Diageo is looking to save around $500m in costs over the next three years as part of the drinks giant’s effort to become more “agile” and “resilient”.
The Johnnie Walker and Guinness maker said the move would help the company invest in “future growth” and improve its “operating leverage”.
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Diageo said the plan for cost savings were part of a broader initiative – dubbed ‘Accelerate’ – that will see “a shift in how we do business”, including developing a “more agile global operating model”.
CEO Debra Crew said: “This sets out clear near-term cash delivery targets and a disciplined approach to operational excellence and cost efficiency. It will strengthen Diageo by increasing our effectiveness, agility and resilience.”
Under the plans, the UK-listed group said it expects to generate around £3bn ($4bn) free cash flow a year from its 2025/26 fiscal year.
The announcement came alongside a trading update for the third quarter of Diageo’s current financial year, three months that ran to the end of March.
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By GlobalDataNet sales increased 2.9% to £4.38bn and were up 5.9% on an organic basis. The company said the “phasing” of its sales in the third quarter boosted its organic net sales by around four percentage points. Diageo said its volumes rose 2.8% organically.
Crew added: “We continue to believe in the attractive long-term fundamentals of our industry and in our ability to outperform the market. We view the near-term industry pressure as largely macro-economic driven, with continued uncertainty impacting both the timing and pace of recovery.”
Diageo maintained its full-year guidance, pointing out the increased growth rate the company saw in its third quarter versus the first half of the fiscal year was “mainly driven by phasing”.
The group said it continues to expect to see a “sequential improvement” in the growth of its organic net sales compared with the first half of its financial year.
Diageo also continues to expect a “slight decline” in its organic operating profit in the second half of the year, which would be “broadly in line” with the decrease the company saw in the first half. That forecast includes the impact of the tariffs already announced that will impact its 2024/25 financial year.
The company provided an update on how it sees the changes on tariffs affecting its business. In February, the Don Julio Tequila owner had forecast tariffs would hit profits by around $200m. Today, Diageo said the current situation meant it was forecasting an “unmitigated impact” of $150m a year. The higher tariffs the US and China have imposed on each other “do not have a material impact on our business”, Diageo said.
Shares in Diageo were down 0.14% at 2,149p at 09:37 BST.
