The spirits giant warned that it was taking a hit from volatile consumer demand, with the company having scrapped a key sales target due to the uncertainty
Diageo, the powerhouse behind Johnnie Walker and Guinness, has issued a stark warning that proposed US tariffs by President Donald Trump could slash its profits by a hefty $200m (£161m). Amid growing uncertainty fuelled by the tariffs and unpredictable consumer demand, the spirits giant has been forced to abandon a crucial sales forecast.
The company, which also produces Gordon’s gin and Baileys, is currently in discussions with the US Government regarding forthcoming tariff policies that may “impact” its sales recovery. Over the weekend, the Trump administration announced intentions to impose 25% tariffs on imports from Canada and Mexico, but the implementation has been postponed for a month.
Diageo has expressed that these taxes, particularly affecting its tequila and Canadian whisky offerings, introduce “further complexity” into forecasting future business performance. Approximately 45% of the group’s US sales are imports from Canada and Mexico, as stated by company executives.
Finance chief Nik Jhangiani revealed on Tuesday that the company anticipates an approximate $200m (£161m) impact should the tariff policies remain unchanged. He informed journalists that Diageo has strategies ready to counteract about 40% of this potential hit, which might involve boosting its inventory stateside ahead of the tariff roll-out.
In light of economic and political uncertainties, particularly those surrounding tariffs, the FTSE 100 entity has withdrawn its medium-term guidance that projected organic net sales growth of between 5% and 7%.
It came as the London-based company revealed that net sales dipped by 0.6% to $10.9bn (£8.8bn) for the six months to December 31, as an increase in organic sales was dragged back by “unfavourable” currency exchange rates.
Their reported operating profit shrunk by 4.9% within the same timeframe.
in the UK sales grow 2%, thanks to soaring demand for Guinness—which occurred despite recent “temporary supply constraints” British pubs were left high and dry over the Christmas period, as they struggled to keep enough of the black stuff flowing to meet punters’ demands.
Guinness sales growth offset weaker spirit sales in Britain, which were down by around 6% for the half-year. Across Europe, spirit sales slipped 3% despite double-digit growth in tequila and a price inflation-driven rise for raki.
It said these were more than offset by lower demand for gin, vodka and rum.
Debra Crew, chief executive of Diageo, said: “Our fiscal 2025 first-half results marked a return to growth, delivering organic net sales growth of 1% despite a challenging industry backdrop as consumers continue to navigate through inflationary pressures.
“The confirmation at the weekend of the implementation of tariffs in the US, whilst anticipated, could very well impact this building momentum.
“We are taking a number of actions to mitigate the impact and disruption to our business that tariffs may cause, and we will also continue to engage with the US administration on the broader impact that this will have on everyone supporting the US hospitality industry, including consumers, employees, distributors, restaurants, bars and other retail outlets.”
