Diageo has scrapped a long-held sales target as the drinks giant continues to grapple with falling alcohol sales and possible tariffs in the US.
The maker of Guinness, Johnnie Walker whisky and Smirnoff vodka blamed economic and political uncertainty in many of its key markets for the removal of a medium-term target of 5% to 7% organic sales growth.
In a crucial set of half-year results, Diageo said organic sales in the six months to 31 December grew 1% to $10.9bn while organic operating profit declined by $42m or 1.2%. Reported operating profits fell 5% to $3.2bn.
CEO Debra Crew said this morning that potential US tariffs on Mexico and Canada could “very well impact” Diageo’s momentum, with its tequila and Canadian whisky brands most likely to be affected.
“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,” she said.
Other complications facing the business include Chinese tariffs on European brandy, the potential for additional levies on European scotch sales in the US, and calls from the US surgeon general for health warnings on booze bottles.
But some shareholders are growing impatient with the FTSE 100 company, which has insisted its current struggles are temporary. Its share price is now at a seven-year low, down almost a fifth in the past year since Crew issued a profit warning in late 2023 due to a sales slump in Latin America.
In the UK, net sales were up 2%, “mainly driven by strong Guinness performance”, Diageo said. This partially offset a 6% decline in sprits sales due to “overall category weakness”.
Globally, Guinness recorded its eighth consecutive half of double-digit growth, helping drive total beer sales sales up 11%. Diageo has ruled out selling the brand after media speculation to the contrary.
Diageo has recently offloaded several other underperforming brands, including Venezuelan rum Pampero and Dutch liqueur Safari.
Analysts at Bernstein called Diageo’s latest results a “solid performance in face of adversity” but highlighted its stengths in Guinness, Don Julio Reposado, and Crown Royal Blackberry were “very concentrated”.
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