The Diageo (LSE: DGE) share price is in a pickle. It’s plunged 18.43% over one year and 32.41% over two. That’s a dismal performance from a company that for years was one of the biggest and best dividend growth stocks on the FTSE 100.

The group’s shares dropped 11% in a day on 10 November 2023, after first-half sales in Latin America and the Caribbean collapsed. Rising prices hit demand for Diageo’s premium spirits brands, leading to build-up of unsold inventory in Mexico and Brazil.

I thought this was my opportunity and bought Diageo shares a couple of weeks afterwards, but the rot was deeper than I feared.

FTSE 100 recovery opportunity

On 30 July, the group reported a 4.8% drop in full-year organic operating profit to $304m. All but $2m of this was down to its Latin American issues, true, but sales also felt 2.5% in North America, amid more inventory issues. On the plus side, sales in Africa, Asia Pacific and Europe were “resilient”.

As the shares suffer a huge two-year hangover, many investors are wondering whether to kick the Diageo habit for good.

But I’ve just found one strong reason for holding on. Diageo’s come up with a world-class product and is only just starting to realise its potential. In fact, I’m a convert.

Diageo boasts a host of iconic spirits brands, including Baileys, Johnnie Walker, Smirnoff, Tanqueray. At some point, it picked up Irish stout maker Guinness too.

It’s always been a niche product with steady global sales. Suddenly, it’s going ballistic. And it’s the alcohol-free version that’s doing the business. I’ve tried Guinness 0.0 and it isn’t hard to see why. It’s by far the best alcohol-free beer I’ve had.

A shot in the arm for this top UK stock

I love craft beers and real ale but can’t stand hangovers anymore. I’ve sampled a few alcohol-free IPAs, and some are okay, but they’re lacking in something (what might that be?). Guinness 0.0 tastes as good as the real thing. That’s an incredible break-through.

Sales have doubled in the year and it isn’t hard to see why. What’s really fascinating is that Gen Z and young women in particular love it. It’s all over Instagram, I’m told.

I’ve written before that Diageo faces an existential threat as the younger generation backs away from boozing. Now it may have found the solution. So far, Guinness 0.0 was only available in cans, but Diageo has been rolling it out in draft format across thousands of pubs and bars. The opportunity’s huge.

The vast majority of Diageo’s brands are spirits, and I can’t see how alcohol-free vodka, gin or whisky can work. Spirit sales could take a beating if younger people really are cutting back on drinking. It doesn’t help as people are still short of cash after the cost-of-living crisis, and not just in the UK. Also, the shares aren’t that cheap anymore, trading at 19.76 times earnings.

Yet I’m feeling more optimistic about Diageo than for some time. I plan to average down on my stake before the Guinness 0.0 revolution really froths up.