Guinness beer maker Diageo is set to expand its cost-cutting plans after reporting a fall in profits following a “challenging year” during which the previous boss stepped down.
It comes after the company, also known for Johnnie Walker whisky and Gordon's gin, reported a slight decline in net sales amid a decline in consumer demand for some spirits as young people continue to cut back on their drinking habits.
The London Stock Exchange-listed spirits giant said it was aiming to achieve savings of €718m (£625m), exceeding its previous target of €574m (£500m).
Nick Jhangiani, the company's acting chief executive, said the cost-cutting plan “does not involve job cuts,” but added that “there will be some layoffs.” He stressed that the company could still increase its overall headcount.
Diageo said it expects to achieve these savings over the next three years by streamlining advertising and marketing spend, reducing overheads and improving the supply chain.
The plans to increase savings come amid changes at the company following the departure of its previous chief executive last month.
Debra Crew has stepped down as chief executive “with immediate effect” and “by mutual consent” following the recent fall in Diageo's share price.
Tariffs, cautious consumer demand and increased cost pressures are weighing on the beverage business.
Diageo reported on Tuesday that net sales fell 0.1% to $20.2 billion for the year, although organic sales rose 1.7%.
The company noted that the decrease in net sales was due to unfavourable exchange rates and changes in the brand mix.
In Europe, Diageo reported net sales growth of 0.4%, while in the UK they rose 6.7% despite a fall in sales volumes.
The company said UK sales growth was driven by continued strong demand for Guinness, although it was held back by “supply constraints” that led to shortages of the Irish stout in some pubs earlier this year.
The company said operating profit fell 27.8 percent to $4.33 billion (€3.74 billion) for the year ended June 30.
Mr Jangiani said: “While macroeconomic uncertainty and the resulting consumer challenges continue to weigh on the spirits sector, we are confident in the attractive long-term fundamentals of our industry and our ability to continue to deliver strong performance in the evolving TBA (total alcohol in beverages) market environment.”
“We focus on what we can control and what we can work on at the right pace.
“The Board of Directors and management of the Company are focused on achieving improved financial performance and higher returns for shareholders on a sustainable basis.”
Sourse: breakingnews.ie
