Diageo plans $500 million of cost cuts as U.S. tariffs kick in
Diageo has been hit by a slowdown in the U.S., its biggest market, and tariff fears that have threatened to dent consumer confidence.
Diageo Plc will cut costs by $500 million over three years as the maker of Johnnie Walker whisky grapples with US trade tariffs.
President Donald Trump’s trade tariffs will cost $150 million annually at current levels, half of which it can mitigate, Diageo said in a statement Monday. The British distiller reiterated its guidance for the full year and expects sales growth to improve in the second half.
The company’s shares rose as much as 2.4% in early trading in London. They had fallen just over 15% so far in 2025 through Friday’s close.
Like rivals, Diageo has been hit by a slowdown in the US, its biggest market, and more recently higher trade friction that threatens to further dent consumer confidence. That led the company to scrap its long-held medium-term sales target in February.
Organic net sales rose 5.9% in the third quarter, beating analyst estimates, as wholesalers in North America stocked up ahead of anticipated tariff announcements. Strong performance of Don Julio lifted tequila sales.
Given that growth was driven by orders being pulled forward ahead of the tariff announcements, Diageo expects a weaker final quarter — though its second half performance overall will be an improvement on the first.
Diageo didn’t give details on where it will cut costs. Rival Moët Hennessy said this month it would reduce its workforce due to shrinking demand as well as a tariff stand off between the European Union and China over Cognac.
Citi analyst Simon Hales said Diageo’s cost-saving program should be well-received by investors, and with the absence of new negatives, there was “increasing confidence that Diageo is in control of what it can control.”
Diageo said the Asia Pacific region continued to weigh on sales. It also expects a slight decline in organic operating profit in the second half of its fiscal year compared to last year, which includes the impact of the tariffs.
“Tariff uncertainty represents a distraction, however Diageo is in recovery mode,” Jefferies analyst Edward Mundy said in a note.
This story was originally featured on Fortune.com
