Diageo, facing potential U.S. tariffs, is implementing strategies to minimize impact on its business. The company has also withdrawn its medium-term guidance due to macroeconomic and geopolitical uncertainty.
Diageo , the multinational alcoholic beverages company, announced on Tuesday that it is taking proactive measures to address the potential ramifications of U.S. tariffs on its key supply chain regions. The company has also withdrawn its medium-term guidance due to the prevailing macroeconomic and geopolitical uncertainties.
CEO Debra Crew stated that the prospect of tariffs poses a significant challenge to the firm's ongoing efforts to revitalize falling sales and adds further complexity to providing accurate and updated guidance. Diageo is implementing a multifaceted strategy to mitigate the impact and disruption that tariffs might inflict on its business operations. These measures encompass various tactics such as adjusting pricing strategies, optimizing inventory management, adapting its supply chain, and reallocating investments. Crew emphasized the company's commitment to engaging with the U.S. administration to discuss the broader implications of these tariffs on the entire U.S. hospitality sector, encompassing consumers, employees, distributors, restaurants, bars, and other retail outlets. The company reported a 0.6% decline in first-half reported sales to $10.9 billion, slightly surpassing the $10.7 billion estimated by analysts in an LSEG poll. While spirits brands like Tanqueray, Gordon's, and Smirnoff witnessed substantial declines in net sales, Guinness emerged as a notable exception, recording double-digit growth for the eighth consecutive half-year. This achievement was notable considering the supply chain disruptions that led to shortages of the popular Irish stout during the crucial Christmas holiday season. Diageo has been facing mounting pressure from investors due to a confluence of factors, including declining sales, management changes, the emergence of weight-loss drugs that may potentially reduce alcohol consumption, and the growing trend toward low- and no-alcohol products. Shares of Diageo, which owns renowned brands such as Johnnie Walker, Captain Morgan, and Don Julio, dipped 3% on Monday amidst a global market downturn as investors grappled with the economic ramifications of Trump's tariffs on imports from Canada, Mexico, and China. An estimated 46.2% of Diageo's U.S. sales originate from imports to Mexico and Canada, encompassing brands like Crown Royal, Don Julio, and Casamigos, according to Jefferies analysts. This proportion is considerably higher compared to Campari Group, an Italian company, which derives just over one-third (35.3%) of its U.S. sales from Mexico and Canada, and Pernod Ricard, a French company, which obtains only 6%
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