Drinks giant Diageo has warned that the continuation of the 10% U.S. tariff on UK and European imports could cost the company an estimated $150 million (£112 million) annually.
The company said it expects to offset around half of the impact on operating profit on an ongoing basis without adjusting its prices, but added that it will continue to explore additional mitigation measures.
Diageo issued the warning in its Q3 2025 trading statement, which showed a 2.9% year-on-year sales increase to $4.4 billion (£3.3 billion). While organic net sales rose positively by 5.9%, this growth was partially offset by unfavorable foreign exchange movements and disposals.
Taking the tariff impact into account, the drinks producer expects a slight decline in organic operating profit in the second half of fiscal year 2025 compared to the previous year, roughly matching the decline seen in the first half.
Diageo is launching the first phase of its Accelerate programme, designed to create a more agile operating model. The initiative is forecast to generate $3 billion (£2.2 billion) in free cash flow annually from fiscal 2026, supported by a $500 million (£374 million) cost-saving programme. These savings are intended to fund future growth and enhance operating leverage.
Chief executive Debra Crew said: “We continue to believe in the attractive long-term fundamentals of our industry and in our ability to outperform the market. We view the near-term industry pressure as largely macro-economic driven, with continued uncertainty impacting both the timing and pace of recovery.”
Earlier this year, Diageo dismissed rumors of selling its iconic Guinness brand, despite speculation that the company might divest the famous stout to boost growth. Around the same time, it sold Cacique—the rum brand it had owned since 2003—to French spirits group La Martiniquaise-Bardinet.
In July last year, the company sold its Safari liqueur brand to Portuguese drinks group Casa Redondo. Later in November, it launched the Diageo Luxury Company to streamline operations and intensify its focus on the luxury sector.
Diageo’s portfolio includes over 200 drinks brands, among them Johnnie Walker, Baileys, Smirnoff, Captain Morgan, and Casamigos.
