New Diageo boss Dave Lewis plans major job cuts to turn the struggling drinks-maker around. Lewis has been trying to reverse the fortunes of the FTSE 100 group since taking the helm in January. The group’s brands include Guinness, Johnnie Walker whisky, and Smirnoff vodka.
Staff in Edinburgh have been told of plans for considerable cuts, with some teams to be reduced by half and some offices to close. It is not clear how many jobs will go.
Job Cuts and Restructuring
Last year, Diageo had more than 29,000 staff. But one team of around 100 senior leaders could be slashed by between 20pc and 30pc, according to Reuters. Lewis – nicknamed ‘Drastic Dave’ after his cuts at Tesco – is set to outline his plans to investors at a ‘capital markets day’ on August 6.
A Diageo spokesman said the group ‘shared our intention to redesign our operating framework’ in February to ‘drive sustainable returns for shareholders by delivering a more competitive Diageo’.
Response from Analysts and the Board
Barclays analyst Laurence Whyatt said that it was likely there will be ‘a larger and faster cost programme than investors currently assume’. Diageo chairman John Manzoni is reportedly seeking drinks-industry veterans to appoint to its board to boost the level of sector knowledge.
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Of the 11 people on the board, just one non-executive director has held a senior job at a spirits company, former Remy Cointreau boss Valerie Chapoulaud-Floquet.
Diageo expects sales to decline by 2pc to 3pc this year, blaming weak consumer demand in the US. Shares are down 2pc this year, and by more than 50pc over the past five years.
Performance of Key Brands
Despite its struggles with other brands and regions, demand for Guinness has helped it boost sales in Europe. The brand has gained traction among young women, with famous fans including Dua Lipa and Olivia Rodrigo.
As Diageo moves forward with its restructuring plans, it will be important to see how the company balances cost-cutting measures with investments in its key brands. The success of Guinness in Europe may provide a model for how the company can revitalize its other brands.
The company’s plans to redesign its operating framework and drive sustainable returns for shareholders will be closely watched by investors and analysts. With the capital markets day approaching, Diageo will need to provide clear guidance on its strategy and expectations for the future.
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