to a liability to SDRT.
Purchases of ordinary shares (as opposed to ADRs) will be subject to UK stamp
duty, and/or SDRT as the case may be, at the rate of 0.5% of the price payable
for the ordinary shares at the time of the transfer (or, in certain circumstances,
the value of the ordinary shares). Stamp duty applies where a physical
instrument of transfer is used to effect the transfer. SDRT applies to any
agreement to transfer ordinary shares (regardless of whether or not the transfer
is effected electronically or by way of an instrument of transfer). However,
where the ordinary shares being acquired are transferred direct to the
Depositary’s nominee, the only charge will generally be the higher charge of
1.5%, subject to the applicability of any exemptions to the 1.5% charge
discussed above.
Any stamp duty payable (as opposed to SDRT) is rounded up to the nearest £5.
No stamp duty (as opposed to SDRT) will be payable if the amount or value of
the consideration is (and is certified to be) £1,000 or less. Stamp duty and SDRT
are usually paid or borne by the purchaser.
Whilst stamp duty and SDRT may in certain circumstances both apply to the
same transaction, in practice usually only one or the other will need to be paid.
UK stamp duty and SDRT are expected to be replaced by a new single tax in
2027, the Securities Transfer Tax (STT). Draft legislation for the STT was
published on 13 July 2026. The STT is intended to modernise the existing stamp
taxes regime, by simplifying and digitising the administration and payment of
tax on transactions in securities. Based on the draft legislation as currently
published, no material changes to the current rates or method of computation are
anticipated, although there may be further changes prior to the legislation being
implemented. As such, the impact of the STT on transactions involving the
acquisition or transfer of the ordinary shares or ADSs remains uncertain.
US backup withholding and information reporting
Payments of dividends and sales proceeds with respect to ordinary shares and
ADSs may be reported to the IRS and to the US holder. Backup withholding
may apply to these reportable payments if the US holder fails to provide an
accurate taxpayer identification number or certification of exempt status or fails
to report all interest and dividends required to be shown on its US federal
income tax returns. Certain US holders (including, among others, corporations)
are not subject to information reporting and backup withholding. The amount of
any backup withholding from a payment to a US holder will be allowed as a
credit against the holder’s US federal income tax liability and may entitle the
holder to a refund, provided that the required information is timely furnished to
the IRS. US holders should consult their tax advisors as to their qualification for
exemption from backup withholding and the procedure for obtaining an
exemption. Certain US holders who are individuals (and certain specified
entities), may be required to report information relating to their ownership of
non-US securities unless the securities are held in accounts at financial
institutions (in which case the accounts may be reportable if maintained by non-
US financial institutions). US holders should consult their tax advisors regarding
any reporting obligations they may have with respect to the ordinary shares or
ADSs.
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Other additional information continued
Data preparation methodology for SECR tables
Data preparation methodology for Scope 1 and 2 greenhouse
gas emissions
We calculate CO2e emissions data based on direct measurement of energy use
(meter readings/invoices) for the majority of sites. We externally report Scope 1
and 2 greenhouse gas emissions using metric tonnes of CO2e to compare the
emissions from the seven main greenhouse gases based on their global warming
potential. We base our CO2e reduction targets and reporting protocols (since
2007) on market-based emissions.
Direct (Scope 1) emissions
We report fuel consumption by fuel type at site level using the environmental
management system. Using calorific values, the fuel is then converted to energy
consumption, in kilowatt hours (kWh), by fuel type and is multiplied by the
relevant CO2e emission factor to derive total CO2e emissions. Scope 1 emission
factors for fuels are typically average fuel CO2e emissions factors and calorific
values (the latest available at the end of the period) from the UK Government
Department for Energy Security and Net Zero (DESNZ) for fossil fuels and
from UK Government National Air Emissions Inventory (NAEI) for bioenergy
sources.
For market-based emissions calculations, we apply product-specific factors
where available. Energy attribute certificates (EACs), derived from our
distillery by-product feedstock and processed by a third party to generate
biomethane, form a component of our decarbonisation, together with purchased
renewable gas EACs (i.e. from certificate-backed biomethane supplied
indirectly through the natural gas grid).
Fugitive and owned agricultural (Scope 1) emissions
We calculate fugitive emissions based on the amount of emitted ozone-
depleting substances and fluorinated gases, multiplied by the relevant emission
factor to represent the global warming potential in tonnes of CO2e. Annually,
each site reports the quantity (mass) of each material and/or gas emitted based
on any added and/or topped-up amount, reported via the environmental
management system. The mass of each emitted ozone-depleting substance and
fluorinated gas is multiplied by the relevant emission factor from the
Intergovernmental Panel on Climate Change Sixth Assessment Report (IPCC
AR6) and then added together to report the equivalent GHG emissions in tonnes
of CO2e.
We calculate Scope 1 FLAG emissions from our owned agricultural direct
impacts (i.e. fertiliser use). The relevant quantities of fertiliser are multiplied by
the percentage of nitrogen content and by the relevant GHG emission and
conversion factors (e.g. nitrogen to nitrous oxide, nitrous oxide GHG emission
factor) to determine the equivalent tonnes CO2e emissions.
Indirect (Scope 2) emissions
We report greenhouse gas emissions from electricity (Scope 2) as market-based
emissions and as location-based emissions in line with the World Resources
Institute (WRI)/World Business Council for Sustainable Development
(WBCSD) GHG Protocol Scope 2 guidance 2015. For market-based emissions,
electricity consumption recorded on our environmental management system is
multiplied by emissions factors specified in EACs, contracts, power purchase
agreements and supplier utility emissions, as detailed in the GHG Protocol’s
Scope 2 guidance. We use GHG Protocol Scope 2 to ensure EACs and
associated financial instruments meet the required standards. GHG emission
factors, relating to indirect (Scope 2) emissions, are updated to the latest
available by end of the period.
Total direct and indirect greenhouse gas emission (Scope 1 and
Scope 2 data aggregation)
For market-based: total direct and indirect greenhouse gas emissions by weight
(market/net based) (1,000 tonnes CO2e) is the aggregation of Scope 1 and 2
GHG emissions with fugitive and owned agriculture emissions to calculate total
direct operations market-based emissions. The percentage reduction in absolute
greenhouse gas emissions (direct and indirect greenhouse gas emissions by
weight (market/net based)) from the prior year is a percentage change
calculation with reference to the corresponding prior year figure. Our direct
operations emissions target for 2030 remains consistent with earlier reporting
protocols and is based on market-based emissions.
GHG emission intensity ratios
Total, aggregated direct operations market-based emissions are divided by the
volume of direct operations packaged product reported in the same period. The
market-based emissions are converted to grammes of CO2e and the volume of
packaged product is reported in litres to generate relevant GHG emission
intensity ratios in g CO2e/litre packaged.
Data preparation methodology for energy consumption
We report total energy and renewable energy in MWh and/or TJ. We calculate
direct and indirect energy data based on the direct measurement of energy use
(meter readings/invoices for volumes of fuel supplied).
We determine direct energy (renewable/non-renewable) from the quantity of
different fuel types (in metric tonnes, litres) of renewable and non-renewable
fuels and by applying the relevant calorific value (either from DESNZ or the
supplier).
We report fuel consumption by fuel type at site level using the environmental
management system. Using calorific values, the fuel is then converted to energy
consumption, in kWh, by fuel type and classified as either renewable or non-
renewable based on fuel type or source. EACs, derived from our distillery by-
product feedstock and processed by a third-party to generate biogas, together
with purchased renewable gas EACs, are applied to relevant natural gas
supplied to sites via a common carrier pipeline/network.
We measure indirect energy (renewable/non-renewable) in MWh and/or TJ
from energy utilities or suppliers and/or by applying the relevant EACs.
All indirect energy generated and used on site, along with purchased indirect
energy supplied through the grid is classified as renewable by the allocation of
EACs, contracts, power purchase agreements and supplier-specific utility
factors, where relevant.
We include directly connected renewable energy generated on or near our sites,
where all energy is used on site and no EACs are created (e.g. roof-mounted
solar panels with all generated renewable electricity used on site).
223 | Diageo Form 20-F 2026 |
Strategic report | Governance report | Financial statements | Additional information | ||||||||
Additional information for shareholders |
Annual General Meeting (AGM)
The AGM will be held at Convene 133 Houndsditch, London, EC3A 7DB on 5
November 2026 at 2.30 pm.
Documents on display
The Annual Report on Form 20-F and any other documents filed by the
company with the US Securities Exchange Commission (SEC) may be
inspected at the SEC’s office of Investor Education and Advocacy located at
100 F Street, NE, Washington, DC 20549-0213, USA. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms and their
copy charges. Filings with the SEC are also available to the public from
commercial document retrieval services, and from the website maintained by
the US Securities and Exchange Commission at https://www.sec.gov.
Warning to shareholders – share fraud
Please beware of the share fraud of ‘boiler room’ scams, where shareholders are
called ‘out of the blue’ by fraudsters (sometimes claiming to represent Diageo)
attempting to obtain money or property dishonestly. Further information on boiler
room scams can be found on the Financial Conduct Authority’s website (https://
www.fca.org.uk/consumers/share-bond-and-boiler-room-scams) but in short, if in
doubt, take proper professional advice before making any investment decision.
Electronic communications
Shareholders can register for an account to manage their shareholding online,
including being able to check the number of shares they own and the value of
their shareholding; register for electronic communications; update their personal
details; provide a dividend mandate instruction; apply for the Dividend
Reinvestment Plan; access dividend confirmations; and use the online share
dealing service. To register for an account, shareholders should visit https://
www.diageoregistrars.com/welcome.
Dividend payments
Direct payment into bank account
UK shareholders: The Company normally pays dividends twice each year and
have taken the decision that these will only be made directly to shareholder's
bank or building society. This is a more secure method of payment and avoids
delays or cheques being lost. Shareholders can register their bank account
details for this purpose online at https://www.diageoregistrars.com/welcome or
call the Registrar on +44 (0)371 277 1010* to supply the details over the phone.
For shareholders outside the UK, MUFG Corporate Markets (a trading name of
MUFG Pension & Market Services and a member of MUFG, a global financial
group) may be able to provide you with a range of services relating to your
shareholding. To learn more about the services available to you please visit the
Share Portal at https://www.diageoregistrars.com/welcome or call +44 (0)371
277 1010.*
Dividend Reinvestment Plan
A Dividend Reinvestment Plan is offered by the Registrar, MUFG Corporate
Markets, to give shareholders the opportunity to build up their shareholding in
Diageo by using their cash dividends to purchase additional Diageo shares.
Shareholders can join the Dividend Reinvestment Plan online at https://
www.diageoregistrars.com/welcome or call the Registrar, MUFG Corporate
Markets, on +44 (0)371 277 1010* to request the relevant application form.
Dividend currency election
Holders of ordinary shares will receive their dividends in sterling unless they
wish to elect to receive their dividends in US dollars. To elect to receive their
dividends in US dollars, shareholders can download the relevant election form
on the shareholder portal at https://www.diageoregistrars.com or call +44 (0)371
277 1010.*
Exchange controls
Other than certain economic sanctions which may be in effect from time to
time, there are currently no UK foreign exchange control restrictions on the
payment of dividends, interest or other payments to holders of Diageo’s
securities who are non-residents of the UK or on the conduct of Diageo’s
operations.
There are no restrictions under the company’s articles of association or under
English law that limit the right of non-resident or foreign owners to hold or vote
the company’s ordinary shares.
Please refer to the ‘Taxation’ section on pages 220-222 for details relating to the
taxation of dividend payments.
Useful contacts
The Registrar/Shareholder queries
MUFG Corporate Markets acts as the company’s registrar and can be
contacted as follows:
By email: Diageo@cm.mpms.mufg.com
By telephone: +44 (0) 371 277 1010*
In writing: Registrars – MUFG Corporate Markets, Central Square, 29
Wellington Street, Leeds, LS1 1DL.
* Calls are charged at the standard geographic rate and will vary by provider. Calls
outside the United Kingdom will be charged at the applicable international rate.
Lines are open 08:00 to 17:30 UK time, Monday to Friday, excluding public
holidays in England and Wales.
ADR administration
Citibank Shareholder Services acts as the company’s ADR administrator
and can be contacted as follows:
By email: citibank@shareholders-online.com
By telephone: +1 866 253 0933/
(International) +1 781 575 4555**
In writing: Citibank Shareholder Services. PO Box 43077,
Providence, RI 02940-3077
** Lines are open Monday to Friday 8:30 to 18:00 EST
General Counsel and Company Secretary
Randall Ingber
The.cosec@diageo.com
Investor Relations
investor.relations@diageo.com
224 | Diageo Form 20-F 2026 |
Liquidity and capital resources
1. Sources and uses of liquidity
The primary source of the group’s liquidity over the last three financial years has been cash generated from operations. These funds
have generally been used to pay interest, taxes and dividends, and to fund capital expenditure and acquisitions, and, together with the
group’s current strong cash position, are expected to continue to fund future operating and capital needs. The group also issues short-
term commercial paper regularly in order to finance its day-to-day operations, and accesses the term debt capital markets regularly to
refinance maturing bonds each year and to manage liquidity.
The table below sets forth the group’s available undrawn committed bank facilities as at 30 June 2026 and 30 June 2025.
30 June 2026 | 30 June 2025 | |
$ million | $ million | |
Expiring within one year | 1,063 | 1,040 |
Expiring after one year | 3,500 | 2,460 |
4,563 | 3,500 |
The facilities can be used for general corporate purposes and, together with cash and cash equivalents, support the group’s
commercial paper programmes.
2. Analysis of cash flows
The table below sets forth the group’s cash flows for the year ended 30 June 2026 and 30 June 2025.
30 June 2026 | 30 June 2025 | |
$ million | $ million | |
Net cash inflow from operating activities | 4,392 | 4,297 |
Net cash outflow from investing activities | (982) | (1,720) |
Net cash outflow from financing activities | (3,784) | (1,494) |
Net (decrease)/increase in net cash and cash equivalents | (374) | 1,083 |
Exchange difference | (18) | (35) |
Reclassification to assets and liabilities held for sale | (292) | 21 |
Net cash and cash equivalents at beginning of the year | 2,178 | 1,109 |
Net cash and cash equivalents at end of the year | 1,494 | 2,178 |
Net cash inflow from operating activities in fiscal 26 was $4,392 million (2025 – $4,297 million), an increase of $95 million
compared to fiscal 25, primarily driven by lower year on year tax and interest payments partly offset by lower operating profit and
adverse creditor movement.
Net cash outflow from investing activities in fiscal 26 was $982 million (2025 – $1,720 million), a net decrease in outflow of $738
million compared to fiscal 25, primarily driven by a decrease of $368 million in net cash expenditure for property, plant and
equipment and computer software and a favourable movement of $225 million in acquisitions, investment in associates, loans, other
investments and other financial assets and an increase of $145 million in net consideration received in respect of sale of businesses.
Net cash outflow from financing activities in fiscal 26 was $3,784 million (2025 –$1,494 million), a net increase in outflow of $2,290
million compared to fiscal 25. This change was driven by an increase in net outflow in relation to bond issuances and repayments
from $1,527 million inflow to $1,648 million outflow and a net decrease in outflow in respect of other borrowings from $629 million
outflow to $127 million outflow. Additionally, dividend payment decreased from $2,436 million to $2,010 million.
The operating, investing and financing activities described above resulted in a decrease in net cash and cash equivalents of $684
million, from $2,178 million at 30 June 2025 to $1,494 million at 30 June 2026 (2025 – increase of $1,069 million).
225 | Diageo Form 20-F 2026 |
3. Analysis of borrowings
The group policy with regard to the expected maturity profile of borrowings of group finance companies is to limit the proportion of
such borrowings maturing within 12 months to 50% of gross borrowings less money market demand deposits, and the level of
commercial paper to 30% of gross borrowings less money market demand deposits. In addition, it is group policy to maintain
backstop facility terms from relationship banks to support commercial paper obligations.
The group’s gross borrowings and net borrowings are measured at amortised cost with the exception of borrowings designated in fair
value hedge relationships, interest rate hedging instruments and foreign currency swaps and forwards. For borrowings designated in
fair value hedge relationships, Diageo recognises a fair value adjustment for the risk being hedged in the balance sheet, whereas
interest rate hedging instruments and foreign currency swaps and forwards are measured at fair value.
The table below sets forth the group’s gross borrowings and net borrowings as at 30 June 2026 and 30 June 2025.
30 June 2026 | 30 June 2025 | |
$ million | $ million | |
Overdrafts | (26) | (22) |
Other borrowings due within one year | (2,423) | (2,906) |
Borrowings due within one year | (2,449) | (2,928) |
Borrowings due between one and three years | (4,247) | (4,662) |
Borrowings due between three and five years | (3,765) | (4,159) |
Borrowings due after five years | (11,050) | (11,999) |
Fair value of foreign currency forwards and swaps | 393 | 557 |
Fair value of interest rate hedging instruments | (199) | (210) |
Lease liabilities | (685) | (653) |
Gross borrowings | (22,002) | (24,054) |
Offset by: | ||
Cash and cash equivalents | 1,520 | 2,200 |
Net borrowings | (20,482) | (21,854) |
The table below sets forth the percentage of the group’s gross borrowings and cash and cash equivalents by currency as at 30 June
2026.
Total | US dollar | Sterling | Euro | Indian rupee | Chinese yuan | Other | |
$ million | % | % | % | % | % | % | |
Gross borrowings | (22,002) | 68% | 3% | 20% | 1% | 5% | 3% |
Cash and cash equivalents | 1,520 | 46% | 3% | 2% | 18% | 5% | 26% |
Based on average monthly net borrowings and net interest charge, the effective interest rate for the year ended 30 June 2026 was
3.9%. For this calculation, net interest charge excludes fair value adjustments to derivative financial instruments and borrowings and
average monthly net borrowings include the impact of interest rate swaps that are no longer in a hedge relationship but exclude the
market value adjustment for cross currency interest rate swaps.
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).
226 | Diageo Form 20-F 2026 |
The principal components of the $1,372 million decrease in net borrowings from 30 June 2025 to 30 June 2026 were mainly the
$3,211 million of free cash flow, partially offset by $1,846 million equity dividends.
For information on the maturity profile of net borrowings and a further description of net borrowings, please see 'Note 17 – Net
borrowings' in the consolidated financial statements.
For information on the use of financial instruments including for hedging purposes, please see 'Note 16 – Financial instruments and
risk management' in the consolidated financial statements.
The group’s management is committed to enhancing shareholder value in the long-term, both by investing in the business and brands
so as to deliver continued improvement in the return from those investments and by managing the capital structure. Diageo manages
its capital structure to achieve capital efficiency, provide flexibility to invest through the economic cycle and give efficient access to
debt markets at attractive cost levels. This is achieved by targeting an adjusted net borrowings (net borrowings aggregated with post-
employment benefit liabilities) to adjusted EBITDA leverage of 2.5–3.0 times, this range for Diageo being currently broadly
consistent with an A-band credit rating. Diageo would consider operating outside of this range in order to effect strategic initiatives
within its stated goals, which could have an impact on its rating. If Diageo’s leverage was to be negatively impacted by the financing
of an acquisition, it would seek over time to return to the range of 2.5–3.0 times. The group regularly assesses its debt and equity
capital levels against its stated policy for capital structure. As at 30 June 2026, the adjusted net borrowings of $20,869 million (2025
– $22,263 million) to adjusted EBITDA ratio was 3.1 (2025 – 3.4) times. For this calculation, net borrowings are adjusted by post-
employment benefit liabilities before tax of $387 million (2025 – $409 million) whilst adjusted EBITDA of $6,650 million (2025 –
$6,645 million) comprises operating profit excluding exceptional operating items and depreciation, amortisation and impairment and
includes share of after-tax results of associates and joint ventures. See page 210 for the reconciliation and calculation of the adjusted
net borrowing to adjusted EBITDA ratio.
The group’s funding, liquidity and exposure to foreign currency, interest rate risks, financial credit risk and commodity price risk are
conducted within a framework of board approved policies and guidelines. The group purchases insurance for commercial or, where
required, for legal or contractual reasons. In addition, the group retains some insurable risk where external insurance is not considered
to be an economic means of mitigating this risk. Loan, trade and other receivables exposures are managed locally in the operating
units where they arise and credit limits are established as deemed appropriate for the customer.
b) The following bonds were issued or repaid:
30 June 2026 | 30 June 2025 | |
$ million | $ million | |
Issued | ||
€ denominated | 1,171 | 2,452 |
$ denominated | — | 1,491 |
Repaid | ||
€ denominated | (1,569) | (1,816) |
$ denominated | (1,250) | (600) |
(1,648) | 1,527 |
227 | Diageo Form 20-F 2026 |
4. Contractual obligations and other commitments
Payments due by period | |||
As at 30 June 2026 | Less than 1 year $ million | More than 1 year $ million | Total $ million |
Long-term debt obligations | 2,441 | 19,330 | 21,771 |
Interest obligations | 882 | 4,234 | 5,116 |
Purchase obligations | 1,202 | 733 | 1,935 |
Commitments for short-term leases and leases of low-value assets | 10 | 3 | 13 |
Provisions and other non-current payables | 654 | 460 | 1,114 |
Lease obligations | 141 | 675 | 816 |
Capital commitments | 382 | 99 | 481 |
Other financial liabilities | 112 | — | 112 |
Total | 5,824 | 25,534 | 31,358 |
Long-term debt obligations comprise the principal amount of borrowings (excluding foreign currency swaps) with an original
maturity of greater than one year. Interest obligations comprise interest payable on these borrowings and are calculated based on the
fixed amounts payable and where the interest rate is variable, on an estimate of what the variable rates will be in the future. Purchase
obligations include various long-term purchase contracts entered into for the supply of raw materials, principally bulk whisk(e)y,
cereals, cans and glass bottles. Contracts are used to guarantee the supply of raw materials over the long term and to enable a more
accurate prediction of costs of raw materials in the future. Purchase obligations contain minimum purchase commitments Diageo had
on 30 June 2026; a change compared to the previous period when total contract values were disclosed. For certain provisions,
discounted numbers are disclosed.
Corporate tax payable of $207 million and deferred tax liabilities of $2,455 million are not included in the table above, as the ultimate
timing of settlement cannot be reasonably estimated.
Management believes that it has sufficient funding for its working capital requirements.
Neither Diageo plc nor any member of the Diageo group has any off-balance sheet financing arrangements that currently have or are
reasonably likely to have a material future effect on the group’s financial condition, changes in financial condition, results of
operations, liquidity, capital expenditure or capital resources.
For more information on commitments and contingencies, please see 'Note 19 – Contingent liabilities and legal proceedings' in the
consolidated financial statements.
5. Capital repayments
Authorisation was given by shareholders on 6 November 2025 to purchase a maximum of 222,565,850 ordinary shares at a minimum
price of 28101/108 pence and a maximum price of the higher of (a) 105% of the average market value of the company's ordinary shares
for the five business days prior to the day the purchase is made and (b) the higher of the price of the last independent trade and the
highest current independent bid on the trading venue where the purchase is carried out. The programme expires at the conclusion of
the next Annual General Meeting or 15 months from the passing of this resolution, if earlier.
During the year ended 30 June 2024, the group purchased 28 million ordinary shares, representing approximately 1.1% of the issued
ordinary share capital at an average price of 2918 pence (3644 cents) per share, and an aggregate cost of $987 million, including
transaction costs under the share buyback programme. The shares purchased under the share buyback programmes were cancelled.
For further details about the shares purchased and the average price paid per share please refer to note 18 in the consolidated financial
statements.
228 | Diageo Form 20-F 2026 |
Exhibits
1.1 | Articles of Association of Diageo plc |
2.1 | Indenture, dated as of 3 August 1998, among Diageo Capital plc, Diageo plc and The Bank of New York Mellon (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form F-1 (File No. 333-8874) filed with the Securities and Exchange Commission on 24 July 1998 (pages 365 to 504 of paper filing)).(i) |
2.2 | Indenture, dated as of 1 June 1999, among Diageo Investment Corporation, Diageo plc and The Bank of New York Mellon (incorporated by reference to Exhibit 2.2 to the Annual Report on Form 20-F (File No. 001-10691) filed with the Securities and Exchange Commission on 15 November 2001 (pages 241 to 317 of paper filing)).(i) |
2.3 | Indenture, dated as of 8 December 2003, among Diageo Finance B.V., Diageo plc and The Bank of New York Mellon (incorporated by reference to Exhibit 1 to the Report on Form 6-K (File No. 001-10691) filed with the Securities and Exchange Commission on 9 December 2003).(i) |
2.4 | Description of Securities registered under Section 12 of the Exchange Act |
4.1 | Service Agreement, dated 9 Nov 2025, between Diageo plc and Dave Lewis. |
4.2 | Service Agreement, dated 8 Feb 2026, between Diageo plc and Nik Jhangiani. |
4.3 | Form of Service Agreement for Diageo plc’s executives in the United Kingdom, dated as of 1 July 2006 (incorporated by reference to Exhibit 4.7 to the Annual Report on Form 20-F (File No. 001-10691) filed with the Securities and Exchange Commission on 17 September 2007). |
4.4 | Form of Service Agreement for Diageo plc’s executives in the United States, dated as of 1 July 2006 (incorporated by reference to Exhibit 4.8 to the Annual Report on Form 20-F (File No. 001-10691) filed with the Securities and Exchange Commission on 17 September 2007). |
4.5 | Form of Service Agreement for Diageo plc’s executives in the United Kingdom, in use as of July 2015 (incorporated by reference to Exhibit 4.6 to the Annual Report on Form 20-F (File No. 001-10691) filed with the Securities and Exchange Commission on 11 August 2015). |
4.6 | Form of Service Agreement for Diageo plc’s executives in the United States, in use as of July 2015 (incorporated by reference to Exhibit 4.7 to the Annual Report on Form 20-F (File No. 001-10691) filed with the Securities and Exchange Commission on 11 August 2015). |
4.7 | Diageo 2010 Sharesave Plan, dated 14 October 2010 (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-8 (File No. 333-169934) filed with the Securities and Exchange Commission on 14 October 2010). |
4.8 | Diageo 2001 Share Incentive Plan, dated 14 October 2010 (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-8 (File No. 333-169934) filed with the Securities and Exchange Commission on 14 October 2010). |
4.9 | Diageo plc 2009 Executive Long Term Incentive Plan, dated 14 October 2009 (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-8 (File No. 333-162490) filed with the Securities and Exchange Commission on 15 September 2009). |
4.10 | Diageo plc Associated Companies Share Option Plan, dated as of 26 August 2008 (incorporated by reference to Exhibit 4.9 to the Annual Report on Form 20-F (File No. 001-10691) filed with the Securities and Exchange Commission on 15 September 2008). |
4.11 | Addendum to Form of Service Agreement for Diageo plc’s executives in the United States (incorporated by reference to Exhibit 4.16 to the Annual Report on Form 20-F (File No. 001-10691) filed with the Securities and Exchange Commission on 15 September 2008). |
4.12 | Diageo plc Associated Companies Share Incentive Plan, dated as of 23 August 2011 (incorporated by reference to Exhibit 4.22 to the Annual Report on Form 20-F (File No. 001-10691) filed with the Securities and Exchange Commission on 5 September 2012). |
4.13 | Diageo plc Long Term Incentive Plan, dated as of 18 September 2014 (incorporated by reference to Exhibit 99.1 to the Registration Statement on Form S-8 (File No. 333-206290) filed with the Securities and Exchange Commission on 11 August 2015). |
4.14 | Letter of Agreement, dated 24 January 2025, between Diageo plc and Sir John Manzoni. |
229 | Diageo Form 20-F 2026 |
4.15 | Diageo plc Share Value Plan, dated as of 20 September 2017 (incorporated by reference to Exhibit 99.1 to the Registration Statement on Form S-8 (File No. 333-223071) filed with the Securities and Exchange Commission on 16 February 2018). |
4.16 | Diageo One World Share Incentive Plan, dated 16 December 2024 (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-8 (File No. 333-286502) filed with the Securities and Exchange Commission on 11 April 2025). |
6.1 | Description of earnings per share (included in the section 'Reported measures' on page 16 of this Annual Report on Form 20-F). |
8.1 | Principal group companies (included in note 22 to the consolidated financial statements on page 193 of this Annual Report on Form 20-F). |
11.1 | Diageo plc Dealing in Securities Code (incorporated by reference to Exhibit 11.1 to the Annual Report on Form 20-F (File No. 001-10691) filed with the Securities and Exchange Commission on 14 August 2025). |
12.1 | Certification of Sir Dave Lewis filed pursuant to 17 CFR 240.13a-14(a). |
12.2 | Certification of Nik Jhangiani filed pursuant to 17 CFR 240.13a-14(a). |
13.1 | Certification of Sir Dave Lewis furnished pursuant to 17 CFR 240.13a-14(b) and 18 U.S.C. 1350(a) and (b). |
13.2 | Certification of Nik Jhangiani furnished pursuant to 17 CFR 240.13a-14(b) and 18 U.S.C. 1350(a) and (b). |
15.1 | Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm. |
15.2 | Diageo plc Annual Report 2026 (incorporated by reference to Exhibit 99 to the report on Form 6-K (File No. 001-10691) filed with the Securities and Exchange Commission on 18 August 2026). |
97.1 | Diageo Group NYSE Compensation Recovery Policy (incorporated by reference to Exhibit 97.1 to the Annual Report on Form 20-F (File No. 001-10691) filed with the Securities and Exchange Commission on 14 August 2025). |
101.INS | Inline XBRL Instance Document |
101.SCH | Inline XBRL Taxonomy Extension Schema |
101.CAL | Inline XBRL Taxonomy Extension Schema Calculation Linkbase |
101.DEF | Inline XBRL Taxonomy Extension Schema Definition Linkbase |
101.LAB | Inline XBRL Taxonomy Extension Schema Label Linkbase |
101.PRE | Inline XBRL Taxonomy Extension Schema Presentation Linkbase |
(i) Pursuant to an Agreement of Resignation, Appointment and Acceptance dated 16 October 2007 by and among Diageo plc, Diageo Capital plc, Diageo Finance BV,
Diageo Investment Corporation, The Bank of New York and Citibank NA, The Bank of New York Mellon has become the successor trustee to Citibank NA under
Diageo’s indentures dated 3 August 1998, 8 December 2003 and 1 June 1999.
230 | Diageo Form 20-F 2026 |
Signature
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant certifies that it meets all of the
requirements for filing on Form 20-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto
duly authorised.
DIAGEO plc |
(REGISTRANT) |
/s/ Nik Jhangiani |
Name: Nik Jhangiani |
Title: Chief Financial Officer |
18 August 2026 |
231 | Diageo Form 20-F 2026 |
Glossary of terms and US equivalents
In this document the following words and expressions shall, unless the context otherwise requires, have the following meanings:
Term used in UK annual report | US equivalent or definition |
Associates | Entities accounted for under the equity method |
American Depositary Receipt (ADR) | Receipt evidencing ownership of an ADS |
American Depositary Share (ADS) | Registered negotiable security, listed on the New York Stock Exchange, representing four Diageo plc ordinary shares of 28101/108 pence each |
Called up share capital | Common stock |
Capital redemption reserve | Other additional capital |
Company | Diageo plc |
CPI | Consumer price index |
Creditors | Accounts payable and accrued liabilities |
Debtors | Accounts receivable |
Employee share schemes | Employee stock benefit plans |
Employment or staff costs | Payroll costs |
Equivalent units | An equivalent unit represents one nine-litre case of spirits, which is approximately 272 servings. A serving comprises 33ml of spirits, 165ml of wine, or 330ml of ready-to-drink or beer. To convert volume of products other than spirits to equivalent units: beer in hectolitres divide by 0.9, wine in nine-litre cases divide by five, ready-to-drink and certain pre-mixed products classified as ready-to- drink in nine-litre cases divide by ten. |
Euro, €, ¢ | Euro currency |
Exceptional items | Items that, in management’s judgement, need to be disclosed separately by virtue of their size or nature |
Excise duty | Tax charged by a sovereign territory on the production, manufacture, sale or distribution of selected goods (including imported goods) within that territory. It is generally based on the quantity or alcohol content of goods, rather than their value, and is typically applied to alcohol products and fuels. |
Leases | Capital lease |
Financial year | Fiscal year |
Free cash flow | Net cash flow from operating activities aggregated with net purchase and disposal of property, plant and equipment and computer software |
Freehold | Ownership with absolute rights in perpetuity |
GAAP | Generally accepted accounting principles |
Group and Diageo | Diageo plc and its consolidated subsidiaries |
IFRS | International Financial Reporting Standards (IFRS) Accounting Standards 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 |
Impact Databank, IWSR, IRI, Beverage Information Group and Plato Logic | Information source companies that research the beverage alcohol industry and are independent from industry participants |
Net sales | Sales after deducting excise duties |
Noon buying rate | Buying rate at noon in New York City for cable transfers in sterling as certified for customs purposes by the Federal Reserve Bank of New York |
Operating profit | Net operating income |
Organic movement | At level foreign exchange rates and after adjusting for exceptional items, certain fair value remeasurements, hyperinflation, and acquisitions and disposals for continuing operations |
Own shares | Treasury stock |
Pound sterling, sterling, £, pence, p | UK currency |
Price/mix | Price/mix is the number of percentage points by which the organic movement in net sales exceeds the organic movement in volume. The difference arises because of changes in the composition of sales between higher and lower priced variants/markets or as price changes are implemented. |
Profit | Earnings |
232 | Diageo Form 20-F 2026 |
Term used in UK annual report | US equivalent or definition |
Profit for the year | Net income |
Provisions | Accruals for losses/contingencies |
Reserves | Accumulated earnings, other comprehensive income and additional paid in capital |
RPI | Retail price index |
Ready-to-drink | Ready-to-drink products. Ready-to-drink also include ready-to-serve products, such as pre- mix cans in some markets, and progressive adult beverages in the United States and certain markets supplied by the United States. |
SEC | US Securities and Exchange Commission |
Share premium | Additional paid in capital or paid in surplus |
Shareholders’ funds | Shareholders’ equity |
Shareholders | Stockholders |
Shares | Common stock |
Shares and ordinary shares | Diageo plc’s ordinary shares |
Shares in issue | Shares issued and outstanding |
Trade and other payables | Accounts payable and accrued liabilities |
Trade and other receivables | Accounts receivable |
US dollar, US$, $, ¢ | US currency |
233 | Diageo Form 20-F 2026 |
Exhibit 2.4
DESCRIPTION OF SECURITIES
REGISTERED UNDER SECTION 12 OF THE EXCHANGE ACT
As of 30 June 2026 Diageo plc. ('Diageo,' the 'Company,' 'we,' 'us,' and 'our') had the following series of securities registered pursuant
to Section 12(b) of the Act:
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
American Depositary Shares | DEO | New York Stock Exchange |
Ordinary shares of 28101/108 pence each | 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.
Capitalized terms used but not defined herein have the meanings given to them in Diageo’s annual report on Form 20-F for the fiscal
year ended 30 June 2026.
ORDINARY SHARES
The following description of our ordinary shares is a summary and does not purport to be complete. It is subject to and qualified in its
entirety by Diageo’s articles of association (as adopted by special resolution at the Annual General Meeting on 28 September 2023)
and by the Companies Act 1985 and the Companies Act 2006 and any other applicable English law concerning companies, as
amended from time to time.
A copy of Diageo’s articles of association is filed as an exhibit to Diageo’s annual report on Form 20-F for the fiscal year ended 30
June 2026, as Exhibit 1.1.
General
As at 30 June 2026 there were 2,432,397,125 ordinary shares of 28101/108 pence each in issue with a nominal value of $886,821,989.
On 25 July 2019 the Board of Diageo approved a return of capital program to return up to £4.5 billion to shareholders over the three-
year period ending 30 June 2022. During the first phase, which completed on 31 January 2020, the group purchased 36.1 million
ordinary shares.
On 9 April 2020 Diageo announced that it had not initiated the next phase of the return of capital programme and that it would not do
so during the remainder of the year ended 30 June 2020. On 12 May 2021 it was announced that Diageo was recommencing the up to
£4.5 billion programme, extending the original completion date by two years to 30 June 2024.
The final three phases of the £4.5 billion programme completed on 11 February 2022, 5 October 2022 and 1 February 2023
respectively, having announced in July 2022 that it would bring forward the final completion date to during the year ending 30 June
2023. Under these three additional phases Diageo purchased a further 88.1 million shares in total.
On 25 January 2023 the Board of Diageo approved an additional share buyback programme to return up to £0.5 billion to
shareholders by the end of the year ending 30 June 2023. This programme commenced on 16 February 2023 and completed on 2 June
2023 with Diageo having purchased 14 million shares.
On 31 July 2023 the Board of Diageo approved an additional return of capital programme to return up to $1.0 billion to shareholders
by 30 June 2024. This programme commenced on 12 October 2023 and completed on 29 May 2024 with Diageo having purchased
27.4 million shares.
All shares repurchased have been cancelled.
Our ordinary shares are listed on the London Stock Exchange (LSE). Diageo ADSs (as further described below), representing four
Diageo ordinary shares each, are listed on the New York Stock Exchange (NYSE) under the symbol 'DEO'.
All of Diageo’s ordinary shares are fully paid. Accordingly, no further contribution of capital may be required by Diageo from the
holders of such shares. Diageo’s ordinary shares are represented in certificated form and also in uncertificated form under 'CREST'.
CREST is an electronic settlement system in the United Kingdom which enables Diageo’s ordinary shares to be evidenced other than
by a physical certificate and transferred electronically rather than by delivery of a written stock transfer form. Diageo’s ordinary
shares:
•may be represented by certificates in registered form issued (subject to the terms of issue of the shares) following issuance of the
shares by Diageo or receipt of a form of transfer (bearing evidence of payment of the appropriate stamp duty) by Diageo Registrar,
PO Box 521, Darlington, DL1 9XS; or
234 | Diageo Form 20-F 2026 |
•may be in uncertificated form with the relevant CREST member account being credited with the ordinary shares issued or
transferred.
Under English law, persons who are neither residents nor nationals of the United Kingdom may freely hold, vote and transfer Diageo
ordinary shares in the same manner and under the same terms as UK residents or nationals.
Dividend rights
Holders of Diageo’s ordinary shares may, by ordinary resolution, declare dividends but may not declare dividends in excess of the
amount recommended by the directors. The directors may also pay interim dividends or fixed rate dividends. No dividend may be
paid other than out of profits available for distribution. All of Diageo’s ordinary shares rank equally for dividends, but the Board may
withhold payment of all or any part of any dividends or other monies payable in respect of Diageo’s shares from a person with a
0.25% interest (as defined in Diageo’s articles of association) if such a person has been served with a restriction notice (as defined in
Diageo’s articles of association) after failure to provide Diageo with information concerning interests in those shares required to be
provided under the Companies Acts. Dividends may be paid in currencies other than sterling and such dividends will be calculated
using an appropriate market exchange rate as determined by the directors in accordance with Diageo’s articles of association.
If a dividend has not been claimed, the directors may invest the dividend or use it in some other way for the benefit of Diageo until
the dividend is claimed. If the dividend remains unclaimed for 12 years after the date such dividend was declared or became due for
payment, it will be forfeited and will revert to Diageo (unless the directors decide otherwise). Diageo may stop sending cheques,
warrants or similar financial instruments in payment of dividends by post in respect of any shares or may cease to employ any other
means for payment of dividends if either (a) at least two consecutive payments have remained uncashed or are returned undelivered
or that means of payment has failed, or (b) one payment remains uncashed or is returned undelivered or that means of payment has
failed and reasonable enquiries have failed to establish any new postal address or account of the holder. Diageo must resume sending
dividend cheques, warrants or similar financial instruments or employing that means of payment if the holder requests such
resumption in writing.
Diageo’s articles of association permit payment or satisfaction of a dividend wholly or partly by distribution of specific assets,
including fully paid shares or debentures of any other company. Such action is only permitted upon the recommendation of the board
and must be approved by ordinary resolution by the general meeting which declared the dividend.
Voting rights
Voting on any resolution at any general meeting of the company is by a show of hands unless a poll is duly demanded. On a show of
hands, (a) every shareholder who is present in person at a general meeting, and every proxy appointed by any one shareholder and
present at a general meeting, has/have one vote regardless of the number of shares held by the shareholder (or, subject to (b),
represented by the proxy), and (b) every proxy present at a general meeting who has been appointed by more than one shareholder
has one vote regardless of the number of shareholders who have appointed him or the number of shares held by those shareholders,
unless he has been instructed to vote for a resolution by one or more shareholders and to vote against the resolution by one or more
shareholders, in which case he has one vote for and one vote against the resolution. On a poll, every shareholder who is present in
person or by proxy has one vote for every share held by that shareholder, but a shareholder or proxy entitled to more than one vote
need not cast all his votes or cast them all in the same way (the deadline for exercising voting rights by proxy is set out in the form of
proxy).
A poll may be demanded by any of the following:
•the chairman of the general meeting;
•at least three shareholders entitled to vote on the relevant resolution and present in person or by proxy at the meeting;
•any shareholder or shareholders present in person or by proxy and representing in the aggregate not less than one-tenth of the total
voting rights of all shareholders entitled to vote on the relevant resolution; or
•any shareholder or shareholders present in person or by proxy and holding shares conferring a right to vote on the relevant
resolution on which there have been paid up sums in the aggregate equal to not less than one-tenth of the total sum paid up on all
the shares conferring that right.
Diageo’s articles of association and the Companies Acts provide for matters to be transacted at general meetings of Diageo by the
proposing and passing of two kinds of resolutions:
•ordinary resolutions, which include resolutions for the election, re-election and removal of directors, the declaration of final
dividends, the appointment and re-appointment of the external auditor, the approval of the remuneration report and remuneration
policy and the grant of authority to allot shares; and
•special resolutions, which include resolutions for the amendment of Diageo’s articles of association, resolutions relating to the
disapplication of pre-emption rights, and resolutions modifying the rights of any class of Diageo’s shares at a meeting of the
holders of such class.
An ordinary resolution requires the affirmative vote of a simple majority of the votes cast at a validly constituted shareholders’
meeting. Special resolutions require the affirmative vote of not less than three-quarters of the votes cast at a validly constituted
shareholders’ meeting. The necessary quorum for a shareholders’ meeting of Diageo is a minimum of two shareholders present in
person or by proxy and entitled to vote.
235 | Diageo Form 20-F 2026 |
A shareholder is not entitled to vote at any general meeting or class meeting in respect of any share held by him if he has been served
with a restriction notice (as defined in Diageo’s articles of association) after failure to provide Diageo with information concerning
interests in those shares required to be provided under the Companies Acts.
Directors
Diageo’s articles of association provide for a Board of Directors, consisting (unless otherwise determined by an ordinary resolution
of shareholders) of not fewer than three directors and not more than 25 directors, in which all powers to manage the business and
affairs of Diageo are vested. Directors may be elected by the members in a general meeting or appointed by Diageo’s Board. At each
annual general meeting, every director is required to retire and is then reconsidered for election/re-election by shareholders, assuming
they wish to stand for election/re-election. There is no age limit requirement in respect of directors. Directors may also be removed
before the expiration of their term of office in accordance with the provisions of the Companies Acts.
Liquidation rights
In the event of the liquidation of Diageo, after payment of all liabilities and deductions taking priority in accordance with English
law, the balance of assets available for distribution will be distributed among the holders of ordinary shares according to the amounts
paid up on the shares held by them.
Pre-emption rights and new issues of shares
While holders of ordinary shares have no pre-emptive rights under Diageo’s articles of association, the ability of the directors to
cause Diageo to issue shares, securities convertible into shares or rights to shares, otherwise than pursuant to an employee share
scheme, is restricted. Under the Companies Acts, the directors of a company are, with certain exceptions, unable to allot any equity
securities without express authorisation, which may be contained in a company’s articles of association or given by its shareholders
in a general meeting by way of an ordinary resolution, but which in either event cannot last for more than five years. Under the
Companies Acts, Diageo may also not allot shares for cash (otherwise than pursuant to an employee share scheme) without first
making an offer to existing shareholders to allot such shares to them on the same or more favourable terms in proportion to their
respective shareholdings, unless this requirement is disapplied by a special resolution of the shareholders. However, Diageo has in
the past sought authority from its shareholders to allot shares and disapply pre-emptive rights (in each case subject to certain
limitations).
Disclosure of interests in Diageo’s shares
There are no provisions in Diageo’s articles of association whereby persons acquiring, holding or disposing of a certain percentage of
Diageo’s shares are required to make disclosure of their ownership percentage, although there are such requirements under the
Companies Acts. The basic disclosure requirement under Part 6 of the Financial Services and Markets Act 2000 and Rule 5 of the
Disclosure Guidance and Transparency Rules made by the Financial Conduct Authority (successor to the UK Financial Services
Authority) imposes a statutory obligation on a person to notify Diageo and the Financial Conduct Authority of the percentage of the
voting rights in Diageo he directly or indirectly holds or controls, or has rights over, through his direct or indirect holding of certain
financial instruments, if the percentage of those voting rights:
•reaches, exceeds or falls below 3% and/or any subsequent whole percentage figure as a result of an acquisition or disposal of shares
or financial instruments; or
•reaches, exceeds or falls below any such threshold as a result of any change in the breakdown or number of voting rights attached
to shares in Diageo.
The Disclosure Guidance and Transparency Rules set out in detail the circumstances in which an obligation of disclosure will arise,
as well as certain exemptions from those obligations for specified persons.
Under section 793 of the Companies Act 2006, Diageo may, by notice in writing, require a person that Diageo knows or has
reasonable cause to believe is or was during the three years preceding the date of notice interested in Diageo’s shares to indicate
whether or not that is the case and, if that person does or did hold an interest in Diageo’s shares, to provide certain information as set
out in that Act.
Article 19 of the EU Market Abuse Regulation (2014/596) (as it is incorporated into UK domestic law by virtue of the European
Union (Withdrawal) Act 2018 and amended by The Market Abuse (Amendment) (EU Exit) Regulation 2019) further requires
persons discharging managerial responsibilities within Diageo (and their persons closely associated) to notify Diageo of transactions
conducted on their own account in Diageo shares or derivatives or certain financial instruments relating to Diageo shares.
The City Code on Takeovers and Mergers also imposes strict disclosure requirements with regard to dealings in the securities of an
offeror or offeree company on all parties to a takeover and also on their respective associates during the course of an offer period.
Variation of rights
If, at any time, Diageo’s share capital is divided into different classes of shares, the rights attached to any class of shares may be
varied, subject to the provisions of the Companies Acts, either with the consent in writing of the holders of not less than three-
quarters in nominal value of the issued shares of that class or upon the adoption of a special resolution passed at a separate meeting of
the holders of the shares of that class.
236 | Diageo Form 20-F 2026 |
At every such separate meeting, all of the provisions of Diageo’s articles of association relating to proceedings at a general meeting
apply, except that (a) the quorum is to be the number of persons (which must be at least two) who hold or represent by proxy not less
than one-third in nominal value of the issued shares of the class (excluding any shares of that class held as treasury shares) or, if such
quorum is not present on an adjourned meeting, one person who holds shares of the class regardless of the number of shares he holds,
(b) any holder of shares of the class who is present in person or by proxy may demand a poll, and (c) each shareholder present in
person or by proxy and entitled to vote will have one vote per share held in that particular class in the event a poll is taken.
Class rights are deemed not to have been varied by the creation or issue of new shares ranking equally with or subsequent to that
class of shares in all respects or by the reduction of the capital paid up on such shares or by the purchase or redemption by Diageo of
its own shares, in each case in accordance with the Companies Acts and Diageo’s articles of association.
Repurchase of shares
Subject to authorisation by shareholder resolution, Diageo may purchase its own shares in accordance with the Companies Acts. Any
shares which have been bought back may be held as treasury shares or, if not so held, must be cancelled immediately upon
completion of the purchase, thereby reducing the amount of Diageo’s issued share capital. At the Annual General Meeting held on 6
November 2025, Diageo’s shareholders gave it authority to repurchase up to 222,565,850 of its ordinary shares subject to additional
conditions. The minimum price which must be paid for such shares is 28101/108 pence and the maximum price of the higher of (a)
105% of the average market value of the company's ordinary shares for the five business days immediately preceding the day on
which that ordinary share is contracted to be purchased and (b) the higher of the price of the last independent trade and the highest
current independent bid on the trading venue where the purchase is carried out.
Restrictions on transfers of shares
The Board may decline to register a transfer of a certificated Diageo share unless the instrument of transfer (a) is duly stamped or
certified or otherwise shown to the satisfaction of the Board to be exempt from stamp duty and is accompanied by the relevant share
certificate and such other evidence of the right to transfer as the Board may reasonably require, (b) is in respect of only one class of
share and (c) if to joint transferees, is in favour of not more than four such transferees.
Registration of a transfer of an uncertificated share may be refused in the circumstances set out in the uncertificated securities rules
(as defined in Diageo’s articles of association) and where, in the case of a transfer to joint holders, the number of joint holders to
whom the uncertificated share is to be transferred exceeds four.
The Board may decline to register a transfer of any of Diageo’s certificated shares by a person with a 0.25% interest (as defined in
Diageo’s articles of association) if such a person has been served with a restriction notice (as defined in Diageo’s articles of
association) after failure to provide Diageo with information concerning interests in those shares required to be provided under the
Companies Acts, unless the transfer is shown to the Board to be pursuant to an arm’s length sale (as defined in Diageo’s articles of
association).
Substantive shareholder voting rights
The company’s substantial shareholders do not have different voting rights.
Untraced Shareholders
At the Annual General Meeting held on 6 November 2025, Diageo’s shareholders approved the adoption of new articles of
association. The articles amended the provisions relating to untraced shareholders, following the launch of Diageo's asset
reunification programme in January 2025. The amendments provide that, following the sale of shares belonging to an untraced
shareholder in accordance with the articles of association, the net sale proceeds and any uncashed or unclaimed dividends or other
sums relating to those shares will immediately belong to Diageo to be used as the Board thinks fit, rather than the net sale proceeds
being held by Diageo for another six years. This amendment aligned the articles with current market practice and reduced the
administrative burden associated with untraced shareholders.
AMERICAN DEPOSITARY SHARES
General
The ordinary shares of Diageo may be issued in the form of American depositary shares, or ADSs. Each Diageo ADS represents four
ordinary shares of Diageo.
Citibank, N.A. is the depositary with respect to Diageo’s ADSs, which are evidenced by American depositary receipts, or ADRs.
Each ADS represents an ownership interest in four ordinary shares deposited with the custodian, as agent of the depositary, under the
Deposit Agreement dated 14 February 2013 between Diageo, the Depositary and owners and beneficiaries of the ADRs (the 'Deposit
Agreement'). Each ADS also represents any other securities, cash or other property which may be held by Citibank, N.A. as
depositary.
The principal executive office of Citibank, N.A. and the office at which the ADRs will be administered is currently located at 388
Greenwich Street, New York, New York 10013, United States. Citibank, N.A. is a national banking association organized under the
laws of the United States. The custodian will be Citibank, N.A. (London Branch) and its duties will be administered from its principal
London office, currently located at 33 Canada Square, Canary Wharf, London E14 5LB, United Kingdom.
237 | Diageo Form 20-F 2026 |
You may hold ADSs either directly or indirectly through your broker or other financial institution. If you hold ADSs directly, by
having an ADS registered in your name on the books of the depositary, you are an ADR holder. If you hold the ADSs through your
broker or financial institution nominee, you must rely on the procedures of such broker or financial institution to assert the rights of
an ADR holder described in this section. You should consult with your broker or financial institution to find out what those
procedures are.
Diageo will not treat ADR holders as shareholders and ADR holders will not have shareholder rights. English law governs
shareholder rights. The depositary will be the holder of the ordinary shares underlying your ADSs. As a holder of ADRs, you will
have ADR holder rights, which are set out in the Deposit Agreement. The Deposit Agreement also sets out the rights and obligations
of the depositary.
The following is a summary of the material terms of the Deposit Agreement. Because it is a summary, it does not contain all the
information that may be important to you. For more complete information, you should read the entire form of Deposit Agreement and
the form of ADR, which contain the terms of the ADSs. Please refer to Exhibit 99.A on Form F-6 (File No. 333-186400) filed with
the Securities and Exchange Commission on 1 February 2013). Copies of the Deposit Agreement are also available for inspection at
the offices of the depositary.
Share Dividends and Other Distributions
Diageo may make various types of distributions with respect to its securities. The depositary has agreed to pay to you the cash
dividends or other distributions it or the custodian receives on ordinary shares or other deposited securities, after deducting its fees
and expenses. You will receive these distributions in proportion to the number of underlying ordinary shares that your ADSs
represent.
Except as stated below, to the extent the depositary is legally permitted it will deliver such distributions to ADR holders in proportion
to their interests in the following manner:
•Cash. Upon receiving notice from Diageo that Diageo intends to distribute a cash dividend or other cash distribution, the depositary
will establish a record date for such distribution. As promptly as practicable following the receipt of a cash dividend or other cash
distribution from Diageo, the depositary will: (i) if at the time of receipt thereof any amounts received in a foreign currency can, in
the judgment of the depositary, be converted on a practicable basis into U.S. dollars transferable into the United States, promptly
convert or cause to be converted such cash dividend or cash distributions into U.S. dollars, (ii) if applicable, establish a record date
for the distribution and (iii) distribute promptly such U.S. dollar amount, net of applicable fees, charges and expenses of the
depositary and taxes withheld. The depositary shall distribute only such amount as can be distributed without attributing to any
ADR holder a fraction of one cent. Any such fractional amounts shall be rounded to the nearest whole cent and so distributed to
ADR holders entitled thereto. If the depositary cannot reasonably make such conversion or obtain any governmental approval or
license necessary for the conversion, the depositary will hold any unconvertible foreign currency for your account without liability
for any interest or, upon request, will distribute the foreign currency to you. If exchange rates fluctuate during a time when the
depositary cannot convert a foreign currency, you may lose some or all of the value of the distribution.
•Shares. Upon receiving notice from Diageo that Diageo intends to distribute a share dividend or free distribution of ordinary shares,
the depositary will establish a record date for such distribution. The depositary will then either (i) deliver additional ADSs
representing such ordinary shares, or (ii) if additional ADSs are not so distributed, take all actions necessary so that each ADS
issued and outstanding after the ADS record date shall, to the extent permissible by law, thenceforth also represent rights and
interests in the additional ordinary shares distributed, in each case net of applicable fees, charges and expenses of the depositary
and taxes withheld. Only whole ADSs will be issued. Any ordinary shares which would result in fractional ADSs will be sold and
the net proceeds will be distributed to the ADR holders entitled to them.
•Rights to receive additional shares. Upon receiving notice from Diageo that Diageo intends to distribute rights to subscribe for
additional ordinary shares or other rights and that Diageo wishes such rights to be made available to holders of ADSs, the
depositary shall, after consultation with Diageo, have discretion as to the procedure for making such rights available to any ADR
holders or in disposing of such rights on behalf of any ADR holders and making, as promptly as practicable, the net proceeds
available to such ADR holders. If, by the terms of the offering of rights or for any other reason, the depositary may not either make
such rights available to any ADR holders or dispose of such rights on behalf of any ADR holders and make the net proceeds
available to such ADR holders, then the depositary shall allow such rights to lapse. If the depositary determines in its reasonable
discretion that it is not lawful or practicable to make such rights available to all or certain ADR holders, if Diageo does not furnish
such evidence or if the depositary determines it is not lawful or practicable to distribute such rights to all or some of the registered
holders, the depositary may:
•distribute such rights only to the holders to whom the depositary has determined such distribution is lawful and practicable;
•if practicable, sell rights in proportion to the number of ADSs held by registered holders to whom the depositary has determined it
may not lawfully or practicably make such rights available and distribute the net proceeds as cash; or
•allow rights in proportion to the number of ADSs held by registered holders to whom the depositary has determined it may not
lawfully or practicably make such rights available to lapse, in which case such registered holders will receive nothing.
Diageo has no obligation to file a registration statement under the Securities Act of 1933, as amended, in order to make any rights
available to ADR holders.
238 | Diageo Form 20-F 2026 |
•Other Distributions. Upon receiving notice from Diageo that Diageo intends to distribute securities or property other than those
described above and that Diageo wishes such rights to be made available to holders of ADSs, the depositary may distribute such
securities or property in any manner it deems equitable and practicable. To the extent the depositary deems distribution of such
securities or property not to be practicable, the depositary may, after consultation with Diageo, adopt any method that it reasonably
deems to be equitable and practical, including but not limited to the sale of such securities or property and distribution of any net
proceeds in the same way that cash is distributed.
The depositary may choose any practical method of distribution for any specific ADR holder, including the distribution of securities
or property, or it may retain such items, without paying interest on or investing them, on behalf of the ADR holder as deposited
property.
There can be no assurances that the depositary will be able to convert any currency at a specified exchange rate or sell any property,
rights, shares or other securities at a specified price, nor that any of such transactions can be completed within a specified time period.
Deposit, Withdrawal and Cancellation
The depositary will deliver ADSs if you or your broker deposit ordinary shares or evidence of rights to receive ordinary shares with
the custodian. In the case of the ADSs to be issued under a prospectus supplement, Diageo may arrange with the underwriters named
therein to deposit such ordinary shares if and as provided in the prospectus supplement.
Ordinary shares deposited with the custodian must also be accompanied by certain documents, including (a) in the case of certificated
shares, instruments showing that such ordinary shares have been properly transferred or endorsed and (b) in the case of book-entry
shares, confirmation of book-entry transfer and recordation, in each case to the person on whose behalf the deposit is being made.
The custodian will hold all deposited ordinary shares for the account of the depositary. ADR holders thus have no direct ownership
interest in the ordinary shares and have only such rights as are contained in the Deposit Agreement. The deposited shares and any
other securities, property or cash received by the depositary or the custodian and held under the Deposit Agreement are referred to as
deposited property.
Upon each deposit of ordinary shares, receipt of related delivery documentation and compliance with the other provisions of the
Deposit Agreement, including the payment of the fees and charges of the depositary and any taxes or other fees or charges owing, the
depositary will issue and deliver ADSs in the name of the person entitled thereto and, if applicable, issue ADRs evidencing the
number of ADSs to which such person is entitled. ADRs will be delivered at the depositary’s principal office.
The depositary will make arrangements for the acceptance of ADSs for book-entry settlement through The Depository Trust
Company, or DTC. All ADSs held through DTC will be registered in the name of Cede & Co., the nominee for DTC. Unless issued
as uncertificated ADSs, the ADSs registered in the name of Cede & Co. will be evidenced by one or more receipt(s) in the form of a
'Balance Certificate,' which will provide that it represents the aggregate number of ADSs from time to time indicated in the records of
the depositary as being issued to DTC hereunder and that the aggregate number of ADSs represented thereby may from time to time
be increased or decreased by making adjustments on such records of the depositary and of DTC or Cede & Co.
When you turn in your ADSs (and, if applicable, the ADRs evidencing the ADSs) at the depositary’s office, the depositary will, upon
payment of certain applicable fees, charges and taxes, and upon receipt of proper instructions, deliver the underlying ordinary shares
to you. At your risk, expense and request, the depositary will deliver (to the extent permitted by law) deposited property at the
depositary’s principal office.
The depositary may restrict the withdrawal of deposited securities only in connection with:
•temporary delays caused by closing Diageo’s transfer books or those of the depositary or the deposit of ordinary shares in
connection with voting at a shareholders’ meeting, or the payment of dividends;
•the payment of fees, taxes and similar charges; or
•compliance with any U.S. or foreign laws or governmental regulations relating to the ADSs or to the withdrawal of deposited
securities.
This right of withdrawal may not be limited by any other provision of the Deposit Agreement.
Voting Rights
If you are an ADR holder and the depositary asks you to provide it with voting instructions, you may instruct the depositary how to
exercise the voting rights for the ordinary shares which underlie your ADRs. After receiving voting materials from Diageo, the
depositary will, if Diageo asks it to, notify the ADR holders of any shareholder meeting or solicitation of consents for proxies. This
notice will describe how you may, subject to English law and the provisions of Diageo’s articles of association, instruct the
depositary to exercise the voting rights for the ordinary shares which underlie your ADSs. For instructions to be valid, the depositary
must receive them on or before the date specified. The depositary will try, as far as practical, subject to English law and the
provisions of Diageo’s articles of association, to vote or to have its agents vote the shares or other deposited securities as you instruct.
The depositary will not vote or attempt to exercise the right to vote that attaches to the shares or other deposited securities, other than
in accordance with your instructions or deemed instructions. If the depositary does not receive instructions from you on or before the
specified date and voting is by poll, the depositary will deem you to have instructed it to give a discretionary proxy to a person
designated by Diageo to vote such deposited securities.
239 | Diageo Form 20-F 2026 |
However, we cannot assure you that you will receive our voting materials in time for you to give the depositary instructions to vote
any deposited securities. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions to
vote the deposited securities, if, for example, the instructions are not received in time to vote the amount of the deposited securities or
if English or other applicable laws prohibit such voting.
Notwithstanding anything contained in the Deposit Agreement or any ADR, the depositary may, to the extent not prohibited by law
or regulations, or by the requirements of the stock exchange on which the ADSs are listed, in lieu of distribution of the materials
provided to the depositary in connection with any meeting of, or solicitation of consents or proxies from, holders of deposited
securities, distribute to ADR holders a notice that provides ADR holders with, or otherwise publicizes to ADR holders, instructions
on how to retrieve such materials or receive such materials upon request (i.e., by reference to a website containing the materials for
retrieval or a contact for requesting copies of the materials).
Notwithstanding anything else contained in the Deposit Agreement or any ADR, the depositary shall not have any obligation to take
any action with respect to any meeting, or solicitation of consents or proxies, of holders of deposited securities if the taking of such
action would violate applicable U.S. laws. Diageo has agreed to take any and all actions reasonably necessary and as permitted by
English law to enable ADR holders and beneficial owners to exercise the voting rights accruing to the deposited securities.
Reports and Other Communications
The depositary will make available for inspection by ADR holders any reports and communications from Diageo that are both
received by the depositary as holder of deposited property and made generally available by Diageo to the holders of deposited
property. Upon the request of Diageo, the depositary will send to you copies of reports furnished by Diageo pursuant to the Deposit
Agreement.
Reclassifications, Recapitalizations and Mergers
If Diageo takes actions that affect the deposited securities, including any change in par value, split-up, consolidation or other
reclassification of deposited securities or any recapitalization, reorganization, merger, consolidation, sale of assets or other similar
action, then the depositary may, and will if Diageo asks it to:
•distribute additional or amended ADRs;
•distribute cash, securities or other property it has received in connection with such actions; or
•sell any securities or property received and distribute the proceeds as cash.
If the depositary does not choose any of the above options, any of the cash, securities or other property it receives will constitute part
of the deposited property and each ADS will then represent a proportionate interest in such property.
Amendment and Termination
Diageo may agree with the depositary to amend the Deposit Agreement and the ADSs without your consent for any reason. ADR
holders must be given at least 30 days’ notice of any amendment that imposes or increases any fees or charges (except for taxes and
other charges specifically payable by ADR holders under the Deposit Agreement), or affects any substantial existing right of ADR
holders. If an ADR holder continues to hold ADRs when an amendment has become effective such ADR holder is deemed to agree to
such amendment.
No amendment will impair your right to surrender your ADSs and receive the underlying securities except to comply with mandatory
provisions of applicable law.
The depositary will terminate the Deposit Agreement if Diageo asks it to do so. The depositary may also terminate the Deposit
Agreement if the depositary has told Diageo that it would like to resign and Diageo has not appointed a new depositary bank within
180 days. In either case, the depositary must notify you at least 90 days before termination. After termination, the depositary’s only
responsibility will be (i) to advise you that the Deposit Agreement is terminated, (ii) to collect distributions on the deposited
securities (iii) to sell rights and other property, and (iv) to deliver ordinary shares and other deposited securities upon cancellation of
the ADRs. At any time from the termination date, the depositary may sell the deposited property which remains and hold the net
proceeds of such sales and any other cash it is holding under the Deposit Agreement, without liability for interest, for the pro rata
benefit of ADR holders who have not yet surrendered their ADRs. After making such sale, the depositary shall have no obligations
except to account for such proceeds and other cash. The depositary will not be required to invest such proceeds or pay interest on
them.
Limitations on Obligations and Liability to ADR Holders
The Deposit Agreement expressly limits the obligations and liability of the depositary, Diageo and their respective agents. Neither
Diageo nor the depositary assumes any obligation nor shall either of them be subject to any liability under the Deposit Agreement to
any ADR holder, except that they each agree to perform their respective obligations specifically set forth in the Deposit Agreement
without negligence or bad faith. Neither Diageo nor the depositary will be liable if:
•law, regulation, the provisions of or governing any deposited securities, act of God, war or other circumstance beyond its control
shall prevent, delay or subject to any civil or criminal penalty any act which the Deposit Agreement or the ADRs provide shall be
done or performed by it;
•it exercises or fails to exercise discretion permitted under the Deposit Agreement or the ADR;
•it performs its obligations specifically set forth in the Deposit Agreement without negligence or bad faith; or
240 | Diageo Form 20-F 2026 |
•it takes any action or inaction by it in reliance upon the advice of or information from legal counsel, accountants, any person
presenting ordinary shares for deposit, any registered holder of ADRs, or any other person believed by it to be competent to give
such advice or information.
In the Deposit Agreement, Diageo agrees to indemnify Citibank, N.A. for acting as depositary, except for losses caused by Citibank,
N.A.’s own negligence or bad faith, and Citibank, N.A. agrees to indemnify Diageo for losses resulting from its negligence or bad
faith.
The depositary will not be responsible for failing to carry out instructions to vote the deposited securities or for the manner in which
the deposited securities are voted or the effect of the vote.
The depositary may own and deal in deposited securities and in ADSs.
Neither Diageo nor the depositary nor any of their respective directors, employees, agents or affiliates shall incur any liability for any
consequential or punitive damages for any breach of the terms of the Deposit Agreement.
Books of Depositary
The depositary or its agent will maintain a register for the registration, registration of transfer, combination and split-up of ADSs and,
if applicable, ADRs evidencing such ADSs. You may inspect such records at such office during regular business hours, but solely for
the purpose of communicating with other holders in the interest of business matters relating to the Deposit Agreement.
The depositary will maintain facilities to record and process the issuance, cancellation, combination, split-up and transfer of ADSs.
These facilities may be closed from time to time when the depositary considers it expedient to do so.
241 | Diageo Form 20-F 2026 |
Exhibit 12.1
I, Sir Dave Lewis, certify that:
1.I have reviewed this annual report on Form 20-F of Diageo plc;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented
in this report;
4.The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period
covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control
over financial reporting; and
5.The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing
the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s
internal control over financial reporting.
Date: 18 August 2026
/s/ Sir Dave Lewis
Name: Sir Dave Lewis
Title: Chief Executive
(Principal Executive Officer)
242 | Diageo Form 20-F 2026 |
Exhibit 12.2
I, Nik Jhangiani, certify that:
1.I have reviewed this annual report on Form 20-F of Diageo plc;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented
in this report;
4.The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period
covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control
over financial reporting; and
5.The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing
the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s
internal control over financial reporting.
Date: 18 August 2026
/s/ Nik Jhangiani
Name: Nik Jhangiani
Title: Chief Financial Officer
(Principal Financial Officer)
243 | Diageo Form 20-F 2026 |
Exhibit 13.1
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United
States Code), the undersigned officer of Diageo plc, a public limited company incorporated under the laws of England and Wales (the
‘Company’), hereby certifies, to such officer’s knowledge, that:
The Annual Report on Form 20-F for the year ended 30 June 2026 (the ‘Report’) of the Company fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Report fairly
presents, in all material respects, the financial condition and results of operations of the Company.
Date: 18 August 2026
/s/ Sir Dave Lewis
Name: Sir Dave Lewis
Title: Chief Executive
(Principal Executive Officer)
The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and
(b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Report or as a separate disclosure
document.
244 | Diageo Form 20-F 2026 |
Exhibit 13.2
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United
States Code), the undersigned officer of Diageo plc, a public limited company incorporated under the laws of England and Wales (the
‘Company’), hereby certifies, to such officer’s knowledge, that:
The Annual Report on Form 20-F for the year ended 30 June 2026 (the ‘Report’) of the Company fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Report fairly
presents, in all material respects, the financial condition and results of operations of the Company.
Date: 18 August 2026
/s/ Nik Jhangiani
Name: Nik Jhangiani
Title: Chief Financial Officer
(Principal Financial Officer)
The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and
(b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Report or as a separate disclosure
document.
245 | Diageo Form 20-F 2026 |
Exhibit 15.1
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in the Registration Statements on Form F-3 of Diageo plc (No. 333-294004),
Diageo Capital plc (No. 333-294004-01) and Diageo Investment Corporation (No. 333-294004-02), and Form S-8 (No. 333-286502,
333-153481, 333-162490, 333-169934, 333-182315, 333-206290 and 333-223071) of our report dated 18 August 2026 relating to the
financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 20-F.
/s/ PricewaterhouseCoopers LLP
London, United Kingdom
18 August 2026