UK-based alcoholic beverages company Diageo has reported declines in annual sales and profit, with a restructuring program now underway to improve performance.
The company, which owns Guinness, Johnnie Walker and Smirnoff, saw net sales for the year ended June 30 slide 3 per cent. Organic net sales fell 2 per cent, including a 0.4 per cent drop in volume and unfavourable price/mix of 1.6 per cent.
Management attributed the decline to a drop in competitiveness in North America, including weak US spirits performance. In addition, the shift in Chinese government policy on white spirits consumption led to a 34.9 per cent net sales decline in Greater China.
They noted that growth in Europe, Latin America and the Caribbean, and Africa helped offset the weakness.
Operating profit for the year plunged 27 per cent due to exceptional restructuring costs and impairment charges. Excluding these, organic operating profit increased 2 per cent, with the benefit of cost savings partly offset by adverse mix and tariffs.
The company’s net profit also fell 22.9 per cent.
As part of the restructuring, a revised operating framework is being rolled out across the business.
According to CEO Dave Lewis, the change incurred a cost of US$800 million in FY26, representing 70 per cent of the total cost of the two-year program. He expects the restructuring to generate savings of approximately $850 million over two years, starting in FY27.
“These savings will allow us to invest in the turnaround without needing to reduce operating profit,” Lewis said.
- Further reading: Diageo weighs sale of China assets amid strategic review.
