Diageo has seen its organic net sales increase by 5.9% year-on-year to $4.4bn in the third quarter.

The owner of drinks brands including Guinness, Smirnoff and Captain Morgan, said that in the three months to 31 March, its organic growth was partially offset by "unfavourable foreign exchange and disposals".

It added that this performance was also supported by "favourable phasing", mainly from North America, and to a lesser extent in Latin America and Caribbean. However, this is expected to reverse in the final quarter.

In Europe, organic net sales were broadly flat, with performance on the continent being supported by continued strong momentum in Guinness, which has been offset by further softness in spirits across key markets.

The trading update from Diageo comes as it launched the first phase of its Accelerate programme, which aims to create a "more agile operating model".

Under these plans, the firm expects to deliver $3bn in free cash flow from the 2026 financial year and this figure is expected to increase as performance improves. This coincides with a $500m cost savings programme.

Chief executive at Diageo, 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.

"Consistent with our strategic priorities and our focus on what we can manage and control, we are introducing the first phase of our Accelerate programme. 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."

Looking ahead, Diageo expects a slight decline in its organic operating profit, which is set to be impacted by the tariffs outlined by President Trump.

However, its net sales growth is expected to remain in line with guidance.

For the 2026 fiscal year, Diageo stated that it continues to expect to deliver positive operating leverage, with organic profit growth set to be ahead of organic net sales growth.

Equity analyst at Hargreaves Lansdown, Aarin Chiekrie, concluded: "Diageo managed to serve up solid growth in the first quarter, with sales benefiting from a good mix of both price and volume growth.

"The current tariff regime is expected to cost around $150m annually. Diageo expects to be able to offset around half of this through streamlining operations and will likely lean on price hikes to help offset the rest. But this will take a bit of time to enact. Alongside a soft first-half performance, full-year organic operating profits are expected to decline slightly.

"Zooming out, the picture is starting to look a touch better than it has for some time. Sales to China are largely unaffected by tariffs, Latin America and the Caribbean are lapping some weak comparable figures, and there are early signs that the industry is recovering from its cyclical hangover."

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