Newsletter · · Ashutosh Agarwal

Diageo Core Brands Sink as Guinness Carries the Turnaround - Beverage Alcohol & Nicotine - Week of August 19, 2026

Beverage alcohol and nicotine newsletter for the week of August 19, 2026. Diageo turned its billion-dollar savings target into an organic turnaround plan built on canned cocktails and Guinness, a billion-dollar nicotine-pouch challenger surfaced from a Turning Point Brands joint venture, and the THC seltzer fight became a fight over who gets to distribute the category.

Beverage Alcohol & Nicotine

Week of August 19, 2026: Diageo Core Brands Sink as Guinness Carries the Turnaround

The biggest name in booze finally showed its homework this week. A month after telling investors it needed to save a billion dollars, Diageo laid out what the fix actually looks like, and the picture underneath the plan is stark: its best-known American spirits are in a multi-year slide, and the one thing genuinely working is a 250-year-old Irish stout that went viral on TikTok. The rest of the week rhymed with that theme. The moderation story keeps hardening on the alcohol side, and the loudest nicotine item came from a $1 billion pouch upstart most investors have never heard of. And the fight everyone in drinks is watching, over THC seltzers, quietly turned into a turf war over who gets to distribute them.

TL;DR

  • Diageo, maker of Johnnie Walker, Smirnoff and Guinness, spelled out its turnaround, and it is an admission of how deep the hole is: North American sales fell 8% in the latest figures, with Smirnoff, Captain Morgan, Don Julio and Casamigos all in decline, while Guinness grew 10.9% and is now the only real growth engine. New boss Dave Lewis promised an "organic turnaround," no big buying or selling, built on two bets: total spirits including canned cocktails, and premium beer led by Guinness.
  • The nicotine story of the week was a challenger, not a giant. ALP, a wet nicotine-pouch brand launched in November 2024 as a joint venture between public company Turning Point Brands and the Tucker Carlson Network, says it is already a "$1 billion plus" brand and the fourth-largest pouch in the stores it's in, a direct shot at the profit pool the tobacco majors are counting on.
  • The THC-drinks fight became a distribution fight. A new bill would regulate hemp beverages under the same three-tier, 21-and-over system as alcohol, and the beer wholesalers' lobby "couldn't be happier." The read: Big Alcohol has stopped trying to ban the category and started trying to own the trucks that carry it.

What's new

Diageo showed its cards, and the core of the business is worse than the headline. The most useful hour on any podcast this week was the BBC World Service's Business Daily, "What's next for Guinness owner Diageo?" (Aug 12, 2026), where host Will Bain sat down with Kate Burnett, a drinks-industry analyst at the newsletter Feel Good Insights. The United States is up to 40% of Diageo's sales, and Burnett was blunt that the American portfolio is the problem: "Some of the lead brands in the US have been in decline for years. I mean, Smirnoff and Captain Morgan in particular really need to be restored." Worse, the two premium tequilas that were supposed to be the future have their own self-inflicted wound: "Trust in the Casamigos and Don Julio brands has declined in recent years. They were the subject of some class action lawsuits last year regarding the use of non-agave additives in those products." When your fastest-growing, highest-margin category is the one drinkers just learned to distrust, that is not a soft quarter, that is a franchise problem.

The number that frames everything: in Diageo's biggest market, North America, "their sales fell by 8%." And the miss Burnett kept circling back to was ready-to-drink cocktails, the cans-of-margarita format that is basically the only part of US spirits still growing. "In the US, spirits have not grown if you remove RTDs from the equation. So really growth in spirits is RTDs. And Diageo has been quite slow to bring those to market... The fact that Casamigos is just launching an RTD margarita now. I mean, this is just money left on the table." Diageo's own North America chief, John O'Keefe, has conceded the point.

New group CEO Dave Lewis, nicknamed "Drastic Dave" in the British press for his history of slimming down companies, used his investor presentation to draw the map. He was careful to kill the takeover chatter: "The plan that we're sharing with you today is an organic turnaround... we're not buying, we're not selling." The strategy is two priorities and not much else: "Total spirits, full price ladder, including RTDs. That's market number one for Diageo going forward. Premium beer with Guinness market number two."

"We're not quite looking at the cigarette industry here, but I think we are looking at an industry that maybe isn't going to be as successful, even in those new markets, as it has been in the past." (the BBC's Rahul Tandon, on Diageo's growth outlook)

That Guinness line is the genuinely bright spot, and it is remarkable: Guinness sales grew 10.9% in the latest figures, against a backdrop of decline nearly everywhere else. The brand is still only the number-12 premium beer in the US and, per Diageo's global Guinness marketing chief, is "not represented at all" in many premium beer markets, so the company thinks it can push Guinness into the US top 10 and grow it in India and Brazil. The reason it's working is the "split the G" TikTok challenge, which Diageo didn't invent but was perfectly positioned to ride because of decades of investment in proper draft pours and glassware. As Burnett put it, the trend introduced "a new generation who probably thought it was dark and heavy and sticky" to Guinness "in a way that no ad campaign the brand thought up ever could have done." For anyone modeling Diageo, the bet is now legible: stabilize four sick core brands, catch up on canned cocktails, and hope one viral stout can carry the beer half of the story.

A billion-dollar nicotine brand you've probably never heard of is eating into the majors' pouch profits. The week's substantive nicotine item came from Total Retail Talks, "Nicotine Brand ALP's DTC Journey to Success" (Aug 17, 2026), an operator interview with Lorenzo DiPlano, co-founder and CEO of ALP. This is worth attention because nicotine pouches are the single most important growth story for Philip Morris (Zyn), Altria (on!) and BAT (Velo), and here is a startup taking share in it. DiPlano is not a random founder: he built one of America's first vape manufacturers, sold it to public company Turning Point Brands in 2019, and ran new ventures there before spinning up ALP as a 50-50 joint venture between Turning Point Brands and the Tucker Carlson Network. ALP launched in November 2024 and, in his words, "quickly grown into a $1 billion plus brand."

The strategy is the interesting part for incumbents. ALP went direct-to-consumer first, "an incredible sandbox" that gave it first-party data on exactly which ZIP codes were begging for the product, then walked that demand data into retailers. The result: "We're already the fourth largest brand in stores that we're currently in," competing "with massive big tobacco companies with tens of billions of dollars in value." His product wedge is a knock on Zyn directly: DiPlano argues Zyn's pouches "lacked the moisture," while ALP uses the wetter pouch technology common in mature Scandinavian markets. Two takeaways for a book: the pouch category is still explosive enough to mint a billion-dollar brand in under two years, which is bullish for total nicotine volumes; but a fragmenting field of well-funded challengers is exactly what erodes the pricing and margin the majors are counting on to offset dying cigarettes. Note the direct beneficiary here is Turning Point Brands, which owns half the venture.

Athletic Brewing made the clearest operator case yet that non-alcoholic beer is a durable winner, not a fad. On Knowledge at Wharton's Marketing Matters, "Athletic Brewing's Senior Director of Marketing, Rosalie Kennedy" (Aug 17, 2026), Kennedy dropped the stat that anchors this whole newsletter: "49% of Americans are trying to drink less alcohol." Athletic, which brews only non-alcoholic beer at its own facilities in Connecticut and San Diego, always under 0.5% ABV, has turned that trend into scale. Kennedy said Athletic is "the biggest supplier in beer, period" at Whole Foods, "not just non-alcoholic beer, but all beer," and is now in all 50 states across grocery chains, independents, on-premise bars and restaurants, e-commerce, and even American Airlines.

Her strategic framing matters because it explains why the category has staying power. Athletic refuses to sell itself as the "healthy" or sober option: "I don't like to think of us as an alternative. I think we're a choice... Our target is people who drink beer." The pitch is taste and social inclusion, not virtue, "it's awkward to cheers with a glass of water." And she was explicit that Athletic's real competitive set is no longer other beers but the entire universe of feel-good drinks, including THC and CBD beverages: "we're up against anything that doesn't have alcohol. There's so many categories that exist right now that play off of flavor, play off of functional benefits, that play off of other effects." When a fast-growing category leader tells you the fight is for the whole non-alcohol occasion, that is the moderation thesis stated from the inside.

A private-equity veteran poured cold water on the "better-for-you" beverage gold rush. The counterweight to all the functional-drink optimism came from Monetary Matters with Jack Farley, "Ex-Goya COO on the $1.4 Trillion Family Business Opportunity in Three Consumer Sectors, Andy Unanue" (Aug 18, 2026). Unanue, former COO of Goya and now a private-equity investor, cited Poppi and Olipop as "beautiful stories," and then explained why his firm won't touch beverages: "for every one winner... there's 100 plus that aren't going to make it. And we're just not willing to take that risk. That's asymmetric risk." His reasoning is grounded, not glib: food has "more science and more manufacturing internal know-how," while beverages are "more replicable... more about marketing," which makes outcomes binary. "I have a stack back in my office of probably 100 that nobody's ever heard of... because they're out of business." The read-through for anyone long the functional-drink theme: the category is real, but survivorship bias makes it look far safer than it is, and the durable winners may end up being the big incumbents, not the upstarts (more on that below).

The debate

The question at the center of this newsletter is whether the drop in drinking is a permanent generational shift or a cyclical dip that reverses. This week the evidence again leaned bullish for the moderation thesis, but, unusually, the bear case got a couple of real, non-trivial witnesses.

Bull (the moderation is structural), still the heavier side. Diageo is the exhibit. You do not lay out a billion-dollar, "not buying, not selling" organic turnaround built around one growing brand unless you believe the demand base has genuinely reset. Burnett noted that in the US, "rates of underage drinking have been in drastic decline for decades... basically been cut in half since 1984," and that only about half of Gen Z is even of legal drinking age yet, a cohort still to be tested. Athletic Brewing's 49%-trying-to-drink-less figure, and its expansion into every channel in the country, says the substitute is now a permanent fixture rather than a novelty. And the functional and THC categories keep pulling at the edges of the drinking occasion.

Bear (the dip is cyclical or overstated), with better witnesses than usual this week. Two came from operators and analysts, not optimists. First, the World Cup. On Business of Drinks, "Is Your Drinks Brand Actually Growing? With Danelle Kosmal" (Aug 12, 2026), Kosmal, a veteran data analyst formerly of Nielsen/NielsenIQ and the Beer Institute, pointed to depletion data showing "beer sales have been increasing in both off and on premise" around the World Cup. Big sporting events still move volume, which is exactly what a purely structural-decline story struggles to explain. Second, Guinness up 10.9% and India "trading up" (per drinkers Business Daily interviewed in Mumbai) both show that when the product and the occasion are right, premium alcohol can still grow fast. And a chunk of Diageo's pain is self-inflicted, RTD lateness and the agave-additive lawsuits, not the market walking away.

Kosmal also handed us the single most useful analytical warning of the year, and it cuts against taking any single headline at face value: revenue can rise while the business shrinks. "Revenue might be growing and your volume is down because you had a recent price increase... consumers are just purchasing less." Premiumization can flatter a declining category for a long time before the volume math catches up, which is precisely why "even is the new up" has become the industry's mood.

On the nicotine side, the one hard data point of the week (ALP) argues the pouch category is still booming, a point for the "durable smoke-free transition" bulls, but it came from a challenger explicitly trying to take the majors' share, so read it as a volume signal rather than a margin one.

Read-throughs

Non-alcoholic beer is spreading from the specialists to the craft mainstream. On the Brewbound Podcast, "The Beer Industry's New Era of Competition" (Aug 12, 2026), the hosts broke the news that Vermont's Lawson's Finest Liquids is launching a non-alcoholic IPA called Sippin, notable because Lawson's is a full-strength craft brewer, not an NA specialist. The tell is in the data they cited: about 30% of Lawson's existing drinkers already buy non-alcoholic beer. When roughly a third of a hop-forward brewery's loyal base is already reaching for zero-proof, NA has stopped being a niche and become table stakes. That is good for category leader Athletic, but it also means Athletic's clean runway is about to get crowded with credible craft names.

The distribution middle tier is quietly turning against small craft, and that reshuffles who wins the moderation dollar. Also on Brewbound, the annual Tamarron survey of 170 beer wholesalers found that well over 55% plan to de-emphasize or cut SKUs on both regional and local craft in the coming year, while national craft held far more positive sentiment. Distributors were split on whether to expand or cut hemp drinks, given the regulatory fog. And two Northeast craft distributors, Serene and Remarkable Liquids, swapped territories across New York and New Jersey to cut out redundant truck routes. The read: in a flat-to-shrinking beer market, wholesalers are rationalizing their trucks around scale, and the brands with national heft and clean logistics, not the local upstarts, are the ones keeping their shelf space.

The THC-drink story has shifted from "will it be banned" to "who distributes it," and Big Alcohol wants the job. Following last week's reprieve that pushed the hemp ban to December 11, the Brewbound hosts flagged a new bill that would regulate hemp beverages under the same three-tier distribution system and 21-and-over age gate as alcohol. Their summary of the wholesalers' reaction: "the NBWA couldn't be happier about this," the National Beer Wholesalers Association being the beer distributors' lobby. The more colorful version came from the Cannabis Legalization News Podcast, "Hybrid Dispensaries, Schedule III Rescheduling, and the Fight Over THC Hemp Drinks" (Aug 16, 2026), where the hosts, advocates rather than neutral analysts, argued the whole exercise is really "about selling units of THC in the alcohol supply chain," with a likely cap around 5 milligrams per can sold interstate "at the liquor store." Strip out the politics and the investable point is the same one CANN's CEO made last week: the alcohol industry has moved from trying to kill THC drinks to trying to fold them into its own trucks, shelves and rules. For distributors like Reyes and the big three-tier players, THC beverages could become a new, high-margin line rather than a threat.

The functional-drink boom increasingly belongs to the giants. Unanue's caution on beverage start-ups had a flip side worth pulling out for a portfolio: the incumbents are absorbing the trend. He noted Pepsi's playbook, buying the healthier snack maker Siete, chasing Poppi and Olipop, shrinking pack sizes, cleaning up labels, and leaning into lower-calorie, higher-protein and higher-fiber formats as more consumers go on GLP-1 weight-loss drugs. "The growth is not coming from where it came from when we were growing up." For the big beverage and snack names, the moderation-and-wellness shift is not just a threat to the old sugary core; it is where they now expect their growth to come from, which is a more constructive read on Coca-Cola and PepsiCo than the "soda is dying" narrative suggests.

What changed

  • Diageo moved from a number to a plan. Last month it was "we need to save a billion dollars." This week it became a concrete strategy: two priority markets (total spirits including canned cocktails; premium beer with Guinness), an explicit "organic, not buying or selling" stance, and named culprits: four declining core brands, a late RTD push, and the agave-additive lawsuits that dented Casamigos and Don Julio.
  • The hemp fight turned into a channel fight. The story is no longer just the December 11 ban deadline; it's a live bill to run THC drinks through alcohol's three-tier, 21-plus system, with the beer wholesalers actively lobbying for it. Whoever wins that structure wins a new revenue line.
  • Nicotine's new data point came from a challenger. ALP surfaced as a $1 billion-plus pouch brand and the fourth-largest in its stores, a reminder that the category driving the entire reduced-risk thesis is now attracting fast, well-backed competition.