Profits decline by 28% in Diageo, the company owning Guinness beer brand
Diageo Announces New Leadership and Improvement Plan Amidst Declining Alcohol Market
Diageo, the global alcoholic beverages giant, is seeking a new chief executive officer (CEO) and finance head as it looks to turn around its financial and share performance. The company's current CEO, Debra Crew, stepped down last month after two years in the role, and the board aims to find a permanent CEO by the end of October.
The global alcohol consumption market is currently experiencing a downturn, impacting Diageo's financial performance. Analyst estimates predicted a drop of 10%, but the actual decline was much higher. Despite this, Diageo reported 1.7% organic net sales growth for the 12 months ending June 2022, driven by volume and pricing/mix improvements.
To address these challenges, Diageo has unveiled an expanded 'Accelerate' programme. This plan focuses on cost savings, operational efficiency, prioritizing investments, and driving growth. The company raised its cost-savings target by $125 million to a total of $625 million over the next three years.
Key elements of the plan include creating a more agile and efficient global operating model, balancing cost-cutting efforts with strategic reinvestment, mitigating external challenges, targeting mid-single-digit organic operating profit growth, and lowering capital expenditure for fiscal 2026.
Diageo's new interim CEO, Nik Jhangiani, stated that while he is encouraged by some areas of progress, there is still much more work to be done across the company's broader portfolio and brands. The company expects organic sales to fall slightly in the first half of 2026, with growth more weighted towards the second half.
Despite the challenges, Diageo maintained or grew its market share in most measured markets, showing resilience in a challenging environment. The company's organic sales volumes increased by 0.9% during the same period.
In May, Diageo announced a plan to cut $500 million in costs and make substantial asset sales by 2028. The decline in Diageo's profit is attributed to "exceptional impairment and restructuring costs". The exact date for the financial results to be reported for the first half of 2026 is not specified.
The company, which owns brands such as Guinness and Johnnie Walker whisky, reported a 27.8% decline in operating profit to $4.3 billion (€3.7 billion). Diageo expects muted sales growth in this fiscal year. The sales for the 12 months ending June 2022 decreased by 0.1% to $20.2 billion.
In summary, Diageo aims to navigate the downturn through cost discipline, operational restructuring, targeted brand investment, and efficiency gains to restore growth and improve financial results in the medium term.
- In an attempt to improve its financial standing and overall business performance, Diageo has announced an expanded 'Accelerate' program, focusing on areas such as cost savings, operational efficiency, and strategic investments.
- As Diageo steers its way through the declining alcohol market, the company has raised its cost-savings target to $625 million over the next three years, with the aim of generating mid-single-digit organic operating profit growth and lowering capital expenditure for fiscal 2026.
