Financial Data and Key Metrics Changes - In Q1, organic net sales were flat, with reported net sales of $4.9 billion down 2.2% year-over-year, primarily impacted by the disposal of Guinness Nigeria and the Shiraz North America transaction [8][9] - Organic volume growth was 2.9%, offset by a negative price mix of 2.8%, largely due to the adverse impact of Chinese white spirits [8][9] - The company updated its fiscal guidance, now expecting organic net sales growth to be flat to slightly down for the fiscal year, with organic operating profit growth projected in the low to mid-single-digit range [15][17] Business Line Data and Key Metrics Changes - North America saw organic net sales decline by 2.7%, with U.S. spirits down 4.1%, while Diageo Beer Company grew by 9.2% [9][10] - Europe experienced organic net sales growth of 3.5%, driven by strong performance in Guinness Draught and spirits, particularly in Turkey and the Middle East [10][11] - Asia-Pacific faced a 7.5% decline in organic net sales, primarily due to reduced consumption of Chinese white spirits, which negatively impacted regional sales by approximately 13% [10][11] Market Data and Key Metrics Changes - In LAC, organic net sales grew by 10.9%, led by strong performance in Brazil, while Africa reported 8.9% organic sales growth, with broad growth across East Africa and Southwest and Central Africa [11][12] - The tequila category in North America is experiencing increased competitive pressure, with a decline in overall category growth from 10% in 2023 to just under 3% [32][35] - The company noted a shift in consumer behavior, with consumers trading down from super premium to premium products, impacting sales of Don Julio and Casamigos [35][36] Company Strategy and Development Direction - The company is advancing its "Accelerate" program to strengthen its foundations for long-term sustainable growth, with a focus on cost efficiency and process simplification [12][18] - Management is committed to improving operating leverage and enhancing commercial execution, particularly in key markets [13][15] - The company is exploring selective disposals of non-core assets to focus on growth opportunities in RTDs and brand activation during major events like FIFA 2026 [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed concern over current performance, particularly in North America, and emphasized the need for urgent actions to drive growth [5][6] - The economic environment is weighing on consumer sentiment, leading to weaker-than-expected results in the U.S. [9][15] - Despite challenges, management remains confident in delivering $3 billion in free cash flow for fiscal 2026, supported by ongoing initiatives [12][17] Other Important Information - The company is implementing a clearer decision-making framework to enhance speed and agility in operations [14][15] - Management highlighted the importance of maintaining brand equity while optimizing marketing spend across different markets [56][59] Q&A Session Summary Question: Insights on U.S. spirits performance and guidance - Management acknowledged the complexity of U.S. spirits performance, noting a decline in depletions and the impact of tariff-related pre-buys [21][22] Question: Competitive pressure in the tequila market - Management discussed increased competition in the tequila category, emphasizing the need for strategic interventions to improve performance [31][32] Question: EBIT guidance and margin support - Management expressed confidence in achieving low to mid-single-digit EBIT growth despite market challenges, citing cost efficiencies and stronger whiskey performance [45][47] Question: Impact of A&P reductions - Management clarified that A&P reductions in GB were part of a broader strategy to optimize marketing spend while maintaining brand equity [55][56] Question: Accelerate program details - Management provided insights into the Accelerate program, highlighting its role in driving efficiencies and improving resource allocation [63][66]

Financial Performance - Organic net sales increased by 1.7%[9], but excluding the Cîroc transaction, the increase was 1.5%[9] - Organic operating profit decreased by 0.7%[10], attributed to overheads, primarily staff costs and strategic investments[10] - Pre-exceptional EPS decreased by 8.6% to 164.2 cents[10], mainly due to a lower Moët Hennessy contribution and unfavorable FX at 103.48c[10] - Free cash flow increased by $0.1 billion to $2.7 billion[9], driven by strong working capital management[10] Strategic Initiatives - The company is implementing the "Accelerate" program to deliver approximately $625 million in cost savings over 3 years[22], with about 50% reinvested for future growth and 50% dropping through to the bottom line[29] - Capital expenditure for fiscal year 26 is guided to be in the range of $1.2-$1.3 billion[47], moving to mid-single-digit % net sales (fiscal 25: 7.7%) over 3 years[47] - The company aims to be well within the leverage target range of 2.5-3.0x net debt/EBITDA no later than fiscal year 28[23] Market Dynamics - Developed markets accounted for 62% of organic net sales, while emerging markets accounted for 38%[67] - The company gained or held share in 65% of measured markets[65] - Non-alcoholic beverages experienced approximately 40% organic net sales growth[88] Regional Performance - North America: Organic sales growth with share gains in TBA led by Don Julio and Crown Royal[69] - Asia Pacific: Weaker performance in China and Travel Retail offset India growth[65] - Latin America and Caribbean: Return to growth[65], with organic sales growth of 9.2%[68]