Dive Brief

The spirits producer, which denied reports it will divest Guinness earlier this year, said taxes on European imports could result in a $150 million hit to profits.

Published May 20, 2025

Dive Insight:

Diageo owns a variety of prominent spirits brands produced outside the U.S., making it vulnerable to President Donald Trump's tariff policy. Imports from Europe are subject to a 10% universal tax, raising costs for alcohol producers as they already struggle with declining demand.

Guinness and Bailey’s are produced in Ireland; Johnnie Walker hails from scotch capital Scotland; Crown Royal whiskey is from Canada; Ketel One vodka is produced in the Netherlands; and Don Julio and Casamigos tequila are made in Mexico. By potentially selling off one of its flagship brands, Diageo could offset losses it expects to incur if tariffs remain in place.

In response to an investor question, Jhangiani was careful not to reveal which brands could be sold.

“With any kind of M&A or disposals transactions, you could get certain things agreed and announced, but timing of transaction closure and cash coming in are very much dependent on a number of factors,” Jhangiani said.

Diageo CEO Debra Crew told investors its 6.2% organic net sales growth in North America last quarter was driven by a “pull-forward of imports to distributors ahead of potential tariffs.”

According to Crew, U.S. consumer sentiment dipped substantially in February and March as people cut back their overall spending amid economic uncertainty. But these consumers are “not so much down-trading” to less expensive spirits, she said. The company is focusing on smaller bottles of its spirits in a bid to win consumers back.

“They want premium products, but their household cash is trapped. So by offering a smaller size of premium products, we are finding that that is working for us in many markets, including the U.S.,” Crew said.

Diageo has made portfolio tweaks over the past year as it aims to secure growth through more expensive spirits. It’s also building out its U.S. manufacturing arm, investing $415 million in an alcohol facility in Alabama.

Last year, the alcohol giant created Diageo Luxury Group, a business division focused on brands that sell products over $100, like Johnnie Walker and Brora scotch. More recently, the company cut ties with former Cîroc Ultra-Premium Vodka spokesman Sean “Diddy" Combs, trading its ownership of Cîroc for a majority stake in LeBron James-backed Lobos 1707 Tequila.