Diageo Launches $1 Billion Cost-Cutting Plan Amid Profit Slump

Global spirits manufacturer Diageo announced a $1 billion cost-cutting and restructuring plan over the next three years to reverse a business decline. The initiative involves redesigning the company's operating framework, streamlining the supply chain, and reducing spending on excess capacity. As part of these measures, approximately 172 jobs are at risk of redundancy at Scotch whisky distilleries in Scotland, specifically in the Speyside and Islay regions.

For the fiscal year ending June 30, 2026, the company reported a 27.2% drop in operating profit to approximately $3.16 billion, largely due to $2.53 billion in exceptional charges from impairments and restructuring. Reported net sales fell 3% to $19.64 billion. While Scotch and Guinness volumes grew, the company faced an 8.4% organic sales decline in North America and a 47% drop in Chinese white spirits following government policy changes.

CEO Sir Dave Lewis attributed the struggles to weak demand in the US and China, tariffs, and shifting consumer habits among younger adults and users of weight-loss drugs. Consequently, Diageo scrapped its medium-term growth target of 5% to 7%, now forecasting low-single-digit organic net sales growth through the 2029 financial year. Shares rose approximately 6% following the announcement of the new strategy.