Diageo: nearly 2,000 fewer employees in a year, with further job cuts on the way (FT)
(Il Sole 24 Ore Radiocor) - Diageo has cut its workforce by nearly 2,000 in the last financial year as part of the turnaround plan led by new chief executive Dave Lewis, which involves an aggressive cost-cutting programme in the immediate term. According to the Financial Times, the maker of Guinness and Johnnie Walker reported an average of 27,938 full-time employees in the financial year ending in June, over 6 per cent fewer than the 29,860 recorded the previous year. Despite the reduction in staff numbers, the total average staff cost rose from $2.48 billion to $2.55 billion due to the UK government’s decision to increase the rate of employers’ social security contributions and lower the threshold at which companies begin to pay them. Lewis, the former CEO of Tesco and nicknamed “Drastic Dave” for his cost-cutting policy, aims to achieve savings of $1 billion over the next three years. The reorganisation of the operating model and supply chain could lead to further staff reductions. Diageo has not specified the total number of redundancies, but analysts – according to the London-based newspaper – estimate between 3,000 and 5,000 potential job cuts. The group has already reorganised its regional management and asked the heads of the various divisions to reduce staff numbers and other expenses. The savings will also be used to fund investments in mass-market brands, such as Smirnoff and Captain Morgan, and in ready-to-drink canned cocktails, which are particularly popular amongst younger consumers. In the financial year ending 30 June, revenue fell by 2 per cent on an organic basis to $19.6 billion, whilst operating profit fell by 27 per cent to $3.2 billion. The result was impacted by $900 million in restructuring costs and a $1.5 billion write-down relating to operations in Turkey.
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