Diageo is looking at China and asking the question every turnaround CEO asks sooner or later: is this still worth the headache?
According to Bloomberg, the spirits giant behind Guinness, Johnnie Walker, and Don Julio is considering options for its China business, including potentially selling off some assets as it reshapes its global portfolio.
“Drastic Dave” Arrives, and the Trimming Begins
The timing is not subtle.
This comes just a couple weeks into the tenure of new CEO Sir David Lewis, a leader known in the British press as “Drastic Dave” thanks to his aggressive turnaround reputation from prior roles at Unilever and Tesco.
Under Lewis, Diageo is reportedly looking to slim down its global holdings, and China is starting to look like a logical place to begin that cleanup.
China Has Been Dragging on Sales
China is not just a “not growing fast enough” market for Diageo.
It’s actively weighing on results. Diageo said China helped drag net sales down about 2.5% in its first quarter of FY26, which is the type of number that makes an underperforming region go from “strategic growth market” to “potential divestiture candidate” overnight.
The Core Problem: People in China Are Drinking Less
Even if Diageo executed perfectly, the macro is still ugly.
Alcohol consumption in China has been falling for years. World Health Organization data shows the average Chinese adult over age 15 drank:
7.53 liters of pure alcohol in 2015
4.52 liters in 2022
That’s not a small shift. That’s a structural demand decline.
Baijiu Weakness Isn’t Helping
Diageo specifically called out weaker consumption of baijiu, China’s traditional white spirit with thousands of years of history, as a major factor behind the slump.
And it’s not just taste preferences changing. The broader environment has been turning against heavy drinking.
What’s Behind the Drop-Off
One recent study cited a mix of forces driving China’s drinking decline, including:
public health campaigns
stricter taxes and market regulations
demographic shifts
tighter government policy
Last summer, China also cracked down on government workers drinking during official functions as part of a wider “anti-extravagance” push, which sends a signal through the entire culture.
Bottom line: Diageo is trying to clean up its portfolio under a new turnaround CEO, and China is suddenly looking less like a growth engine and more like a long-term drag in a country that’s drinking materially less than it did a decade ago.