Diageo 'concern' over impact of US-EU trade row on Scotch

A senior executive at spirits giant Diageo has expressed concern over the impact a trade dispute between the US and Europe could have on Scotland's whisky industry.

This month, the US threatened to impose tariffs on a range of European Union imports, including Scotch whisky.

Diageo Europe president John Kennedy said his company would be "ready to handle whatever comes".

But he added he was concerned about the impact on Scotch whisky's supply chain.

Mr Kennedy's comments came as Diageo announced a 9% rise in operating profit, to £4bn, for the year to 30 June.

• Scotch whisky targeted by new US tariffs

• Scottish Diageo workers reject 'insulting' pay offer

He told BBC Radio's Good Morning Scotland programme: "We are not immune from a trade war or the impact of tariffs in the short term, but we are used to dealing with volatility in global trade and we are resilient as we operate across over 180 countries at almost every price point with all of our brands, so we feel like we're fit and agile and will be ready to handle whatever comes.

"What I would say though is, we are concerned about the potential impact of tariffs on Scotch whisky and the industry in Scotland, not just for us.

"We are a big company, we can handle many changes. However, there is a big supply chain of smaller enterprises across Scotland that participate in Scotch whisky that would be negatively affected, so we are hoping that both sides participate in getting to a resolution."

The US has threatened to impose tariffs on European Union imports worth up to $4bn (£3.2bn), although it is not known when tariffs would be imposed.

Meanwhile, Mr Kennedy said he was hopeful a pay row with Scottish employees will be resolved.

The Unite and GMB unions are set to ballot workers at Diageo sites across Scotland over strike action after pay talks at arbitration service Acas broke down.

On Wednesday, GMB Scotland said Diageo's latest offer of a 2.8% pay rise fell short of its members' aspirations.

The union, which has nearly 1,000 members across Diageo's Scottish operations, said its ballot would run from 29 July to 16 August.

It added that any action would disrupt production of brands such as Johnnie Walker, Gordon's and Smirnoff.

'We remain open'

Mr Kennedy said: "We did improve our offer. That wasn't accepted but we remain open and expect to continue talks to get to an acceptable resolution.

"We feel good about how we operate as an employer in Scotland. We pay in the upper quartile versus other manufacturers in the country and have a wide range of strong benefits, so we expect those conversations to continue and hope to get to a resolution."

On Thursday, Diageo reported that sales for the year rose by 5.8% to £12.8bn on the back of growth "across regions and categories".

Diageo said sales remained strong in Europe, pushed higher by a particularly strong performance in the UK and Ireland.

The company's chief finance officer, Kathryn Mikells, said that the "gin phenomenon" has continued to drive sales globally, but particularly in continental Europe and the UK.

Brands Tanqueray and Gordon's both reported double-digit growth in Europe as they were boosted by new product releases, such as Gordon's pink gin.

Diageo also hailed strong growth for Johnnie Walker, which saw sales rise by 7%, although in Europe Scotch sales were largely flat as this was offset by weaker sales of J&B.