Diageo cut nearly 2,000 jobs during its latest financial year as chief executive Dave Lewis began a broad restructuring effort designed to deliver $1 billion in savings over the next three years.

According to the company’s annual report for the year ended 30 June, the maker of Guinness, Johnnie Walker, Smirnoff and Captain Morgan employed an average of 27,938 full-time staff, down from 29,860 a year earlier. The reduction of 1,922 employees represents a workforce decline of more than 6%.

The workforce reduction comes as Lewis, who joined the company in January after previously leading Tesco, seeks to reverse a period of weakening financial performance and reposition the world’s largest spirits company for future growth.

Workforce reduction signals start of wider overhaul

Diageo did not provide a specific explanation for the decline in employee numbers in its annual report.

However, the reduction coincides with a company-wide restructuring programme that includes organisational changes, supply chain improvements and tighter cost controls.

Industry analysts cited in reports have estimated the broader restructuring could eventually affect between 3,000 and 5,000 roles, although Diageo has not disclosed a projected figure.

Lewis has already begun reshaping the company’s regional leadership structure and has directed senior executives to reduce costs and headcount across their operations.

The latest workforce figures provide the first measurable indication of the scale of the transformation effort underway.

Cost pressures weigh on performance

The restructuring comes against a challenging backdrop for the global spirits sector.

Consumer drinking habits have shifted in several markets as health-conscious consumers reduce alcohol consumption. Inflation has also increased the cost of alcoholic beverages, placing additional pressure on demand.

Diageo is also navigating the aftermath of a pandemic-era sales surge that boosted demand across much of the beverage industry before growth began to normalise.

The company’s latest financial results reflected those pressures.

Key figures for the year ended 30 June include:

Revenue of $19.6 billion

Organic revenue decline of 2%

Operating profit of $3.2 billion

27% drop in operating profit

$900 million in restructuring charges

$1.5 billion impairment linked to its Turkey business

The results highlight the scale of the challenge facing management as it attempts to improve efficiency while restoring growth momentum.

Staff costs continue to rise

Despite the reduction in workforce numbers, Diageo reported higher employee-related costs during the financial year.

Average staff costs increased from $2.48 billion to $2.55 billion.

The company said the increase occurred during a period when the UK government raised employers’ National Insurance contributions and lowered the earnings threshold at which companies begin paying the tax.

The figures illustrate the rising cost pressures many large employers continue to face even as they reduce headcount.

Lewis accelerates focus on efficiency

Lewis earned the nickname “Drastic Dave” during his tenure at Tesco because of his reputation for aggressive cost management and operational restructuring.

At Diageo, the savings programme is intended to achieve more than cost reduction.

The company has said the initiative is designed to release capital for investment in business areas with stronger growth prospects.

This includes increased attention on larger-volume brands such as Smirnoff and Captain Morgan, which Diageo believes received less emphasis in recent years as the company focused on premium spirits.

The group is also investing in the expanding ready-to-drink cocktails segment, which continues to attract younger legal-drinking-age consumers across multiple markets.

Growth targets remain in place

While restructuring efforts continue, Diageo has maintained its medium-term ambitions. The company is targeting:

Low single-digit organic sales growth

Mid-single-digit operating profit growth

Achieving those goals will depend on improving efficiency, strengthening brand performance and adapting to changing consumer preferences across global markets.

For now, the reduction of nearly 2,000 jobs marks the opening phase of a wider transformation programme. With $1 billion in savings still targeted over the next three years, the workforce changes reported this year are unlikely to be the last as Diageo seeks to rebuild profitability and accelerate growth under Lewis’ leadership.