Guinness maker Diageo to offset US tariffs with cost cuts
London’s biggest drinks business, Diageo, has unveiled a $500m (£375m) cost-cutting programme as it struggles with the impact of US tariffs.
Guinness and Johnnie Walker maker Diageo said it would make the cost savings over the course of three years, but did not confirm how many jobs would be impacted by the move.
The firm said it intended to make “selective disposals” of its drinks portfolio in a bid to bring down its debt levels.
CEO Debra Crew said the programme “sets out clear near-term cash delivery targets and a disciplined approach to operational excellence and cost efficiency. It will strengthen Diageo by increasing our effectiveness, agility, and resilience.”
“It will also ensure that we are well-positioned to deliver sustainable, consistent performance while maximising shareholder returns; even if current trading conditions persist.”
Diageo shares rose 2.7 per cent in early London trade.
The move could raise hopes of a turnaround for the spirits conglomerate, which has seen its shares fall almost 40 per cent over the past two years amid softening demand for premium spirits.
Diageo’s Tariff impact
The cost-cutting scheme comes as Diageo said it was preparing for a $150m annual hit from the impact of US tariffs on imports from the UK and Europe. The calculation assumes a 10 per cent tariff on imports from Europe and a continued tariff exemption on imports from Mexico and Canada under the USMCA trade agreement.
North America accounts for as much as 39 per cent of Diageo’s global sales, worth around $8bn in 2024. That includes imports of whisky such as Johnnie Walker, considered a key brand for the US market, which had already suffered a 10 per cent fall in net sales in the region last year.
“We will continue to work on measures to mitigate this impact further,” Diageo said. “Our long track record of managing international tariffs gives us confidence in our ability to navigate this successfully.”
Diageo’s net sales for the three months to end March rose 2.9 per cent to $4.4bn, the company said, with volume rising 2.8 per cent over the period.
“We view the near-term industry pressure as largely macro-economic driven, with continued uncertainty impacting both the timing and pace of recovery,” Crew added.