Diageo is reviewing its operations in Europe

Diageo is reviewing its operations in Europe

Diageo has said that it is reviewing its European operations, amid reports that the drinks giant may seek to cut jobs in light of tough economic conditions in the region.

Diageo confirmed to just-drinks today (24 May) that it is reviewing its European business. "We have recently embarked upon a review of our European operating model, which is still in train," a spokesperson for the company said.

"It is far too early to attempt to signal any outcome, and we are also committed to the principle that our employees and their representatives should understand any potential impact first.”

A report in today's Irish Times newspaper said that Diageo may seek to cut jobs among its 1,800-strong Irish business, as part of a plan to restructure in Europe. Part of the plan may include merging some corporate functions between Ireland and the UK, the paper claimed.

Momentum in Diageo's European drinks business has been dented by the economic downturn, which has hit hard in important regional markets for the group, such as Greece, Spain and Ireland.

Some analysts welcomed news of potential restructuring in Europe. Andy Smith, head of global consumer equity research at MF Global, said: "It will clearly be positive news if a new cost saving programme is launched in Ireland, given the headwinds that Western Europe is presenting for Diageo.

"Further costs savings in the region would help Diageo counter-act the negative channel mix and generally difficult conditions the Western European region is seeing," he said.

In the first nine months of Diageo's fiscal year, to the end of March, net sales in its Europe business declined by 3%.

Group CEO Paul Walsh said: "Overall trading in Europe continues to be challenging although in the [third] quarter stronger price/mix in Great Britain and Russia offset weaker price/mix in Ireland and Greece and a deterioration of the on-trade in Spain."