Diageo's New CEO Plans Significant Job Cuts to Revitalize Business

Diageo's new chief executive, Dave Lewis, is planning substantial job cuts as part of a strategy to revitalize the struggling spirits and beer maker. Lewis, who took the helm in January, is reportedly looking to implement significant reductions in the workforce to improve the FTSE 100 company's performance.

Staff in Edinburgh have been informed of potential restructuring, with some teams facing reductions of up to 50% and the possibility of office closures. While the exact number of jobs at risk has not been disclosed, Diageo employed over 29,000 people last year. Reports suggest that a group of approximately 100 senior leaders could see their numbers reduced by 20% to 30%.

Lewis, who earned the nickname ‘Drastic Dave’ for his cost-cutting measures at Tesco, is expected to detail his turnaround plan to investors on August 6 at a capital markets day. A Diageo spokesperson stated in February that the company intended to "redesign our operating framework" to "drive sustainable returns for shareholders by delivering a more competitive Diageo."

Analysts anticipate a more aggressive cost-reduction program than currently factored in by investors. Laurence Whyatt, an analyst at Barclays, suggested that the measures would likely result in a "larger and faster cost programme than investors currently assume."

Diageo, whose brands include Guinness, Johnnie Walker whisky, and Smirnoff vodka, is facing declining sales. The company anticipates a sales decrease of 2% to 3% this year, citing weak consumer demand in the United States. Diageo's shares have fallen 2% year-to-date and have dropped more than 50% over the past five years.

Despite broader challenges, demand for Guinness has remained robust, particularly in Europe, aided by its appeal to younger demographics and endorsements from public figures. This strength has helped to bolster sales for the iconic stout.