Diageo
Diageo's $20.2B revenue masks simultaneous regional pressure—China down 9%, SE Asia down 7%—testing whether portfolio diversity protects against correlated shocks.
Diageo's fiscal 2025 delivered $20.2 billion revenue (up 1.7% organic) while navigating hostile territory: China spirits down 9%, Southeast Asia down 7%, US consumer environment "weaker than planned." Yet Guinness achieved double-digit growth for the eighth consecutive half—a keystone species propping up the entire portfolio. When Diageo's CEO says they're "not satisfied with current performance," it's code for: our portfolio breadth isn't protecting us like it should. The insurance hypothesis for biodiversity assumes different assets respond differently to shocks, but when China, Southeast Asia, AND the US all decline simultaneously, correlation approaches 1.0 and diversification fails.
The company's strategic response reveals bet-hedging through geographic and category reallocation. Africa delivered double-digit growth in Ghana, South Africa, and Tanzania—proof that while developed markets stagnate, emerging markets still offer expansion territory. Diageo's April 2025 swap of Cîroc majority stake for Lobos 1707 Tequila demonstrates active portfolio management: exit declining categories (vodka losing US share), enter growing ones (tequila gaining share). This is the Accelerate programme in action—announced May 2025 to "optimize investment and allocate resources effectively." Translation: stop defending losing positions, redeploy to winning territories.
Diageo's brand portfolio (Johnnie Walker, Smirnoff, Guinness, Tanqueray, Captain Morgan across 180 countries) provides response diversity in theory but concentration risk in practice. When macro trends turn negative across multiple regions simultaneously, even functionally complementary products suffer. The company's flat Q1 fiscal 2026 organic sales (October 2025) while cost-cutting through Accelerate suggests margin protection while waiting for environmental conditions to improve. This is the tortoise strategy: reduce metabolic rate, wait for better foraging conditions, don't waste energy fighting headwinds you can't control. The risk is competitors gain share while you hibernate.