Diageo, the company behind Smirnoff vodka and Johnnie Walker whiskey, has said US tariffs could damage a recovery in its sales, hitting its tequila portfolio and Canadian whisky in particular.
Debra Crew, the chief executive who took over in June 2023, today (4) said that Diageo had planned for a number of potential scenarios regarding tariffs, but said the new duties announced over the weekend “could very well impact this building momentum".
“In the US, our largest market, the products which would be impacted by the tariffs would mainly be our tequila portfolio, which given geographic origin requirements must be made in Mexico, and also Canadian whisky.
“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.”
This could include higher prices, fewer promotions, as well reallocation of investment, inventory and supply chain management.
The warning came as the world’s largest spirits maker, which has almost 30 malt distilleries in Scotland and owns global brands such as Johnnie Walker whisky, Guinness stout, Smirnoff vodka and Captain Morgan rum, revealed that net sales dipped 0.6 per cent to £8.8bn for the six months to December 31, as an increase in organic sales was dragged back by “unfavourable” currency exchange rates.
Crew said, “Our fiscal 2025 first-half results marked a return to growth, delivering organic net sales growth of 1 per cent 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. It also adds further complexity in our ability to provide updated forward guidance given this is a new and dynamic situation.
Reported operating profit declined 4.9 per cent for the group’s first-half period, Diageo reported.
Diageo's finance chief Nik Jhangiani said today (4) that the company estimates an around £160 million hit to operating profit in its current financial year if US tariffs on Mexico and Canada are implemented in March, about 40 per cent of which it could mitigate before any price impact.
