Diageo’s profits fell almost 30% last year as the world’s largest spirits maker suffered at the hands of changing drinking habits and global tariffs.
The maker of Guinness and Smirnoff said operating profits fell 27.8% to $4.3bn, below analyst’s expectations of a 10% fall. This was due to “exceptional impairment and restructuring costs” and a decline in profit margin.
Organic sales were up 1.7% in the year to 30 June due to both volumes and prices rising about 1%. Net sales hit £20.2bn, in line with analysts’ expectations.
Amid the pressure on profits, Diageo said it is looking to increase cost savings through its Accelerate programme by $125m to $625m over the next three years. The company launched Accelerate in May to try and move to a more agile global operating model.
Diageo is one of the FTSE’s worst performers in 2025 with its share price down almost a third since January and standing no higher than it did in 2016.
Former CEO Debra Crew stepped down last month and was replaced by CFO Nik Jhangiani on an interim basis.
“While we are encouraged by areas of progress and the standout performance from Don Julio, Guinness and Crown Royal Blackberry, there is clearly much more to do across our broader portfolio and brands,” said Jhangiani. ”We are focused on what we can manage and control and executing at pace.”
Jhangiani said the board was “moving at speed” to fill the vacant CEO position and should be in a position to announce by end of October.
In Great Britain, net sales grew 3.5%, driven by double-digit organic net sales growth in Guinness despite temporary supply constraints. This was partially offset by a mid-single-digit decline in spirits sales due to overall category weakness.
The company is now expecting a global sales growth to remain at the same level next year as the market continues to face challenges. Its sales will fall slightly in the first half with growth coming in the latter six months, the company said.
Profit growth is expected to be “mid-single-digit” thanks to additional costs savings through the Accelerate programme mitigating the increased impact of US tariffs.
Diageo expects tariffs to cost around $200m a year because of the 15% duty rate on imports from the EU into the US. This is up from a $150m forecast in May, although it expects to mitigate around half without price rises.
Guinness remained a stand-out performer for Diageo last year with double-digit growth and gaining market share in its three largest markets.
There has been speculation that Guinness would be sold-off as part of a wide-ranging cost-cutting plan, a move the company has so far ruled out.
“The fact that profits and margins have struggled so much, even at the height of Guinness’s popularity, has quite rightly sounded alarm bells,” said Robinhood UK lead analyst Dan Lane.
“The bull case around Diageo was that younger people were drinking less but upping the quality, except higher inflation has meant consumers can’t quite reach the top shelf anymore and are seemingly trading down as well as slowing down.”
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