Diageo Faces Profit Slump and Tariff Blow Amid Leadership Crisis

Published: 05 August ‘2025. The English Chronicle Desk

Diageo, the world’s leading spirits producer and owner of iconic brands such as Guinness, Johnnie Walker, and Smirnoff, has reported a sharp 28% fall in its annual operating profits. This downturn has been attributed to a combination of internal challenges, shifting consumer habits, and external economic pressures—including a looming $200 million hit from new U.S. tariffs imposed under former President Donald Trump’s trade policy.

The company, listed on the FTSE 100, is also navigating a leadership transition following the sudden resignation of CEO Debra Crew. Crew’s departure, said to be by mutual agreement, came amid growing concern among investors over the company’s declining share price and overall performance. She had taken charge in 2023 after the unexpected death of long-serving and well-respected CEO Ivan Menezes. Under Crew, Diageo faced multiple setbacks, including sluggish sales in Latin America and supply chain issues that caused a Guinness shortage during last year’s holiday season.

Interim CEO Nik Jhangiani, the company’s current CFO, has expanded Diageo’s cost-cutting initiative, increasing the savings target from £500 million to £625 million. While some roles are expected to be cut, Jhangiani emphasized that the overall workforce may still grow as part of a broader restructuring. Despite the challenging year, he pointed to strong performances from certain products such as Guinness, Don Julio tequila, and Crown Royal Blackberry as bright spots in an otherwise underwhelming fiscal report.

Compounding its financial concerns, Diageo is bracing for a significant hit from newly enforced U.S. tariffs. The 10% levy on UK-imported spirits, along with a 15% tax on EU imports—while sparing Mexican and Canadian products—is expected to cost the company approximately $200 million annually. These tariffs took effect after the implementation of the UK-US trade agreement on 30 June, with additional EU tariffs set to begin on 7 August.

In response, Diageo has ramped up contingency planning, aiming to counter the tariff effects through inventory management, supply chain adjustments, and the reallocation of investments. According to internal projections, these measures could offset up to half of the anticipated financial impact.

Despite these efforts, Diageo’s stock has plummeted over 25% since the start of the year, placing it among the poorest performers on the FTSE 100 index. Analysts also point to broader market trends, such as shifting drinking habits among younger consumers and the ongoing cost-of-living crisis, as factors contributing to the public’s growing preference for more affordable, non-premium brands.

With a new CEO yet to be named and economic headwinds continuing to buffet the global spirits industry, Diageo stands at a crossroads—needing to stabilize operations, restore investor confidence, and adapt to an evolving market landscape.