Diageo''s +5-7% mid-term growth was introduced during peak spirits euphoria In December 2021, the European Spirits sub-sector reached a record valuation of c.29x consensus forward P/E marking the top of the Covid-driven market euphoria on spirits. It was the month after Diageo had introduced its medium-term guidance for +5-7% organic sales growth. We no longer believe the US spirits industry will return to mid-single digit value growth There has been much discussion around when US spirits will return to +4-5% value growth. We no longer believe it will. IWSR, the pre-eminent global spirits data source, forecasts mid-term US spirits industry volume growth of +0.9% from 2024-28 (down from expectation of +2.7% growth in 2021). We cut our Diageo mid-term LFL US spirits growth forecast to +2.5% (from +3.5% previously). History suggests Diageo''s group LFL growth profile is closer to c.+4% Pre-pandemic (FY10-FY19) group LFL growth averaged +3.6% (vols. +1.1%). A period in which alcohol demand saw good growth in the US. We believe US alcohol vol. demand is now ex. growth. The market is now somewhat sceptical, but we see further downside Visible Alpha consensus has already moved down towards the bottom end of Diageo''s mid-term range at +5.2% (FY27e). However, driven by the deterioration in the outlook for US alcohol / spirits, we believe Diageo''s mid-term growth profile is closer to +4.3%. When do we expect Diageo to cut its medium-term top-line outlook? While Diageo only recently (Nov-2023 CMD) re-iterated its medium-term sales growth guidance, with a new CFO and Head of IR incoming later this year, we believe a cut to the outlook (to +4-6%) ahead of their arrival, with upcoming FY24 results (30th July) is possible. While we would view this as a sensible move, cuts to mid-term organic growth are rarely a good starting point for outperformance in Staples. We re-iterate our Underperform rating and reduce our TP to GBp2,400 (from GBp2,500).