Consensus has warmed to a Spirits recovery narrative; we''re not there yet Consensus has warmed to a Spirits recovery narrative. While we can appreciate the bull argument that Distiller earnings are much closer to a trough (given easy sell-in comps), the sell-out data in both the US and Europe has not yet improved enough for us to take a more constructive stance. Diageo (-): near-term dividend risk combined with a premium valuation keeps us cautious Diageo''s (relatively) strong US sell-out growth is being fuelled by huge outperformance from Don Julio and Crown Royal, which we think is unlikely to be sustained in the mid-term. The stock trades at close to an 18% premium to EU Bevs which we struggle to justify given its est. c.+6% MT EPS growth profile and risk of the first dividend cut in its history (see here). We remain Neutral rated on Pernod Ricard and Remy Cointreau Pernod Ricard is cheap, but we expect it to remain cheap as we continue to see modest downside risk to consensus earnings and US sell-out volumes remain in MSD decline despite now negative price / mix. We also remain Neutral on Remy Cointreau, where longer-term concerns offset potential optimism on the very near-term outlook. Campari (+): downside risk to consensus is more than reflected in the shares We acknowledge downside risk to consensus (esp. in H1) but believe this is well understood by the market and more than reflected in the shares. A reassuring performance from the new CEO (joining 15th Jan) would likely bring investors back to Campari, which remains our sole Spirits Outperform. Our preference remains Beer over Spirits, but structural concerns are building for all alcohol Beverages are trading at a 15-year low vs. EU Staples, and we believe alcohol is at the sharp end of the structural concerns impacting sector valuations. The Beer over Spirits trade did not really work in 2024, but we sense it is a much less consensual position for 2025 and remains our preference.