The London-headquartered company scrapped its medium-term sales target amid uncertainty over tariffs’ impact and flagging demand in some markets.

The company released interim results Tuesday for the second half of 2024, with revenue dropping 0.6% to $10.9 billion while the volume of drinks sold fell 0.2%.

“The introduction of tariffs was an anticipated scenario, albeit the ‘effective immediate’ timeline does create additional uncertainty,” Diageo’s CFO Nik Jhangiani said during the results call.

President Trump announced 25% tariffs on Mexico and Canada over the weekend, a plan he had promised to implement during his campaign. For Diageo, which makes about 40% of its net sales from North America, the White House’s action could have a significant impact.

It’ll affect the costs of making its signature Don Julio tequila in Mexico and Crown Royal whisky in Canada. These are also among the company’s strongest-performing brands, along with the Irish stout Guinness.

In effect, the bright spots in Diageo’s suite of brands are also most at risk if tariffs kick in. Withdrawing the guidance is the “pragmatic choice,” Bernstein SG analyst Trevor Sterling wrote in a note.

Diageo didn’t provide a clear estimate because the timeline of the levies is unclear, and it filed its accounts before Trump announced the tariffs. However, some analysts estimate additional costs of $600 million annually—a challenge given Diageo is trying to ease its swelling debt burden. 

“It is clear that the situation is still extremely fluid, particularly around the implementation and timing of any retaliatory tariffs and the impact, and of course, any potential response to that retaliation,” said Jhangiani. He added that it works in Diageo’s favor that the company’s portfolio is wide-ranging and across geographies, as it’ll help them navigate the tariff whiplash.

Diageo’s woes

Tariffs are the latest twist in Diageo’s tale. The company has been trying to improve its financial performance. In late 2023, CEO Debra Crew, who was only a few months into her role, issued a profit warning for the company’s Latin America business, shaking investor confidence. 

In July, the company reported its first annual sales drop since the pandemic. 

Investors, including Fundsmith’s Terry Smith, have responded to the spirits industry’s changing landscape and the management’s efforts by dumping Diageo shares.  

Its stock has fallen 21% in the last year. 

To be sure, other consumer-facing retail businesses have also had to grapple with reluctant consumer spending following a pandemic-era boom. However, in Diageo’s case, a change in leadership, shifting sentiment toward drinking culture, and exposure to Asia have added further concerns. 

“If tariffs are eventually imposed then it will be a test of Diageo’s pricing power to pass on these extra costs to consumers,” investment platform AJ Bell’s Russ Mould said. 

It’s not all doom and gloom, though. Guinness has seen meteoric success and has become the fastest-growing imported beer in the U.S., according to Nielsen data cited by The New York Times. The stout also experienced its eighth consecutive six-month period of double-digit growth as of the second half of 2024. 

Other investors argue that Diageo’s brands, some of which date back to the 17th century, have a staying power that goes well beyond the current volatility. 

Still, 2025 will throw new curveballs at Diageo’s management—and if it dodges them, it may finally turn the corner.