Diageo Abandons Sales Growth Target Amidst Economic Uncertainty
London - Guinness and Johnnie Walker maker Diageo has abandoned its 7% sales growth target due to mounting geopolitical and economic uncertainty.
The company faces a potential $200 million hit to profits if President Trump follows through with threatened 25% tariffs on Canadian and Mexican goods. Diageo is exploring ways to mitigate the impact, but has warned that price increases are likely.
Trump Tariffs Pose Challenges
Roughly 45% of Diageo's US sales come from products made in Canada and Mexico, particularly whiskies and tequila brands like Don Julio. The potential tariff would primarily affect tequila sales.
Diageo has been engaging with Trump administration officials to address concerns. However, CEO Ivan Menezes downplayed the potential impact of Trump's personal abstinence: "I think Trump is a businessman looking at prosperity for the US."
Other Challenges
Besides potential price increases, Diageo is also targeting supply chain efficiencies. The company has faced declining sales and consumer confidence in recent months.
Guinness Bright Spot
Despite challenges, Diageo's sales of Guinness have exceeded expectations. The stout has gained popularity in the UK, Australia, and Greater China. In the US, Guinness is expanding beyond its traditional Irish pub base.
Market Reaction
Diageo's share price fell over 3.5% on Tuesday after the announcement.