Diageo seeks €8 million savings through further job cuts

As we go to press Diageo is eyeing-up its 1,800-strong Irish workforce with a view to making cuts in its Marketing and support departments in its quest to achieve another €8 million in savings here. The manufacturing side of Diageo remains unaffected.

While refusing to divulge the size of the forthcoming cuts, the company claims this to be part of a wider restructuring plan for its European operations that will see Diageo Ireland’s Chief Executive John Kennedy head up the company’s Western European operation while remaining based here.

Diageo stated, “We have recently embarked upon a review of our European operating model which is still in train. It is far too early to attempt to signal any outcome and we are also committed to the principle that our employees and their representatives should understand any potential impact first”.

Diageo may be examining the possibility of combining some of its corporate support functions in the UK and Ireland, moving them to the UK as part of the reduction in Irish staff.

Managing Director of Diageo Ireland John Kennedy stressed, “Diageo is fully committed to Ireland and has very significant operations here that are an essential element of our company’s operations globally. However we do need to make changes and deliver greater efficiencies in some of the support functions of the business.

With the decline of Guinness in the rural on-trade here, Ireland became the key driver of a four per cent decline in beer sales in Europe, negatively affecting overall performance of the brand.

In the nine months to March 2011 net sales in its European business declined by three per cent.

"Overall trading in Europe continues to be challenging although in the [third] Quarter stronger price/mix in Great Britain and Russia offset weaker price/mix in Ireland and Greece and a deterioration of the on-trade in Spain," Diageo Chief Executive Paul Walsh commented recently.

And Diageo claims that it has extended its review to encompass its global operating model to create a more cost-effective organisation. This will ensure that “all our resources are deployed closer to the market and in those areas where the potential for growth is greatest”.

As a result, it will break up its International region – formerly Latin America and the Caribbean, Africa and Global Travel and the Middle East (GTME) – into Diageo Latin America & Caribbean and Diageo Africa. As part of the move, Diageo’s International Unit President Stuart Fletcher will leave the company.

The GTME hub will report in to Diageo Asia Pacific.

“The rationale is that the Asian traveller has emerged as having crucial significance to the future growth of that business,” a spokesperson for Diageo told the UK online trade magazine just-drinks recently.

As a result of Diageo moving its central sales and commercial organisation within its in-market companies, its Chief Customer Officer Ron Anderson has also decided to stand down but both men will remain with the company until the transition process is complete, most likely by 2012.

Paul Walsh expects to make an announcement at Diageo’s preliminaries presentation this August as to the full extent of the changes which are aimed at redistributing its resources into the more profitable markets rather than simply trimming outgoings.
Paul Walsh hopes that ‘emerging markets’ will be responsible for 50 per cent of Diageo’s total business by 2014 from their present 35 per cent share.