Diageo boss launches £743m cost-cutting plan to deliver turnaround

After Guinness maker Diageo said it will launch a £743million cost-cutting plan, Danni Hewson – AJ Bell head of financial analysis – insists changing drinking habits could hamper its turnaround.

She said: “Dubbed ‘Drastic Dave’ almost 20 years ago, investors understood perfectly how the appointment of Dave Lewis at Diageo was likely to shape the business.

“News of a mega cost-cutting drive helped lift the drinks maker’s shares today. Being more competitive on price could help sway some consumers to look again at some of Diageo’s premium brands.

“Whilst Guinness has been a major bright spot for the business – offering a zero-alcohol option and tapping into the social media zeitgeist – many of its other tipple brands have lost ground as changing drinking habits collided with cost of living pressures.

“Cutting costs won’t be enough on its own to create a sustained growth trajectory, so it’s notable that one of Mr Lewis’ goals is to speed up Diageo’s ability to respond to shifting consumer behaviours, such as the burgeoning demand for pre-mixed cocktails.

“But the business is vast, with a huge number of brands all requiring time and attention in what is already a noisy market. That’s partly why there had been speculation that some parts of the business might be hived off or sold off.

“Investors will give these turnaround plans time to bed in, but they will want to see evidence that the strategy is the right one for today’s drinking culture.”