Diageo, one of the world’s leading spirits and beer companies, has released its Fiscal Q3 2025 Trading Statement, highlighting robust organic net sales growth and a proactive strategy to navigate evolving macroeconomic and regulatory landscapes.
Despite headwinds, including tariff uncertainties and foreign exchange impacts, Diageo’s diversified global footprint and strategic initiatives have helped sustain momentum across its core markets.
Strong Organic Performance in Q3
In the third quarter ending 31 March 2025, Diageo reported:
- Net sales of USD 4.38 billion, a 2.9% year-over-year increase
- Organic net sales growth of 5.9%
- Organic volume growth of 2.8% and positive price/mix of 3.1%
This growth was largely driven by favorable phasing in North America and Latin America & Caribbean, although this benefit is expected to reverse in Q4.
Regional Highlights
- North America: Organic sales rose 6.2%, driven by tequila restocking (Don Julio) and import pull-forwards ahead of potential tariffs.
- Latin America & Caribbean: Led the pack with 28.5% organic growth, benefiting from softer prior year comps and consumer environment stabilization.
- Africa: Delivered 10.1% growth, particularly in Ghana, Tanzania, and Uganda.
- Asia Pacific: Modest 1.6% organic growth, with strength in India offset by continued destocking and downtrading in other areas.
- Europe: Organic sales remained flat, though Guinness showed strong double-digit growth.
Outlook for FY2025
Diageo reiterated its full-year organic net sales and operating profit guidance, anticipating:
- Sequential growth improvement in H2
- A slight organic operating profit decline in H2 (due in part to tariffs)
- A tax rate of approximately 25%, aligned with FY24
- Effective interest rate slightly below FY24’s 4.3%
- CapEx at the upper end of USD 1.3–1.5 billion
While leverage remains above target (expected 3.3–3.5x at year-end), the company remains committed to bringing it back within the 2.5–3.0x range by FY2028.
Introducing “Accelerate” – A Strategic Transformation Plan
Diageo launched the first phase of its Accelerate programme, aimed at reshaping operations for agility and long-term resilience. Key targets include:
- USD 3 billion in annual free cash flow by FY2026
- USD 500 million in cost savings over three years
- Strategic deleveraging and reinvestment in growth
This program reflects a sharpened focus on digital transformation, capital discipline, and portfolio optimization, including selective disposals and acquisitions (e.g., expanding ownership of Lobos 1707 Tequila while exiting Cîroc in North America).
Tariff and Trade Adaptation
Diageo is currently adapting to new 10% tariffs on UK and EU spirits entering the US, with an estimated annual impact of USD 150 million. The company expects to mitigate at least 50% of this impact through internal measures and has factored it into its guidance for FY25 and FY26.
Conclusion
Despite global challenges, Diageo is staying the course with consistent performance, a strong brand portfolio (including Johnnie Walker, Don Julio, and Guinness), and bold strategic action through Accelerate. For investors and industry watchers alike, the company’s disciplined financial approach, growth orientation, and global agility signal a confident path forward—balancing performance today with sustainable success tomorrow.
Source: Diageo