Editor's note: S&P Global Ratings believes there is a high degree of unpredictability around policy implementation by the U.S. administration and possible responses--specifically with regard to tariffs--and the potential effect on economies, supply chains, and credit conditions around the world. As a result, our baseline forecasts carry a significant amount of uncertainty. As situations evolve, we will gauge the macro and credit materiality of potential and actual policy shifts and reassess our guidance accordingly (see our research here: spglobal.com/ratings).

This report does not constitute a rating action.

Key Takeaways

• Among rated consumer goods and retail companies in Europe, the Middle East, and Africa (EMEA), alcoholic beverage and personal luxury goods companies are at most risk from U.S. tariffs.
• Most other EMEA-based rated consumer goods and retail companies operating in the U.S. will see less of a direct impact thanks to their global manufacturing footprints and generally diversified revenue streams and sourcing capabilities.
• However, the secondary effects of higher tariffs, such as lower economic growth, higher inflation, and weaker consumer confidence, could outweigh the direct primary effects and have the potential to affect a wider section of the rated consumer goods and retail companies in EMEA.
• Most companies have limited capacity to raise prices further because list prices are already high. Nevertheless, we believe that some of them will be forced to pass on at least part of the tariff impact to end consumers, exacerbating existing volume pressures.
• Most companies are starting to implement mitigating actions, but it may not be possible to change supply chains, manufacturing, and sourcing extensively enough to fully offset the negative impact on profits in the short-to-medium term.
• The rating impact depends on the companies' rating headroom, capital allocation, and the effectiveness and timeliness of their mitigating actions.

European consumer goods manufacturers have been at risk of new tariffs since President Donald Trump took office in January 2025 and signaled his intention to impose tariffs on a wide range of countries and industries. The unexpected breadth and scale of the tariffs that the U.S. administration announced on April 2, 2025, are quite structural in nature. The tariffs have meaningful implications for global trade and the free flow of goods and services--especially to and from the key consumer market of the U.S.--after decades of globalization.

In S&P Global Ratings' portfolio of rated EMEA-based consumer goods and retail companies, alcoholic beverage and personal luxury goods manufacturers face the biggest risk, with the degree of impact ranging from low to moderate. The U.S. accounts for about one-quarter of these companies' total revenues on average, which is a significant proportion (see chart). We focus our analysis on the companies' public disclosures about their supply chains, production, and plans to mitigate the tariff impact.

The U.S. Market Is Critical To Several European Companies

Sales exposure to the U.S. at the four major alcoholic beverage players that we rate in EMEA ranges from less than 5% for Netherlands-based Heineken N.V., the second-largest brewer globally, to close to 30% for U.K.-based Diageo, the world’s largest spirits manufacturer. Within the spirits sector, exposure varies by category, with Diageo heavily exposed to the U.S. through its leading positions in tequila (about 11% of total sales), Scotch whisky, and vodka. For France-based Pernod Ricard S.A., exposure to the U.S. (about 19% of total sales) is largely through Irish whiskey, vodka, rum and liqueur, and to a lesser extent, cognac.

Within the personal luxury goods industry, the top three global players, LVMH Moët Hennessy - Louis Vuitton SE (LVMH), Kering S.A., and Compagnie Financière Richemont S.A. (Richemont), typically have about 20%-25% sales exposure to the U.S. Chinese consumers' subdued appetite for luxury goods, along with strong demand from citizens and tourists in the U.S., make the U.S. one of these companies' main markets in 2025. As a result, increases in tariffs on personal luxury goods could materially impair EMEA-based luxury goods players' recovery from the slowdown following the post-pandemic boom.

Breitling Holdings S.a.r.l. (Breitling), a luxury watchmaker based in Switzerland, continues to face industry headwinds that weigh on its operating performance, despite management implementing steps to improve the topline and profitability. We see a risk of Breitling not restoring its credit metrics because 26% of its sales come from North America (predominantly the U.S.) and the group has underperformed our base case.

We also anticipate that sportswear companies will face disruption in their supply chains, as they import many of their products to the U.S. from countries such as Vietnam, Cambodia, or Thailand, which the recent tariff announcement has hit hard. Southeast Asia is a significant production hub for sporting goods companies and new duties will drive production costs up further. Companies are likely to pass these through to consumers to some extent.

This will add to the ongoing industry challenges in the U.S. stemming from elevated levels of stock and higher competitive pressure from local and new brands. These factors may prevent companies from being able to fully offset their increasing production costs through price rises, thus translating into an industry-wide drop in profitability. That said, we see some mitigants for EMEA-based Adidas AG and Amer Sports Inc. thanks to their stronger credit metrics in the past 12 months and solid market shares in their respective geographies.

Manufacturing Footprints Vary Across The Global Alcoholic Beverage Industry

Alcoholic beverage companies' manufacturing footprint in the U.S. varies by both sector and company. For example, Belgium-based Anheuser-Busch InBev S.A./N.V. (ABI) produces almost all of its beer in the U.S., which mitigates tariff risk considerably. Heineken’s sales in the U.S. are modest, comprising imports from abroad, mostly Mexico, and it has not publicly stated an intention to shift its production elsewhere.

Within spirits, there is little choice of moving manufacturing, or even bottling in some cases. This is due to certain spirits' protected geographical origins, established manufacturing processes, and the sourcing of their key ingredients. These spirits include tequila, Scotch, Irish whiskey, champagne, and cognac. Over time, we see some scope for the production of other spirits, notably vodka, to shift to the U.S. to cater to the needs of the local market.

In Diageo’s case, tequila imports from Mexico and whisky imports from Canada make up 45% of U.S. sales, while imports of spirits (notably Scotch whisky) and beer from Europe account for another 15%-20% of U.S. sales. Pernod Ricard has not disclosed its production footprint in detail, but we believe that it produces a large amount of Scotch whisky in the U.S., while it likely imports all Irish whiskey, vodka, cognac, rum and liqueur from Europe.

In terms of magnitude, Diageo has indicated a $600 million annualized gross impact on its operating profit from tariffs, 85% of which relate to tequila imports from Mexico. Pernod Ricard has indicated a slightly lower impact of €50 million-€60 million, in addition to an estimated €140 million-€150 million impact from additional tariffs on sales of cognac in China from the end of November 2024. The companies made these estimates based on their assumption of 25% tariffs on Canada and Mexico and 10% on Europe, but the most recent tariff announcements on April 2, 2025, suggest that the impact will be slightly different.

Positively, both Diageo and Pernod Ricard have stated that they can mitigate some of the tariffs by adjusting prices and optimizing their supply chains, for example, by shifting production elsewhere.

Pricing Is The Main Mitigant For The Luxury Goods Multinationals

Luxury goods companies traditionally manufacture their products in Italy, France, and Switzerland, relying on longstanding artistic traditions and craftmanship. Controlling the supply chain and maintaining product quality and brand essence remain key strategies for the large players.

According to the companies' recent disclosures to investors, Kering has no intention of shifting production to the U.S. as it wants to maintain its current footprint. This exposes it to additional tariffs on product imports to the U.S., which has lately been a source of growth. Other luxury goods companies are in a better position to shield their operations from tariff increases. One such company is LVMH, which operates a few factories in the U.S.

LVMH, the industry leader, recently suggested that EMEA-based companies could consider making goods in the U.S. in light of American consumers' growing appetite for U.S.-made products. Nevertheless, we do not expect a major shift in manufacturing in the short term due to the uncertainty around the implementation of the U.S.'s global trade policy.

We therefore believe that pricing will likely be the luxury goods industry's main way of mitigating tariffs, as it caters to wealthy customers who tend to be less sensitive to prices. Higher prices will affect aspirational customers more, especially as they are already reducing their spending on luxury goods in favor of alternatives, such as travel or other leisure experiences. This will dampen sales further.

At the same time, macroeconomic headwinds in developed markets and weakening demand in mainland China are putting significant pressure on luxury goods companies' sales there, hampering their ability to increase prices. Previously, Asia-Pacific contributed to years of record-high growth in the luxury goods industry, but the recent weakening in consumption in China has had a major impact and highlighted the importance of attracting and maintaining a loyal customer base.

We believe that Richemont is in the best position in this space as it caters almost exclusively to affluent customers and has bucked the trend of slowing sales among its rated peers. We also see LVMH as being in a good position thanks to its sheer size and diversity across luxury goods categories and price points. We expect Kering to see the most impact because its main brand, Gucci (about 50% of total sales), is more exposed to aspirational consumers. Kering is also going through a transformational program and facing the challenge of implementing several strategic initiatives amid softening demand.

Denmark-based Pandora A/S, a leading accessible luxury jewelry brand, has estimated a gross total impact from the tariffs of around Danish krone (DKK) 1.2 billion ($176 million) per year, before any mitigating actions. This affects the products that Pandora imports into the U.S. and that mainly originate from Thailand, but also Vietnam, India, China, and a number of other countries.

Pandora expects to be able to fully mitigate DKK250 million linked to the goods that it distributes via the U.S. but eventually sells in Canada and Latin America. Pandora is exploring further mitigating actions to address the potential remaining DKK950 million impact, including price increases and supply chain adjustments.

The Direct Impact On Other EMEA-Based Consumer Goods And Retail Companies Is Lower, But The Indirect Impact Will Be Widespread

We believe that the effect of tariffs on other retail and consumer goods sectors in EMEA is much lower because these sectors mainly process and source essential raw materials and intermediate goods in the U.S. This is particularly true for large companies with diversified global operations, such as Switzerland-based Nestlé S.A. (35% of total sales to North America). Nestle benefits from sourcing and producing approximately 90% of the goods it sells in the U.S. locally.

Similarly, U.K.-based Unilever PLC (22% of total sales to North America) makes most of the products that it sells in key markets like the U.S., Europe, and India in the markets themselves. France-based Danone (24% of total sales to North America) is shielded from tariffs as it sources 80%-90% of the products that it sells in the U.S. locally, procuring the ingredients from domestic farmers.

What's more, we believe that these large global companies can swiftly adjust their production locations if needed, further reducing the potential tariff impact. While there are undoubtedly some risks for large conglomerates, they have the option of taking mitigating actions should the tariff impact become more meaningful.

Within nonalcoholic beverages, Netherlands-based Refresco (Pegasus BidCo B.V.) has notable exposure to the U.S., with 31% of its U.S. sales supplying bottles to U.S. companies such as The Coca-Cola Co. and PepsiCo Inc. However, the latter tend to provide the raw materials to Refresco, which naturally mitigates the tariff threat.

Companies that are exposed to raw materials such as cocoa and coffee, whose prices were increasing even before the recent U.S. tariffs due to unfavourable weather conditions, will see a hit to their sales volumes and profitability. While coffee consumption is growing globally in both established and emerging markets, the U.S. is the largest importer of coffee in the world. Netherlands-based JDE Peet’s N.V., the world’s leading pure-play coffee and tea company by revenue, sources approximately 8% of the world’s green coffee. While the group benefits from good geographical and brand diversity, we expect its profitability to suffer as U.S. consumers will be forced to pay higher prices.

In addition to an increase in the price of coffee beans, Nestle and JDE Peet’s, the largest and second-largest coffee players globally, will also see an impact from higher aluminum prices. Tariffs on aluminum will lead to an increase in packaging costs for many consumer goods companies, especially those in the coffee and beer segment. However, aluminum tends to be priced on a global basis, and the higher costs would affect all industry players manufacturing goods in the U.S. and importing aluminum packaging from China and Canada. Moreover, higher tariffs on aluminum packaging exports to the U.S. may free up some capacity at consumer goods companies in other parts of the world, particularly China and Canada.

Smaller consumer goods companies with less diversified footprints, like U.K.-based Flora Food Management UK Ltd. (35% of total sales to the U.S.), also benefit from local sourcing and manufacturing for most of its U.S. sales. Tariffs could take their toll on adjacent categories like plant-based cheese or cream, as Flora Food Management sources these products from facilities in Canada and Germany, respectively. That said, these smaller companies generally benefit from flexible supply chains that should allow them to avoid tariffs by shifting production and sourcing from one location to another.

We only see a material impact for a few smaller companies with more rigid supply chains and a reliance on certain locations to source key ingredients. For example, Spain-based Deoleo S.A. (33% of total gross profits from the U.S.) imports over 95% of the products it sells in the U.S. from the EU. This reflects the geographical concentration of olive oil production, with Spain accounting for more than 40% of global production. In our view, these smaller companies have fewer mitigating measures at their disposal, namely price adjustments and cost efficiencies.

Rating Headroom Varies Across Sectors

Tariffs will lead to higher inflation and increase prices along the supply chain and for end consumers. The impact on inflation in the near term will be significant, likely averaging closer to 4% by fourth quarter (compared with 3% in our March baseline forecast). Given that the 11% share of consumer spending is represented by imported goods, the additional import cost would add 0.7%-1% to the Consumer Price Index level from our earlier forecast (assuming 50%-75% pass-through to consumers).

This will make it difficult for brands to increase volumes in the U.S. Weaker growth in household income and a softening labor market, with higher interest rates and lingering policy uncertainty, will lead to decelerating economic growth in the U.S. This will ultimately hit consumer spending on goods. Many rated consumer goods and retail companies in EMEA already face weak or declining volumes in the U.S., and high list prices, coupled with the inflationary impact of tariffs, will make volume recovery very challenging.

Among the companies that additional U.S. tariffs will hit hardest, namely the personal luxury goods producers, Richemont has the most room under its credit metrics to accommodate the impact, with 0x net debt to EBITDA and a greater ability to adjust prices because it caters to affluent customers. LVMH also benefits from some flexibility in its credit metrics and its diverse portfolio of brands. We see Kering as being most at risk from tariffs, especially in the context of its ongoing attempts to turn around the fortunes of Gucci and its higher leverage than that of its peers.

Within alcoholic beverages, beer producers ABI and Heineken benefit from significant headroom in their credit metrics, but they are more shielded from the tariff impact thanks to ABI's significant manufacturing footprint in the U.S. and Heineken's limited exposure to the U.S. Within spirits, and based on the companies' disclosures, we see both Diageo and Pernod Ricard withstanding additional headwinds in the U.S. Our forecasts of Diageo's credit metrics signal sufficient headroom in the coming two years, while Pernod Ricard has slightly less headroom due to significant headwinds in China.

That said, over the past couple of years, Pernod Ricard has been investing in a program to achieve sustainable cost savings of about €1 billion from the financial year ending June 30, 2026 (FY2026) to FY2029, with 50% coming from a more efficient operations platform. We expect approximately €900 million of the savings to materialize from FY2025, with about €300 million of efficiencies due in FY2024-FY2025. These could help soften the additional impact from U.S. tariffs.

Within the durable goods sector, AB Electrolux has limited headroom to withstand further tariff cost pressures due to its high share of sales in the U.S. (30% of total 2024 sales) and the underperformance of its U.S. operations. Even though Electrolux has production facilities in the U.S., it imports some appliances from its factories abroad, such as washing machines and certain categories of refrigerator from Mexico.

Within the sportswear sector, both Adidas and Amer Sports are in a strong position as their credit metrics have improved materially in recent fiscal years, which gives them room to maneuver in a more difficult operating environment. Amer Sports reported net leverage of about 1.0x in 2024, materially lower than 5x in prior years, or about 7x on an S&P Global Ratings’ adjusted basis, following the completion of an IPO late in the year. Similarly, Adidas’ credit metrics strengthened materially following solid trading results and portfolio management after the inventory depletion of Yeezy products.

Most rated consumer goods and retail manufacturers in EMEA have not yet publicly quantified the impact of additional tariffs due to the substantial level of uncertainty and their confidence in their ability to mitigate the impact.

Related Research

• Most European Corporates Can Manage The Immediate Effects Of U.S. Tariffs, April 4, 2025
• Global Credit Conditions Q2 2025 Puzzling Reshuffling, March 31, 2025
• Report: Tariffs Will Hurt U.S. Consumer And Retail And Restaurant Companies To Varying Degrees, Feb. 13, 2025
• Industry Credit Outlook 2025: Consumer Products, Jan. 14, 2025