Diageo has outlined plans to extract $1bn in savings from the business over the next three years.
In a statement ahead of a much-anticipated investor meeting later today (6 August) the Guinness and Johnnie Walker maker said it expected to achieve around $1bn in savings “from the work on both the operating framework as well as further work on supply chain”.
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A year ago, Diageo laid out a plan to achieve around $625m in cost savings in the next three years as part of the group’s bid to bolster growth.
Diageo said today a “redesign” of the company’s “operating framework” is expected to provide around $850m of the $1bn in savings, with roughly 40% taking place in the company’s upcoming financial year “and the balance in fiscal ’28”.
The Tanqueray gin maker also expects to achieve around $150m in savings “from supply chain initiatives”, with roughly a quarter of those being effective in the new financial year “and the balance in the following years”.
The group revealed its new savings targets alongside its sales and profit forecasts for its 2026/27 financial year, which include a projection for “broadly flat organic net sales growth”.
Diageo anticipates its organic net sales in North America to decline by a “mid-single digit”, with the assumption the market drops around 3%, “with improving share performance compared to fiscal ’26”, it said.
In its 2027 financial year, the company is also forecasting “low-to mid-single-digit” growth in organic operating profit, which includes the effects from the above mentioned savings initiative.
For “the medium term”, Diageo is anticipating “low-single-digit” growth in organic net sales, which will speed up “over the period as we stabilise and grow share in North America”.
It also expects a “mid-single-digit” rise in organic operating profit, “reflecting the benefit of savings and more favourable mix over the period”.
In the year to 30 June, the Captain Morgan rum distiller booked a 3% decline in reported net sales to $19.64bn. Organically, its net sales declined 2%, against a backdrop of weaker sales in North America and Asia Pacific.
Operating profit fell 27.2% to $3.16bn but, on an adjusted basis, was up 2% attributed “to the benefit of cost savings, partly offset by adverse mix and tariffs”.
In North America, Diageo saw net sales decline 8.4% organically, to $7.5bn, while volumes were down 6.7%. Meanwhile, in Asia Pacific, organic net sales dipped 6.3% to $3.33bn, and volumes dropped 2.4%.
Diageo said a decline in spirits in the US was “only partly offset by growth in Diageo Beer Company USA”.
In Asia Pacific, the group’s organic net sales were hit by a drop in Chinese white spirits, that was “partly offset by growth in India”. Spirits sales were down at a “mid-single-digit” rate due to Chinese white spirits, Diageo said.
The company also today highlighted the booking of impairments in the year totaling $1.5bn.
They feature roughly $786 from Diageo’s operations in Türkiye, which include goodwill linked to its acquisition of Mey İçki in 2011, as well as other brands.
“The charge is largely due to the impact of hyperinflationary accounting on carrying values combined with lower forecast growth assumptions as pricing is not expected to fully match inflation,” the business said.
Diageo also registered a $287m charge in the year linked to its Don Papa rum brand.
“Exceptionals also included restructuring charges of $908m, with circa $752m related to implementation of our new operating framework and circa $156m related to supply chain agility and Accelerate,” the company said.
Accelerate was the name of the a series of measures Diageo drew up last year for, the company said at the time, “a shift in how we do business”, including developing a “more agile global operating model”.
