Why Tesco's former 'Mr Fixit' could be the person to turnaround whisky giant Diageo: City and share price reaction

Lewis will take on the top role from January 1, replacing Nik Jhangiani - the drinks giant’s previous chief financial officer - who has been acting as interim chief executive since Debra Crew resigned abruptly in July. Jhangiani will revert back to being chief financial officer once Lewis starts in the post.

Diageo’s new CEO will resign as chairman of consumer healthcare firm Haleon at the end of December to take the helm at the world’s largest spirits maker, which has almost 30 malt distilleries in Scotland and owns global brands such as Guinness stout, Smirnoff vodka and Captain Morgan rum.

Lewis led Tesco as group chief executive for six years until 2020, having previously spent nearly 30 years at Ben & Jerry’s and Marmite owner Unilever earlier in his career.

His appointment comes at a challenging time for Diageo as it grapples with weaker sales in several key global markets and an under-pressure share price. There was some positive movement in the stock following the announcement of a new CEO.

On Thursday, the group alerted over tough trading once again, cautioning over weaker demand from consumers in China and the US, meaning it could sell fewer drinks this year.

Diageo chairman Sir John Manzoni, who led the appointment process, said: “Having conducted an extensive and thorough global search, the board unanimously felt that Dave has both the extensive CEO experience and the proven leadership skills in building and marketing world-leading brands, which is right for Diageo at this time.

“We are confident that Dave will work with the team to take Diageo into its next successful chapter in the evolving consumer environment. The board wishes to recognise and thank Nik Jhangiani for his excellent leadership as interim CEO and for continuing to drive forward Diageo’s sharpened strategy.”

Lewis said: “Diageo is a world leading business with a portfolio of very strong brands, and I am delighted to be joining the team. The market faces some headwinds but there are also significant opportunities.

“I look forward to working with the team to face these challenges and realise some of the opportunities in a way which creates shareholder value.”

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Lewis, who was knighted in the 2021 New Year's Honour’s, will be paid an annual salary of £1.5 million, plus £210,000 in pension contributions, as well as performance-based bonuses.

Diageo has seen its share price pummelled in recent years, with the FTSE 100 stock down by a fifth over the past six months and nearly halving in value over the past two years.

Crew - who became the group’s first female chief executive - had launched a major cost-cutting plan just months before she stepped down, looking to save some $500m (£380m) as its trading has come under pressure and as it faced a $150m (£114m) annual hit from higher US tariffs. Its sales had already dropped for the first time in around four years during the 2023-24 financial year, dragged lower by a weaker performance in Latin America.

Crew’s resignation in the summer followed just a two-year tenure. She had taken over from former chief executive Sir Ivan Menezes, who died in June 2023, shortly before he was due to retire. Menezes had held the top role at Diageo, which has some 3,500 employees in Scotland and attractions including Johnnie Walker Princes Street in Edinburgh, for ten years.

Richard Hunter, head of markets at investment platform Interactive Investor, noted that Diageo’s shares had risen by around 7 per cent immediately following the news of Lewis’ appointment.

“The announcement is clearly being seen as a potential inflection point for the group given the new hire’s proven ability in brand building, and where the shares have been under some considerable pressure of late, having fallen by 28 per cent so far this year,” he said.

“The news may prompt investors to reconsider the strength of Diageo’s premier brand portfolio.”

Dan Coatsworth, head of markets at AJ Bell, said: “Diageo has pulled a blinder by hiring the man who saved Tesco. Dave Lewis is ‘Mr Fixit’ as far as the market is concerned, joining the grocer with no retail experience and putting it back on track after a difficult period.

“Convincing him to return to CEO life will have been a challenge. Lewis has only held chair and advisory positions since leaving Tesco in 2020, so there must have been something special about Diageo for him to put on his CEO boots again.

“The £1.5m salary is certainly tasty, but Lewis is more likely to have been driven by the size of the task. Pull off a second business recovery of this scale and he’ll become a legend in the business world.”

Matt Britzman, senior equity analyst at investment firm Hargreaves Lansdown, added: “Lewis brings deep experience in consumer brands from his time leading Tesco and decades at Unilever, though he lacks direct exposure to the spirits industry. Investors may welcome his strong marketing pedigree, but any major strategic reset will take time, leaving near-term focus on navigating tough trading conditions.”

Many analysts still see Diageo as a resilient investment, buoyed by a wide geographic spread, some slick marketing and a vast portfolio of iconic brands. The group also has a strong record of shareholder dividend pay-outs.

In August, Diageo reported that net sales dipped 0.1 per cent to $20.2 billion (£15.2bn) for the full year, although organic sales grew by 1.7 per cent. That fall in net sales was driven by unfavourable currency rates and changes to its brand portfolio.