Diageo, the maker of Guinness, has announced plans to cut costs and save £743 million as part of a major overhaul under new chief executive Dave Lewis.
Weaker sales and profits
The drinks giant, which also produces Gordon’s gin and Baileys, reported weaker sales and profits for the past year. Lewis, the former Tesco boss known as “Drastic Dave” for his cost-cutting approach, said there is “hard work ahead” for the business, particularly in North America.
Around £631 million of the savings will come from operations, with £111 million from the supply chain. The restructuring will cost the company about £0.89 billion.
Job impact
The company did not disclose the jobs impact, but it comes days after unions in Scotland warned that 172 distillery workers are at risk of redundancy.
The cost-cutting plan is part of Lewis’s efforts to return Diageo to profit and revenue growth after a downturn under previous chief executive Debra Crew.
Sales decline
For the year to June, net sales fell 3% to £14.5 billion, dragged down by a 9.1% decline in North America due to lower prices in the US and a weak tequila market. This was partly offset by 5.7% sales growth in Europe, with 6.8% growth in Great Britain, driven by double-digit growth in Guinness demand.
Lewis said the business is “confident” it can improve without profits “taking a step back”. He added: “This new strategy, executing with a new, more agile, competitive and cost-effective operating model, gives us confidence that we can return Diageo to a business consistently creating value for shareholders.”
Diageo also cut its proposed dividend payment to shareholders by more than half compared with a year earlier. Shares rose 6% after the update.
