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In its 2025 interim financial results announcement this week, Diageo scrapped its medium-term guidance due to macroeconomic and geopolitical uncertainty.
While the alcohol giant’s fiscal 2025 first half results showed improved organic net sales, up by $101 million (a 1% increase), reported net sales of $10.9 billion declined 0.6% due to unfavourable foreign exchange.
Reported operating profit declined by 4.9% to $3.2 billion, with a $42 million (1.2%) decline in organic operating profit due to continued investment primarily in overheads.
Diageo previously projected organic net sales growth of 5-7%, but this was removed in its interim results announcement on Tuesday (4 February 2025) as the company said the current economic and geopolitical uncertainty in many key markets was impacting the pace of recovery.
This comes amid concerns relating to US president Donald Trump’s plan to impose a 25% tax on imports from Mexico and Canada, as well as a 10% tariff on all goods from China. According to Trump, the tariffs aim to combat drug trafficking, particularly fentanyl, into the US.
While the tariff on imports from China came into effect on 4 February, the proposed tariffs on Canadian and Mexican goods have been delayed for a month following Trump’s ongoing negotiations with president of Mexico, Claudia Sheinbaum, and Canadian prime minister Justin Trudeau, involving measures to tighten up border security.
Debra Crew, CEO of Diageo, said that the implementation of tariffs adds “further complexity” in Diageo’s ability to provide updated forward guidance, due to the novelty and fluidity of the current situation.
She commented: “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.”
Possible actions that Diageo may take to mitigate the potential impact of the tariffs include pricing and promotion management, inventory management, supply chain optimisation and reallocation of investments.
Tariffs are expected to have the most impact on Diageo’s tequila and Canadian whisky products, which drove the company’s organic net sales growth in North America.
Shares in Diageo fell 4% following the announcement, but Crew emphasised that the company “remains confident of favourable long-term industry funadmentals” and “in our ability to outperform the market”.
In Europe, the company has seen the increased success of its Guinness brand, which drove a 2% net sales increase in Britain.
Crew stated: “I’m…particularly proud of the performance of our iconic Guinness brand, which delivered double-digit growth for an eighth consecutive half, supported by brand building expertise, innovation and growing global momentum”.
The drinks giant was rumoured to be considering a sale of the famous Irish stout brand, a sale reportedly valued at more than $10 billion according to Bloomberg, but Diageo ruled this out in January.
However, the group did confirm the sale of its 80.4% shareholding in Guinness Ghana Breweries to Castel Group for $81 million shortly afterward, seeking to ‘optimise its portfolio and strengthen its partnerships’ in Africa.
