Alcoholic drinks giant Diageo has scrapped its 5% to 7% medium-term guidance due to “macroeconomic and geopolitical uncertainty” as shares fell to their lowest since 2020. US President Donald Trump’s tariff plans were a key factor in its decision, with the company estimating a loss of US$200 million from its profits as a result.
The UK company, which owns Guinness and Johnnie Walker, recorded a decline in its half-year earnings caused by “unfavorable foreign exchange.” It reported net sales of US$10.9 billion in the six months to December 2024, a decline of 0.6%, which it says was partially offset by an increase in organic net sales. Organic net sales returned to growth of 1% (increased by US$101 million).
Imports from Canada and Mexico represent around 45% of Diageo’s US sales, including tequila and mezcal from Mexico and whisky from Canada. Trump plans to place levies on imports from Mexico, Canada and China. Diageo has said it is taking several actions to mitigate the impact of the taxes, which have been postponed by a month after negotiations.
Success in some areas
Despite the slump in some areas of its portfolio, the business saw strong performance from tequila and Guinness. The latter has seen a renaissance in recent years owing to a surge in popularity among Gen-Z drinkers.
Diageo’s CEO, Debra Crew, says the company can recover and “outperform the market.” However, she shared that Trump’s plans, which have caused significant market volatility, have made it difficult for the company to provide updated guidance.
“Diageo has anticipated and planned for a number of potential scenarios regarding tariffs in recent months. The confirmation at the weekend of the implementation of tariffs in the US, while anticipated, could very well impact this building momentum. It also adds further complexity in our ability to provide updated forward guidance given this is a new and dynamic situation,” explains Crew.
“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.”
Crew adds that she is pleased to see “early benefits” from changes in its “US route-to-market transformation.”
By Sade Laja
Source: foodingredientsfirst.com
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