When the Diageo (LSE: DGE) share price crashed 12% on 9 November last year, I finally saw my chance and bought it for my self-invested personal pension (SIPP).

Diageo’s shares continue to slide and now I’m wondering whether to average down by adding a second splash of the FTSE 100 spirits giant to my SIPP.

Markets had been shocked by a slump in spirits sales in its key Latin American and Caribbean market, which contributes around 11% of total company earnings. Diageo had spent years repositioning itself as a premium drinks brand, but locals were trading down as they had less money in their pockets. Local inventory problems made things worse.

FTSE 100 shock

I like buying top quality blue-chips on bad news. It allows me to grab their shares at a discounted price, and secure a higher starting yield too. Then I sit back and wait for them to recover.

There’s a problem though. What if they don’t recover?

Diageo has now fallen 20% since November’s shock profit warning, from 3,245p to 2,585p. Over one year, Diageo shares are down 21.65%.

In fact, it’s worse than that. The shares have lost a third of their value since peaking at 4,016p on 31 December 2021. This is more than a blip. And still they slide.

My underlying concern with Diageo is that alcohol may lose its social dominance. Gen Z is boozing less. Health campaigns may be having an effect. People are aware of the damage it can do.

That would be a huge social change, and I don’t think we’re there yet. But it’s something to watch out for.

In the short term, the inflation shock has made people feel poorer, and not just in the UK. The US economy is now slowing and while inflation is easing off, everything costs 20% more than it did just a few years ago.

Diageo also operates in China, which has troubles of its own. There’s a risk it could get caught up in trade wars with the US and EU.

Top growth stock

Diageo now trades at 17.5 times earnings. That’s notably higher than the FTSE 100 average of 12.5 times, but a massive drop from its average valuation over the last decade, when the price-to-earnings (P/E) ratio was routinely between 22 and 24 times. Let’s see what the chart says.

Chart by TradingView

I’m ignoring that pandemic spike, when lockdown fuelled a global cocktail binge. Today’s P/E is close to a 10-year low. I’m sorely tempted to average down on my stake, despite the evident risks.

It still sells more than 200 brands in nearly 180 countries, including big names such as Johnnie Walker, Tanqueray, Baileys, Smirnoff and Guinness. I tried Guinness 0,0 the other day. It was shockingly good. Maybe there is life after alcohol.

I’m willing to bet that the world will keep drinking, and plan to buy more in July. It could be a few years before my bet pays off, but at some point I feel investor tastes will change. I may be wrong, but if they do, I’ll be glad I bought Diageo when it was cheap. I might even treat myself to a drink.