Drinks maker Diageo has scrapped its long-standing sales growth guidance, blaming the uncertainty over US tariffs and weak demand in key markets, as the company comes under pressure from investors to improve performance.
The London-listed maker of Guinness and Johnnie Walker whisky said on Tuesday that sales in the six months to the end of December fell 0.6 per cent to $10.9 billion (€10.6 billion) despite a 13 per cent rise in net sales of Guinness.
Organic operating profit declined less than expected by 1.2 per cent to $42 million.
The decision to ditch its 5 to 7 per cent target for medium-term organic sales growth came as the company faces uncertainty over the impact of a global trade war. US president Donald Trump on Monday pulled back from imposing 25 per cent tariffs on US imports from Mexico and Canada, giving the countries a 30-day reprieve.
Diageo is the spirits group most exposed if the US goes ahead with the levies. The drinks firm said the taxes, which would particularly hit its tequila and Canadian whisky products, added “further complexity” to its ability to predict future trading.
About 45 per cent of the group’s US sales are imports from Canada and Mexico, according to bosses. Finance chief Nik Jhangiani said on Tuesday it expected a roughly $200 million (€192.67 million) impact if tariff policies remained the same.
“In the short term a significant impact on Diageo is likely,” Goodbody analyst Fintan Ryan said in a research note which estimated the gross impact of the proposed tariffs on the Guinness parent at between $500 million and $600 million on an annualised basis, excluding any mitigations or pass-through.
“Tequila accounted for 11 per cent of group sales in full year 2024 and Canadian whisky was 6 per cent – the majority of the sales in both these categories come from the US,” Mr Ryan said.
[ Diageo faces possible $600m hit from tariffsOpens in new window ]
Mr Jhangiani told reporters the business has plans in place to mitigate about 40 per cent of these, which could see the company increase its inventory in the US before the tariffs are introduced.
He said the company had planned for potential tariffs but that the prospect of the levies “adds further complexity in our ability to provide updated forward guidance given this is a new and dynamic situation”.
Diageo was already under pressure from investors, with confidence in the company’s management waning since chief executive Debra Crew issued a shock profit warning in late 2023 following a sales slump in Latin America. Its share price has fallen about a fifth in the past 12 months as investors have grown weary of the company’s poor performance.
The industry’s long-term growth prospects have also faced scepticism.
Demand for spirits in the category’s US market has faltered, prompting concerns that a trend for moderation among health-conscious consumers and the proliferation of weight-loss drugs and cannabis will dent demand. The volume of drinks it sold during the second half of 2024 dropped 0.2 per cent as consumers cut back.
Despite those concerns, Ms Crew said the company remained “confident of favourable long-term industry fundamentals and more importantly in our ability to outperform the market”. – Copyright The Financial Times Limited 2025/PA
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