Diageo unveils US$500M cost-cutting plan as US tariffs come into effect

Drinks heavyweight Diageo has announced a US$500 million cost savings program over the next three years as the company braces for trade tariffs. The cost-cutting will enable the company to reinvest in future growth and improved operating leverage. 

The British multinational, which owns brands such as Guinness, Johnnie Walker, and Smirnoff, has estimated that the impact of US tariffs, in their current form, will be around US$150 million annually.

Diaego has released its fiscal 2025 Q3 trading statement, reporting that net sales for the third quarter increased by 2.9% to US$4.4 billion. The company says it is on track for the full year and expects sales growth to rise in the second half.

“In the third quarter, we delivered strong organic net sales growth and are on track to deliver on our guidance of sequential improvement in organic net sales performance in the second half of fiscal 25,” says CEO Debra Crew.

“We also reiterated our organic operating profit outlook for fiscal 25, including the impact of tariffs based on what we know at this time. 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.”

North America stocks up

Organic net sales in Q3 grew 5.9%, which the company partly attributes to accelerated shipments to the US distributors ahead of the Trump administration’s tariff implementation. Performance in North America was also supported by continued tequila restocking, with Don Julio tequila recording strong sales.

Regionally, the US showed strong shipment growth in Q3 despite slower consumption trends compared to the first half of the financial year 2025.

Diageo recorded broadly flat organic net sales in Europe, with overall performance driven by Guinness. Further “softness” in spirits across crucial markets offset this growth.

The company continues to expect a “slight decline” in organic operating profit in the second of the financial year, factoring in the tariff impacts.

It did not share details of where it would cut costs under the Accelerate program, but will share more information in August with the full year results.

“Consistent with our strategic priorities and focus on what we can manage and control, we are introducing the first phase of our Accelerate program,” notes Crew.

“This sets out clear near-term cash delivery targets and a disciplined approach to operational excellence and cost efficiency. It will ensure that we are well-positioned to deliver sustainable, consistent performance while maximizing shareholder returns, even if current trading conditions persist.”