It is possible that the pursuit of this strategic focus on premium drinks could give rise to furtherbusiness combinations, acquisitions, disposals, joint ventures and/or partnerships (including anyassociated financing or the assumption of actual or potential liabilities, depending on the transactioncontemplated). There can be no assurance that any transaction will be completed. The success of anytransaction will depend in part on Diageo’s ability to successfully integrate new businesses withDiageo’s existing operations and realise the anticipated benefits, cost savings or synergies. There can beno guarantee that any such business combination, acquisition, disposal, joint venture or partnershipwould deliver the benefits, cost savings or synergies anticipated, if any.Similarly, there can be no assurance that the cost-saving or restructuring programmes implementedby Diageo in order to improve efficiencies and deliver cost-savings will deliver the expected benefits.Regulatory decisions and changes in the legal and regulatory environment could increase Diageo’scosts and liabilities or limit its business activitiesDiageo’s operations are subject to extensiveregulatory requirements which include those in respect of production, product liability, distribution,importation, marketing, promotion, sales, pricing, labelling, packaging, advertising, labour, pensions,compliance and control systems, and environmental issues. Changes in laws, regulations orgovernmental or regulatory policies and/or practices could cause Diageo to incur material additionalcosts or liabilities that could adversely affect its business. In particular, governmental bodies incountries where Diageo operates may impose new labelling, product or production requirements,limitations on the advertising and/or promotion activities used to market beverage alcohol, restrictionson retail outlets, other restrictions on marketing, promotion and distribution or other restrictions onthe locations or occasions where beverage alcohol is sold which directly or indirectly limit the sales ofDiageo products. Regulatory authorities under whose laws Diageo operates may also have enforcementpower that can subject the group to actions such as product recall, seizure of products or othersanctions, which could have an adverse effect on its sales or damage its reputation. An increase in thestringency of the regulatory environment could cause Diageo to incur material additional costs orliabilities that could adversely affect its business.25
Business description (continued)In addition, beverage alcohol products are the subject of national excise and other duties in mostcountries around the world. An increase in excise or other duties could have a significant adverse effecton Diageo’s sales revenue or margin, both through reducing overall consumption and by encouragingconsumers to switch to lower-taxed categories of beverage alcohol.