Diageo Share Price Makes New 52 Week Low As Consumer Behaviour Shifts

Diageo's share price (LON:DGE) is facing a sobering reality as it plumbed to new 52-week lows, hitting 1,883, and currently trading at 1,900, down 0.65% on the day. This marks a significant downturn for a company historically seen as a stalwart in the beverage sector, and raises questions about its future trajectory in a rapidly evolving market.

The recent downtrend, that has seen Diageo shares drop 25% YTD, reflects a whole range of factors, from shifting consumer preferences and the rise of weight-loss medications to broader economic headwinds.

One of the primary drivers behind Diageo's struggles is a fundamental shift in consumer behavior, particularly among younger demographics in developed markets. A growing emphasis on health and wellness, coupled with the increasing availability of weight-loss medications like Ozempic and the legalization of cannabis in regions like the United States, is leading to a decline in alcohol consumption.

This trend has not gone unnoticed by markets, with concerns raised about the impact of these medications on alcohol demand and apprehension over the company's new management. There is a view that the potential for weight-loss drugs could not only reduce alcohol consumption but also treat addiction, posing a significant long-term threat to the industry.

Economic pressures are further compounding Diageo's challenges. As global economic growth slows, consumers are increasingly opting for more affordable alcoholic beverages, moving away from the premium spirits that have long been a key source of revenue for Diageo. Challenges in key growth markets, such as China, are also weighing on the company's performance. This shift in consumer spending habits is reflected in Diageo's price-to-earnings (P/E) ratio, which has fallen from a historical average of around 24.15 to just 16.21 as of June 2025, indicating a significant discount compared to its historical valuation.

Despite these headwinds, some analysts remain optimistic about Diageo's long-term prospects. The average 12-month price target for the stock is 2,447, implying a potential upside of more than 25% from current levels. The highest analyst target stands at 2,824, while the lowest is near 1,733. This divergence in opinion reflects the inherent uncertainty surrounding Diageo's future. Several firms, including UBS Group and Jefferies Financial Group, have upgraded the stock to a “Buy” rating, suggesting that they believe the company has the potential to recover from its current challenges. Jefferies, for example, raised its price target from 2,300p to 2,800p.

However, the near-term outlook remains cautious due to the recent declines and the ongoing pressures facing the alcohol industry. The stock is currently trading below its key moving averages, a technical signal that typically indicates bearish momentum.