Diageo vs. Brown-Forman: Which Consumer Goods Stock Is a Better Buy in 2026?

The spirits industry is undergoing a shift as consumer preferences evolve, leaving investors to choose between global diversification and specialized brand power. This comparison evaluates whether Diageo (NYSE:DEO) or Brown-Forman (NYSE:BFB)(NYSE:BFA) is the better buy.

Diageo operates as a global leader with an expansive reach in the premium drinks market, while Brown-Forman focuses on a concentrated portfolio of world-renowned American whiskey brands. Both companies are core holdings in many consumer defensive portfolios, offering stability through established brand loyalty and consistent cash generation.

The case for Diageo

Diageo sells a diverse range of over 200 brands, including Johnnie Walker, Smirnoff, and Guinness, to consumers in almost 180 countries. The company operates across major geographic regions like North America, Europe, Africa, and Asia Pacific. As a significant player among beverage stocks, the business relies on its massive global distribution network to reach a wide variety of customer segments.

In FY 2025, revenue reached nearly $20.2 billion, a slight decline of approximately 0.1% from the prior year. The company reported net income of roughly $2.4 billion for the period. This resulted in a net margin of close to 11.6%, a notable decrease from the 19.1% net margin achieved during the 2024 fiscal year.

According to its June 2025 balance sheet, the debt-to-equity ratio was roughly 2.2x. This indicates that total debt is 2.2 times shareholder equity. The current ratio, which measures the ability to cover short-term debts with current assets, was approximately 1.6x. Free cash flow, which is cash from operations minus capital expenditures, was nearly $2.7 billion.

The case for Brown-Forman

Brown-Forman produces and markets recognizable brands such as Jack Daniel’s, Woodford Reserve, and Herradura. It distributes these products in over 170 markets and employs roughly 5,000 people worldwide. In FY 2025, the company's two largest customers accounted for approximately 13% and 11% of consolidated net sales, respectively. Customer concentration like this adds a layer of risk to the business.

During FY 2025, total revenue was approximately $4.0 billion, a 4.9% decrease from the prior fiscal year. Despite the revenue dip, the company reported net income of roughly $869.0 million. This performance supported a net margin of about 21.9%, indicating the percentage of revenue remaining as profit after all expenses are paid.

As of its April 2025 balance sheet, the debt-to-equity ratio was approximately 0.7x. This shows that total debt is less than the company's shareholder equity. The current ratio was roughly 3.9x, suggesting a strong capacity to meet short-term financial obligations. Free cash flow for the fiscal period was nearly $431.0 million.

Risk profile comparison

Diageo faces intense competition from other global spirits producers like Pernod Ricard and LVMH. The company is also subject to strict international regulations regarding the production, marketing, and sale of alcohol. Changes in excise taxes or trade policies in major regions, such as North America or Europe, could negatively impact total sales and profitability.

Brown-Forman relies heavily on the Jack Daniel’s family of brands for its primary revenue, meaning any loss of consumer relevance would materially affect the business. The company also faces risks from trade policies and retaliatory tariffs on American whiskey, which have historically impacted international margins. Furthermore, major brands are distilled at single locations, leaving the company vulnerable to disruptions from catastrophic events at those facilities while competing with rivals like Constellation Brands.

Valuation comparison

Brown-Forman currently carries a lower Forward P/E compared to Diageo, though Diageo offers a more attractive P/S ratio based on its high total revenue.

Sector benchmark uses the SPDR XLP sector ETF.
Valuation metrics sourced from Financial Modeling Prep (FMP) and may differ from other data providers.

Which stock would I buy in 2026?

As of 2025, the number of U.S. adults who drink alcohol dipped to 54% -- the lowest score in Gallup’s 90 years of measuring the statistic. For young adults aged 18-34 and households under $40,000 annually, these figures plummet to 50% and 39%, respectively, showing that younger generations are not only less interested in drinking but might also lack the financial confidence to spend money on something that used to be largely considered a “staple” good.

Amid these struggles, Diageo and Brown-Forman’s shares have fallen by 64% and 69% over the last five years, leaving the companies to trade at once-in-a-decade low valuations. Thanks to these incredibly low valuations -- as highlighted above by their forward P/E and P/S ratios -- I think it is worth watching these two deeply discounted stocks.

However, neither stock has a clear catalyst to drive its shares higher, so I would rather wait to see some improvement in sales and profitability in upcoming earnings calls before considering a buy. That said, if results improve over the next couple of quarters, I’d be more interested in buying Diageo, as it has a bit of a strong sales tilt toward international markets, which haven’t seen drinking drop off as dramatically.

Furthermore, Diageo has a history of acquisitions, which could put it in a position of power today, as many liquor and alcohol stocks have sold off dramatically. The company could add to its portfolio of drinks at a discount and potentially restart its growth story internationally with a shrewd deal or two.

Ultimately, I’m not in a huge rush to buy either Diageo or Brown-Forman -- I really want to see some improved results first. However, I’d rather look to buy Diageo and its variable 4.2% dividend yield, as its industry-leading scale should help it thrive if and when drinking rates rebound.

Josh Kohn-Lindquist has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands, Diageo Plc, and Lvmh Moët Hennessy - Louis Vuitton, Société Européenne. The Motley Fool has a disclosure policy.