Johnnie Walker owner Diageo says Trump tariffs could hit sales recovery
Johnnie Walker owner Diageo says Trump tariffs could hit sales recovery
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UK drinks company’s shares fall amid fears it could be affected by future US levies on Mexico and Canada. 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. The UK drinks company’s shares fell by 3.7% on Monday, on concerns that it will be hurt by a further 25% US tariffs on imports from Mexico and Canada, and both countries said they would retaliate. Donald Trump has paused the implementation by one month.
“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,” Diageo said. Debra Crew, the chief executive who took over in June 2023, said 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”.
She added: “We are taking a number of actions to mitigate the impact and disruption to our business that tariffs may cause.” This could include higher prices, fewer promotions, as well reallocation of investment, inventory and supply chain management. The investment bank Jefferies has calculated that 46.2% of Diageo’s USrevenues are from goods imported from Mexico and Canada, including brands such as Crown Royal, Don Julio and Casamigos. Along with other European drinks makers such as Pernod Ricard, Campari and Remy Cointreau, the firm could also be hurt by potential higher tariffs of EU products into the US.
Diageo, which also owns the Guinness and Gordon’s gin brands, reported net sales of $10.9bn (£8.9bn) in the six months to December, down by 0.6%, while organic sales returned to growth, of 1%. It made a profit before tax of $2.8bn, down from $3.3bn a year earlier. Diageo scrapped its medium-term guidance “due to the current macroeconomic and geopolitical uncertainty in many of our key markets impacting the pace of recovery”.
