Exclusive-Diageo teams face up to 30% reductions as CEO 'Drastic Dave' slashes costs
Diageo Cost-Cutting Measures and Impact Under CEO Dave Lewis
By Emma Rumney
LONDON, July 22 (Reuters) - Some Diageo teams are cutting around 20% to 30% of their staff after new CEO Dave Lewis ordered deep reductions in overheads to revive performance at the world's top spirits maker, two sources familiar with the plans said.
Leadership Change and Strategic Direction
Lewis, nicknamed "Drastic Dave" for restructuring efforts earlier in his career, joined the maker of Johnnie Walker whisky and Smirnoff vodka in January after years of setbacks that have hurt its share price and shaken investor confidence. He is due to outline his strategy at an investor day on August 6.
Market Reaction and Investor Sentiment
While investors widely anticipate cost cuts under the former Tesco boss, Reuters is the first to report the scale of the reductions under way. Diageo's shares extended gains to over 2% on Wednesday following Reuters' story, and remained 1.9% higher at 1340 GMT.
Workforce Reductions and Company Response
Some employees have already lost their jobs, according to the sources, who asked not to be named as they are not authorised to speak to the media. Reuters could not determine how far the process has progressed or how many jobs will be affected overall. The company employed over 29,000 people at the end of its 2025 fiscal year.
A Diageo spokesperson pointed to plans announced in February to redesign its operating model to drive sustainable returns and improve competitiveness.
"We will always prioritise informing our colleagues of any organisational changes first and have committed to update shareholders on our progress at a Capital Markets Day on 6 August," the spokesperson added.
Details of the Cost-Cutting Initiative
Edinburgh Meeting and Leadership Directives
CUTS FOLLOW EDINBURGH MEETING
Lewis delivered the directive on overheads at a meeting with Diageo's business leaders in Edinburgh during the group's fiscal fourth quarter, which ended in June, the two sources said.
Scope and Scale of Reductions
The restructuring is expected to affect a group of about 100 senior leaders, which will be left 20% to 30% smaller once the initiative is complete, one source said. One large regional business unit is cutting between 25% and 30% of staff, the second source said.
The second source also said Lewis had ordered overhead reductions of up to 40% in some markets and 50% in a centralised unit operating globally, with managers looking to make office closures and other cost reductions to limit job losses.
Both sources said the scale of cuts had shocked employees and shaken morale.
"It's huge," the first source said, adding that when Lewis arrived at Diageo he said he hated his nickname and would make sensible choices. "But it turns out it is pretty drastic what's happening."
A third source close to the situation said business leaders were given cost reduction targets and freedom on how to meet them.
Business Context and Future Outlook
Challenges in the Spirits Market
PRESSURE TO REVIVE GROWTH
Lewis took over a company struggling with weaker spirits demand, particularly in its largest market, the U.S., where consumers have curtailed alcohol spending due to rising costs of living among other factors.
The demand slump and worries about future growth have seen its share price more than halve over the past five years.
Accelerate Programme and Financial Targets
Before Lewis arrived, Diageo had already launched its Accelerate programme, targeting $625 million of total cost savings by 2028 alongside asset sales. Reuters could not determine whether the Edinburgh directive forms part of that programme or is in addition to it.
Diageo said in a third quarter trading update in May that Accelerate was on track to deliver around $300 million in savings in Diageo's current fiscal year.
During the first six months of the current fiscal year Diageo's reported operating margin grew 85 basis points to 29.8%, thanks mostly to the positive impact of asset sales.
Analyst Perspectives and Investor Expectations
Laurence Whyatt, an analyst at Barclays, said in a note that Reuters' report suggested savings from job cuts could exceed his previous forecast for a 25 basis point boost to Diageo's operating margin next year.
It also raised expectations that Lewis will use Diageo's August investor day to announce "a larger and faster cost programme than investors currently assume," he said.
(Reporting by Emma Rumney; Additional reporting by Alexander Marrow in London, Editing by Lisa Jucca, Adam Jourdan and Elaine Hardcastle)
