Diageo, the world-renowned maker of Johnnie Walker whisky and Guinness beer, has announced a bold plan to slash $500 million in costs and divest significant assets by 2028. This strategic move comes as the company aims to improve its financial performance and reduce its debts.
According to Diageo’s finance chief Nik Jhangiani, the cost reductions will be achieved through changes in trade investment, advertising spend, overheads, and supply chain operations. Additionally, the company plans to dispose of certain assets while retaining its prized Guinness brand, with the goal of reducing its leverage ratio from 3.1 times net debt to operating profit to between 2.5 and 3 times by the end of 2024.
Jhangiani emphasized that these asset disposals will go beyond the typical small brand sell-offs seen in recent years, indicating that there are opportunities for substantial changes in Diageo’s portfolio. CEO Debra Crew reaffirmed the company’s commitment to retaining the well-performing Guinness brand, which was previously ruled out for sale earlier this year.
The cost-cutting measures are expected to generate approximately $3 billion in free cash flow annually starting from fiscal 2026. Diageo has also revised down its projected impact from U.S. tariffs following the easing of tensions with Mexico and Canada.
While the company’s turnaround plan does not involve large-scale layoffs, there may be adjustments to headcount through measures like slower hiring. Jhangiani, who joined Diageo in September amid declining sales and investor uncertainty, has received positive feedback from investors for his strategic initiatives.
Despite the optimistic outlook, Diageo continues to face challenges in key markets such as the United States and Europe. President Donald Trump’s tariffs on imports from the UK and EU are expected to dent the company’s operating profit by $150 million annually, although this figure is lower than previously estimated due to the absence of proposed levies on Mexican tequila and Canadian whisky.
Investment managers like Richard Scrope and Rob Burgeman acknowledge that revitalizing a company of Diageo’s magnitude will take time. While the road ahead may be challenging, Diageo’s proactive cost-cutting measures and strategic asset disposals signal a renewed focus on financial stability and growth.
