Down, down, down it goes – when will the Diageo (LSE: DGE) share price ever stop? As someone who bought the stock after its initial profit warning in November 2023, I’m beginning to wonder. How can a company this good do so badly?

The FTSE 100 spirits giant was once seen as one of the brightest, shiniest UK blue-chips of all. That’s why I was quick to snap it up in November 2023, a fortnight after it issued a profit warning following a dip in sales across its Latin America and Caribbean market. I thought that’s just one region, it’ll fix itself. Instead it was the start of a long, relentless decline. And it’s not over yet.

Why has this FTSE 100 stock plunged?

Diageo shares are down 55% over five years, 28% over one year and 14% over three months. The cost-of-living crisis hammered its strategy of building upmarket premium brands, while US tariffs, Gen Z abstemiousness and GLP-1 anti-obesity drugs also threatened sales.

A quick skip through recent full-year results gives us a pretty good picture of why the stock continues to tumble.

• 2025 – $2.54bn
• 2024 – $3.87bn
• 2023 – $4.45bn
• 2022 – $4.33bn
• 2021 – $3.95bn

Turnaround expert Sir Dave Lewis took charge in January, raising hopes that he’d repeat the breathtaking revival act he performed at Tesco. So far all he’s done is make investors even more miserable, by slashing the dividend in half.

Q3 results (6 May) did show net sales growing by 0.3% to $4.5bn. That was better than expected, albeit driven by several regions benefiting from an earlier Easter.  The key North American market remains soft, while sales are forecast to fall 2%–3% this year.

The US and Chinese markets are both weak. Tariffs remain in force. Net debt is a mighty $21.7bn, the market cap a shrunken £32.5bn. And now the cost-of-living crisis is back, if it ever really went away. The oil crash spike will drive up transport costs too — liquids are heavy, after all.

Is there light at the end of the tunnel?

But remember, Lewis didn’t turn Tesco around overnight either. Unsurprisingly, he’s looking to cut costs, because that’s what new CEOs do. The target is $625m over three years.

Disposals will be part of the mix and will help with that debt. Apparently, Lewis will make a push into the canned cocktails market, where Diageo has lost market share to newcomers like BuzzBallz.

I can see one huge issue still. Today, the shares look cheap, with a price-to-earnings ratio of just 12.4. But just ignore anything showing a juicy 5.2% yield as that’s the trailing payout. We’ll get half of that this year.

These are tough times for consumer stocks and likely to stay that way as the Iran war drags on. And we can’t simply assume everybody will start merrily drinking again when they do have money in their pockets. Attitudes to booze have shifted.

Diageo is still a top company with a brilliant range of brands such as Johnnie Walker, Smirnoff, Tanqueray, Baileys and Guinness. The shares won’t fall forever. However, I think we’ll have to be patient before they turn a corner, and finally start climbing again.

Harvey Jones holds shares of Diageo.