The US is the most important market for Diageo (40% of sales and 45% of profit), and the recent decision to change the company’s presentation currency to USD from GBP reflects this. The market is understandably nervous about a slowdown in the company’s largest market, but we think the current valuation overprices the impact of what is likely to be a temporary (and technical) issue. The shares have underperformed the FTSE100 and the Stoxx 600 Food & Beverage index year to date, despite no change to the medium-term fundamentals. The new CEO is experienced and already familiar with the business strategy. We view this underperformance as a buying opportunity. Diageo has a strong brand portfolio and a proven business strategy; both have been honed well over the last decade. Its growth has outpaced that of all other relevant Consumer peers in recent years. The Spirits category remains buoyant, and already looks to be improving in the US. Diageo is highly exposed to above-premium price points, with 30% of its sales in this segment. However, it also has 40% of sales coming from the mainstream Global Giants brands which provide a hedge if consumers do decide to trade down from higher price points. Management recently reiterated guidance at the September AGM. There will be a CMD in New York on 15th November. We believe the location is a deliberate choice and that the event will demonstrate the resilience of the company’s brands in the US. Both Diageo and Pernod have consistently indicated that the US should improve sequentially; Pernod is about one quarter behind Diageo on its slowdown trajectory and it expects Q1 to still be negative but to improve from there. Recent industry data shows encouraging sequential improvement in Spirits off-trade sales, suggesting resilient consumer demand.