Demand for diageos products may be adversely affected

in the future and in turn could impair brand equity and adversely affect Diageo’s business.
Demand for Diageo’s products may be adversely affected by many factors, including changes in
consumer preferences and tastes and adverse impacts of a declining economy Diageo’s collection of
brands includes some of the world’s leading beverage alcohol brands as well as brands of local
prominence. Maintaining Diageo’s competitive position depends on its continued ability to offer
products that have a strong appeal to consumers. Consumer preferences may shift due to a variety of
factors including changes in demographic and social trends, public health regulations, changes in travel,
vacation or leisure activity patterns, weather effects and a downturn in economic conditions, which may
reduce consumers’ willingness to purchase premium branded products. In addition, concerns about
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Business description (continued)
health effects due to negative publicity regarding alcohol consumption, negative dietary effects,
regulatory action or any litigation or customer complaints against companies in the industry may have
an adverse effect on Diageo’s profitability.
The competitive position of Diageo’s brands could also be affected adversely by any failure to
achieve consistent, reliable quality in the product or service levels to customers.
In addition, both the launch and ongoing success of new products is inherently uncertain especially
as to their appeal to consumers. The failure to launch a new product successfully can give rise to
inventory write-offs and other costs and can affect consumer perception of an existing brand. Growth in
Diageo’s business has been based on both the launch of new products and the growth of existing
products. Product innovation remains a significant aspect of Diageo’s plans for growth. There can be no
assurance as to Diageo’s continuing ability to develop and launch successful new products or variants of
existing products or as to the profitable lifespan of newly or recently developed products. Any
significant changes in consumer preferences and failure to anticipate and react to such changes could
result in reduced demand for Diageo’s products and erosion of its competitive and financial position.
Continued economic pressures could lead to consumer selection of products at lower price points,
whether Diageo’s or those of competitors, which may have an adverse effect on Diageo’s profitability.
If the social acceptability of Diageo’s products declines, Diageo’s sales volume could decrease and the
business could be materially adversely affected In recent years, there has been increased social and
political attention directed to the beverage alcohol industry. Diageo believes that this attention is the
result of public concern over problems related to alcohol abuse, including drink driving, underage
drinking and health consequences from the misuse of alcohol. If, as a result, the general social
acceptability of beverage alcohol were to decline significantly, sales of Diageo’s products could
materially decrease.