Diageo
Diageo owns 200+ spirit brands generating $20.2B revenue but profits down 27.8% as category contraction overwhelms individual brand strength.
Diageo's 2024-2025 struggles illuminate the limits of portfolio strategy when underlying demand contracts. The company owns Johnnie Walker, Guinness, Don Julio, Tanqueray, and 200+ other spirits brands across every price point and category—classic resource partitioning where each brand occupies a distinct niche. But fiscal 2025 revenue of $20.2 billion (flat to declining) with operating profits down 27.8% to $4.3 billion exposes a biological truth: portfolio diversity protects against individual brand failure, not against ecosystem-wide collapse. When the entire spirits category contracts due to health trends and economic pressure, owning many brands just means many simultaneous declines.
The company demonstrates hormetic stress response through its "Accelerate programme"—delivering $700 million in productivity savings while maintaining $2.6 billion free cash flow. This is strategic catabolism: breaking down organizational tissue (7,000+ position cuts projected, restructuring costs) to fuel core functions. Interim CEO Nik Jhangiani increased cost-cutting targets from $500 million to $625 million over three years, recognizing that the post-COVID super-cycle won't return. The wisdom is in timing: cutting before crisis becomes existential, while cash flow remains strong enough to fund the transition.
Diageo's biological advantage appears in brand-level differentiation that creates pockets of growth within overall decline. Don Julio tequila surged 50% in H1 2025 while Cîroc vodka fell 32%—the portfolio allows some species to thrive while others contract. Guinness delivered double-digit growth through strategic alignment with sporting events (Premier League, Six Nations), showing how brands can create mutualistic relationships with cultural events that competitors can't easily replicate. The company grew or held market share in 65% of total net sales value, meaning Diageo is losing less slowly than competitors. In contracting ecosystems, relative fitness matters more than absolute growth. The question isn't whether Diageo is growing—it's whether they're consolidating share as weaker competitors exit.