Diageo interim CEO Nik Jhangiani has joined the debate on whether structural or cyclical issues are driving sales declines in the drinks industry.

It follows Brown-Forman CEO Lawson E. Whiting describing it as “the single most important question to ask” about the future of the drinks industry.

Jhangiani hosted a ‘fireside chat’ for investors at the Barclays Global Consumer Staples Conference in Boston on 4 September.

In August, Diageo reported its net sales of $20.2 billion declined 0.1% due to unfavourable foreign exchange and acquisition and disposal adjustments. Organic net sales grew 1.7%, while reported operating profit declined 27.8%.

Jhangiani said: “When you think about moderation, it’s interesting because are people moderating because I’m more focused on health and wellness, or am I more focused on how much I’m consuming, and how I’m going to wake up the next morning?

“Are they also moderating [because] they just don’t have enough money to spend? Is that a trend that’s a continued one, or is that a trend that will reverse because that’s linked to more of the cyclical or the macroeconomic issue?”

Regarding Gen Z drinking less than older generations, Jhangiani said he felt it was not just about the demographic being more health-conscious.

“Even when you look at the Gen Z cohort we’re talking about, you know, a group of people, some of whom have not even reached legal drinking age, some of who are in the earlier part of their legal drinking age piece, and they’re probably the most cash strapped,” he said.

“When people say it’s all about health and wellness and the younger generation, I’ll call a bit bullshit on that.

“There probably is, don’t get me wrong, but it’s not every one of those is suddenly the healthiest person overnight. And that’s all that they’re focused on. When you look at it, as they get into the higher age cohorts, there’s probably a different level or type of socialising that happens, and then they’ll probably get back to more normal levels.”

Brown-Forman CEO’s verdict

Brown-Forman CEO Whiting gave his verdict during an analyst following Brown‑Forman reporting financial results for its first quarter of FY26 (ended July 31, 2025), which saw net sales decrease 3% to $924 million compared to the same prior-year period.

Whiting described the current environment as “challenging” and said the company had delivered “resilient results in the face of persistent headwinds”.

“Inflation and higher interest rates are certainly hurting consumers,” he said. “Uncertainty around tariffs, I think that was not only in the US and actually was more of a global thing, but certainly that didn’t help.” 

He said that growth was still strong in August 2023 before plateauing at Christmas 2023 then plunging from 2024 onwards. However, he said that cannabis, Ozempic-style drugs and the rise in wellness consideration “just does not tank a market that quickly”.

He said he believed that strongest factors behind the drop in sales were cyclical and economic.

“While there is some continuum between cyclical and structural, I still feel like the cyclical side is a little bit a bigger piece of it,” he said.

“Moderation is probably the most often talked about [structural factor] and it certainly gets into the general media seemingly every day. Certainly, there are some people who are drinking on fewer occasions and others are just drinking fewer per occasion. And then you’ve got a few that are drifting towards either lower AB or no or no alcohol products.

“But the whole concept of drinking less but better has been around for a long time and we think we’ve played pretty well in that space. The shift from beer and wine to spirits continues even over in recent quarters and months and that’s been going on as I think we all know for a long, long time.

“So what are we doing about it? Look, we’ve changed the portfolio. I think everyone knows that. That’s a longer-term play. But we prioritize premium and super premium products. And I do think, as time goes on, that will play out very, very well for us.

“It’s not that many Americans are actually exiting the category and not drinking at all. It’s just they’re reducing the consumption at the time.”

He also said that growth in GLP-1s such as Ozempic and Wegovy had “moderated quite a bit”.

“So I don’t want to jump on that too hard, but I don’t think it’s as big of a headwind maybe as it was a year ago,” he said.

“And cannabis kind of the same thing. I think that’s always been a little bit blown out of proportion to its immediate — it’s impact on — yes, spirits consumption, but there are the other — I don’t know, I don’t think we’ve talked much about these hemp-based beverages that are out there, and they’re in — these are the ones that are hemp-derived and they’re legal as a result of this loophole from the 2018 Farm Bill.

“So many — really all the states did not anticipate that potential that, that was going to go that way. We still have some concerns over basically the lack of a regulatory framework and the need to ensure consumer safety. So those things the net-net, I don’t think that has a material impact on takeaway, but it’s still there.

Like Jhangiani, Whiting also felt the perceived Gen Z disinterest in alcohol was nuanced.

“Those are the folks that are in their 20s for the most part and they don’t have a lot of money in their wallet and with rent and all the things we’ve talked about over the quarter, food and everything else,” he said.

“They get hurt more than anyone else and that tends to be the age group that consumes the most alcohol or has the highest per capita. So that has been a headwind.

“But I do think step back for a second and think a little bit longer term, we’ve still got Gen Zs growing, and there’s global growth in the LDA drinking age. And so that will be a tailwind.

“Middle-class consumers are still growing in many markets. And even women getting into spirits is another trend that has been around for quite a while but continues.

“But I don’t want folks to exaggerate the structural end of things. I think I’ve done more than 50 earnings calls in my career, and that’s the longest answer I’ve ever given. So I apologize for that, but I do think, truly, it’s probably the single most important question to ask on the long-term health of this industry.”

Whiting said strategic relationships, such Brown-Forman’s McLaren Formula One and music sponsorships were also key to future growth of brands such as Jack Daniel’s.

“We’re also leveraging an evolved on-premise strategy and our new media campaign to engage a new generation of legal drinking age consumers while remaining intently focused on retaining our core consumers,” he said.

“As a result, compared to a year ago, we are seeing improvements in brand health driven by young adult spirit drinkers. Across key measures of penetration, affinity and uniqueness, we see significant positive shifts in brand performance over the last year, in particular, among legal drinking age to age 34 consumers but also among consumers aged 35 and above.

“These positive shifts across both age categories affirm that our strategic actions are reaching new consumers while not alienating those who have been friends of Jack for years, and we will continue to take bold actions to further enhance the health and growth of Jack Daniel’s.”

Diageo sells UDL to Vok Beverages