People who like to drink a good drink could experience the sight of things that turned out to be non-existent. Brewer and distiller Diageo (LSE: DGE) has had some great decades as a company. However, Diageo shares are down 32% in five years as many investors are concerned about what’s next FTSE100 are the company’s future commercial prospects.

I think the prospects are vivid, which is why I’m content to hold Diageo shares. But could this be the kind of mirage that actually turns out to be a value trap?

Great assets, but what next?

Diageo has been making huge profits for years.

This is due to several reasons. It has a gigantic addressable market for end customers. It is a well-managed company that benefits from economies of scale. It also has a portfolio of unique premium brands (many backed by iconic manufacturing facilities) that give it pricing power.

But the ground around Diageo’s feet has changed.

In my opinion, brands still have the same power. Diageo’s recent results have raised some questions about how well it is run, for example for some Guinness Last year, supplies in the UK were running low. However, I think a return to great management is doable and within the company’s control.

A much bigger long-term issue, which is largely beyond Diageo’s control, is the future prospects for demand for alcoholic beverages.

Diageo has entered into non-alcoholic and low-alcohol products, but I think its future success will depend on the mainstream alcoholic beverages market.

This can be a value trap

This 32% drop in the value of Diageo shares gives me food for thought as an investor in this company. After all, the broader FTSE 100 index has risen 66% over the last five years.

A value trap is just that, a value trap Because he doesn’t look like that.

A company with a prosperous history, excellent assets and a gigantic customer base falls on demanding times and the share price falls. Investors think they’re getting a bargain, but that’s because they’re focusing on the company’s past rather than what it can realistically achieve in the future.

Does this description apply to the 2025 Diageo?

I think it could. After all, younger generations of consumers drink less than their ancestors. This could cause demand to decline dramatically in the coming decades.

I’m an optimist. Here’s why

Diageo’s portfolio of premium brands may continue to perform well in the market, but if the market size shrinks dramatically, Diageo’s sales volume is likely to suffer.

It could employ its pricing power to determine the cost of purchasing the bottle Talisker Or Smirnofffor example, drawing on the tobacco industry’s playbook on mitigating failing sales volumes. However, if the market shrinks enough, profits will be made sooner or later.

That said, while I see it as a risk, I still see value in Diageo shares at its current price. I think they deserve a higher place.

Drinking trends come and go. This is not the first case in history when some social groups limit alcohol consumption or give it up completely.

However, I expect demand to remain high in the long term. Based on this, I see Diageo shares as potentially offering good value rather than a value trap.