Diageo Saw a Drop in Profits by Nearly 30 Percent Year-Over-Year
Last week we reported the news that one of America’s biggest distilleries, MGP, saw a decline in sales by nearly a quarter in Q2 of this year. More bad news for the spirits industry arrived yesterday when Diageo, one of the biggest spirits companies in the world, reported a drop in profits by nearly a third over the past year, something that it appears was not entirely unexpected.
Diageo is the British company that owns major brands like Guinness and Casamigos, American whiskeys like Bulleit and Dickel, and many of the most popular scotch whisky distilleries including Talisker, Lagavulin, and Port Ellen. In mid-July, the CEO, Debra Crew, left the company, but no replacement has been announced as of yet. According to The Guardian, Diageo reported a decline in operating profit by 28 percent in the year leading up to this past June compared to the previous year, and expects slow growth over the next 12 months. Sales over the past year dropped by .1 percent, while organic sales volumes rose by nearly 1 percent—a small bright spot amidst this bad news.
In May, Diageo announced a cost saving plan of $500 million, which then-CFO Nik Jhangiani called the “Accelerate” initiative (he is currently the interim CEO). That plan has now been boosted to $625 million, and according to Jhangiani that will mean some layoffs. “Yes, there will be some, but that’s not what this is about,” he said according to the website Just Drinks. “This is about really freeing up resources and dollars where we can reinvest for the business . . . This could ultimately actually be about more numbers in terms of head count, as we look at more feet on the street, for example, including here in our home market.”
There is, of course, anxiety around the Trump administration’s tariffs, which are set at 10 percent on many goods coming out of the U.K., 35 percent for Canada, and 25 percent for Mexico. Diageo says they will cost the company around $200 million per year. That will affect the sales of brands that have been doing well under the Diageo umbrella, specifically Guinness, Don Julio Tequila, and Crown Royal (the Blackberry expression in particular).
“While macroeconomic uncertainty and the resulting pressure on consumers continues to weigh on the spirits sector, we believe in the attractive long-term fundamentals of our industry and in our ability to continue to outperform as the TBA landscape evolves,” said Jhangiani in a statement. “We are focused on what we can manage and control and executing at pace. The Board and management are committed to delivering improved financial performance and stronger shareholder returns on a sustained basis.” We will see how this plays out over the rest of 2025 and report on any updates.
