Diageo outlined a plan to cut $1 billion in costs over the next three years as the company faces declining sales in its two largest regions.
The announcement came ahead of an investor meeting on August 6, according to Yahoo Finance. The Guinness, Johnnie Walker, and Tanqueray maker said it expects to achieve around $1 billion in savings from work on its operating framework and supply chain.
The bulk of those savings, roughly $850 million, is expected to come from a redesign of the company's operating framework. About 40% of those savings are projected to take effect in the upcoming financial year, with the remainder coming in fiscal 2028. An additional $150 million in savings is expected from supply chain initiatives, with about a quarter of that effective in the new financial year.
The new $1 billion target expands on a plan Diageo announced a year ago to achieve $625 million in savings over a three-year period.
The savings announcement came alongside a set of cautious financial forecasts for the 2026/27 financial year. Diageo projected broadly flat organic net sales growth. In North America, the company anticipates organic net sales will decline by a mid-single digit, with an assumption the overall market drops around 3%.
In the year ending June 30, reported net sales fell 3% to $19.64 billion. On an organic basis, net sales declined 2%. North America was a particular weak spot, with organic net sales dropping 8.4% to $7.5 billion and volumes down 6.7%. Asia Pacific also struggled, with organic net sales falling 6.3% to $3.33 billion and volumes down 2.4%.
Operating profit fell 27.2% to $3.16 billion. On an adjusted basis, operating profit was up 2%, which the company attributed to the benefit of cost savings, partly offset by adverse mix and tariffs. The decline in spirits in the U.S. was only partly offset by growth in Diageo Beer Company USA.
Looking further out, Diageo said it expects low-single-digit growth in organic net sales over the medium term, with that growth accelerating over time as the company stabilizes and grows market share in North America. The company also projected mid-single-digit growth in organic operating profit over that period.
The investor meeting later on August 6 was expected to provide more detail on how Diageo plans to execute the cost cuts and return North America to growth.
