The Gordon's and Smirnoff owner said sales in Latin America were expected to drop by more than 20% year-on-year, causing the multinational to slash its profits forecasts.
The shock news sent Diageo shares tumbling as much as 15.3%, the biggest single-day fall for the London-based giant for more than 25 years, sending shares in French rival Pernod Ricard down 5.1% and Italian business Davide Campari 4% lower.
Diageo CEO Debra Crew, who only stepped into the role in June following the sudden death of her long-serving predecessor Ivan Menezes, said the surprise sales fall was the result of the region's economy struggling.
"Unfortunately macroeconomic pressures have worsened and that caused lower consumption and more downtrading to what the team had expected.
Higher interest rates and inflation is seeing customers destocking.
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