Diageo has announced its Q3 2025 trading results, which include a reported net sales increase of 2.9% to $4.4billion, plus plans to make $500 million in cost cuts.
Cost cuts would come from changes to Diageo’s trade investment and advertising spend, overheads and supply chain, CFO Nik Jhangiani told analysts.
The savings are the first phase of Diageo’s Accelerate program, which the company said aims to create a “more agile operating model” that is expected to sustainably deliver around $3 billion free cash flow per annum from FY2026, increasing as performance improves.
Performance in Q3 was supported by favourable phasing that Diageo estimates contributed around 4% of Q3 group organic net sales growth, mainly from North America and to a lesser extent Latin America and Caribbean, and is expected to reverse in Q4.
All regions delivered positive price/mix except Asia Pacific where continued consumer downtrading and adverse market mix impacted net sales.
The transition to the Guinness license brewing model in Australia and New Zealand is expected to negatively impact net sales throughout the 2025 calendar year.
Chief Executive Debra Crew said: “In the third quarter we delivered strong organic net sales growth and are on track to deliver on our guidance of sequential improvement in organic net sales performance in the second half of fiscal 25.
“We also reiterated our organic operating profit outlook for fiscal 25, including the impact of tariffs based on what we know at this time.
“We continue to believe in the attractive long-term fundamentals of our industry and in our ability to outperform the market. We view the near-term industry pressure as largely macro-economic driven, with continued uncertainty impacting both the timing and pace of recovery.
“Consistent with our strategic priorities and our focus on what we can manage and control, we are introducing the first phase of our Accelerate program.
“This sets out clear near-term cash delivery targets and a disciplined approach to operational excellence and cost efficiency. It will strengthen Diageo by increasing our effectiveness, agility, and resilience.
“It will also ensure that we are well-positioned to deliver sustainable, consistent performance while maximising shareholder returns; even if current trading conditions persist.
“We look forward to sharing more detail on Accelerate with our full year results in August.”
CFO flags asset sales
Jhangiani said the company could make “substantial changes” to its product portfolio.
“Clearly we see through our reviews that we’ve been doing internally and with the board some opportunities for what I would call substantial changes versus portfolio trimming,” he said.
“I can’t say any more than that but clearly it’s going to be above and beyond the usual smaller brand disposals that you’ve seen over the last three years.”
The company has ruled out selling its well-performing beer label Guinness.
The plan does not include large-scale redundancies, although Crew said some changes to headcount may come through approaches such as slower hiring.
Impact of tariffs
Assuming the current 10% tariff remains on both UK and European imports into the US, that Mexican and Canadian spirits imports into the US remain exempt under USMCA, and that there are no other changes to tariffs, Diageo estimated the unmitigated impact of these tariffs is estimated to be around $150 million on an annualised basis.
“Tariffs between the US and China do not have a material impact on our business,” Diageo said.
“We expect that given the actions that we have in place already, before any pricing, we will be able to mitigate around half of this impact on operating profit on an ongoing basis. Looking ahead, we will continue to work on measures to mitigate this impact further. Our long track record of managing international tariffs gives us confidence in our ability to navigate this successfully.”