The world’s biggest spirits company, Diageo, has revealed a slump in annual profits and expanded its cost-cutting plan as it searches for a new boss after the resignation of the chief executive, Debra Crew.
The FTSE 100 company, which owns brands including Guinness, Johnnie Walker whisky, Gordon’s gin and Smirnoff vodka, reported a nearly 28% fall in operating profit in the 12 months to the end of June compared with a year earlier.
The drinks maker also upped its target for cost savings from £500m to £625m. The interim CEO, Nik Jhangiani, said the savings were “not about job cuts”, adding that while some roles would go, the overall workforce could still increase.
The figures come weeks after the surprise announcement that the group had begun the hunt for a successor to Crew, who it said had stepped down “by mutual agreement”, after a period of investor disquiet over its declining share price.
The group also reiterated that it expected an annual hit of $200m from Donald Trump’s tariffs. The figure – first floated in February – assumes there are no further changes to rates on imports into the US, meaning the 10% levy remains on UK drink, along with the 15% on the EU, while Mexican and Canadian spirits remain exempt.
The tariffs on British goods came into effect on 30 June, when the UK-US trade deal kicked in, while the new 15% levy on EU goods will begin on 7 August as part of the White House’s suite of new “reciprocal” tariffs being imposed on dozens of the US’s trading partners.
The British drinks company said it had “continued to undertake considerable contingency planning” in recent months, and remained “focused on what we can control in relation to tariffs”.
Diageo said it had been working to mitigate the impact of tariffs, carrying out work including “inventory management, supply chain optimisation and reallocation of investments”.
As a result, the company believes it will be able to mitigate about half of the impact of tariffs on its operating profit.
Diageo’s performance was lacklustre under Crew, who took the helm in 2023 after the sudden illness and death of Ivan Menezes – a popular figure who led Diageo successfully for 10 years.
Early in Crew’s tenure the company made a profits warning as a result of a sales slump in Latin America and the Caribbean, while last Christmas the company was seen to have misjudged its supply chain, and UK pubs complained that their flow of Guinness had been rationed just ahead of the festive season.
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She has been replaced on an interim basis by Jhangiani, the company’s chief financial officer, leaving Diageo on the hunt for a permanent boss and finance chief.
Jhangiani said Diageo had experienced a “challenging year” but noted certain brands including Guinness, Don Julio tequila and the blackberry-infused Canadian whisky Crown Royal Blackberry were standout performers. “There is clearly much more to do across our broader portfolio and brands,” he said.
Diageo’s shares have fallen by more than a quarter so far this year, making them the third-worst performer on the FTSE 100 in share price terms, according to analysis by the broker AJ Bell. The share price is no higher than it was in 2016.
The company’s shares have also been hit by changes in drinking habits, especially among younger consumers, while the cost of living crisis has resulted in some people switching to cheaper and less premium brands.