Diageo CEO looks to reset with $1 billion cost-cutting plan
Diageo's Strategic Overhaul and Market Outlook
Aug 6 (Reuters) - Diageo announced a plan to save $1 billion over three years on Thursday, an aggressive overhaul of the world's top spirits maker as it forecast low growth through 2029, sending its shares up more than 7%.
Investor Reactions and Company Performance
Investors hope the restructuring marks a turning point for the group behind the Johnnie Walker whisky and Guinness beer brands after years of stagnant or falling sales, weakness in key markets and falling share price.
CEO Dave Lewis's Restructuring Programme
CEO Dave Lewis said in a recorded presentation launching the plan that a restructuring programme of this size has "very significant impacts" on colleagues, but did not say how many jobs would be affected.
The programme had mostly been communicated throughout the business around a month ago, Lewis, who took over at Diageo in January, said.
Leadership and Industry Challenges
Spirits investors are looking to Lewis, nicknamed "Drastic Dave" for his history of cost-cutting at Tesco and Unilever, not only to turn around Diageo, but also to chart a path back to growth for an industry confronted with changes in what, where and how much people drink.
Financial Impact and Market Strategy
Diageo, which also makes Smirnoff vodka and Captain Morgan rum, said it would incur about $1.2 billion of restructuring costs as it works to address weakness in North America, its largest market, and optimize its supply chain.
"There is hard work ahead, particularly in North America, where improving performance is a clear priority, but we are confident we can deliver without taking a step back in operating profit," Lewis said in a statement.
Sales Performance and Future Growth Forecast
Diageo reported a 2% drop in organic sales for the year ended June 30, in line with estimates, and forecast flat annual sales for fiscal 2027.
It expects low-single-digit organic net sales growth between fiscal 2027 and 2029. The company had previously targeted growth of 5% to7% in the medium term before scrapping the forecast as spirits sales shrank from pandemic-era highs.
Reporting Credits
(Reporting by Shashwat Awasthi in Bengaluru and Emma Rumney in London; Editing by Mrigank Dhaniwala and Tomasz Janowski)
