Diageo to nearly double Guinness production and cut jobs in turnaround plan

United Kingdom | Diageo released its highly anticipated turnaround plans on 6 August, which will see the world’s major drinks group nearly double Guinness production, while cutting back a “significant” proportion of its 30,000-strong workforce. Speaking after the company announced a decline in sales but slightly better-than-expected operating profit for its financial year 2026, the new CEO Dave Lewis said his turnaround plan would involve job cuts, adding that the “consequences of that are not great for anybody”.

Mr Lewis declined to give a figure for the expected reduction in the worldwide headcount. However, Diageo told investors that it expects to incur USD 514 million in charges relating to employee severance. The firm promised to deliver USD 1 billion of annual savings over two years through a restructuring that would cost USD 1.2 billion and was aimed at making the company more agile.

Diageo will invest USD 1 billion to harness the rising popularity of Guinness around the world, particularly in North America. Production capacity in Ireland is slated to increase from 8.2 million hl today to 15.7 million hl by 2031.

In the months after Mr Lewis’ appointment in January, industry pundits speculated that Diageo might sell Guinness to raise up to USD 11 billion. The company quickly crushed any such suggestion. Instead, in March, its Indian subsidiary, United Spirits, agreed to dispose of its 100 percent stake in the Royal Challengers Bengaluru cricket franchises to a consortium of investors for approximately USD 1.8 billion.

Strategic missteps

In the past decade, Diage has focused on premiumisation, banking on discerning drinkers choosing high-end brands. That strategy has left Diageo with a portfolio weighted toward high-margin luxury spirits, just as cash-strapped consumers stopped buying from the top shelf. The drinks firm had thrived in the period immediately after the covid pandemic, but fell out of favour with investors as Mr Lewis’ predecessor, Debra Crew, made some strategic errors and issued a surprise profit warning, which led to her exit in June 2025.

Keeping its core brands competitive

Mr Lewis said Diageo would not be “hawking our brands” and was not looking to buy assets either, but would focus more on a broader portfolio, including mid-market brands and a sharper price-pack architecture (read smaller-pack sizes) that were likely to suit cost-conscious drinkers. He also promised to amend Diageo’s failure to cash in on the so-called ready-to-drink category, such as premade cocktails.

For the full year 2026, ended June, the company reported that pre-tax profit fell by 26 percent to USD 2.6 billion, including USD 900 million one-off charges related to Mr Lewis’s restructuring of the business and a USD 1.5 billion hit from its Turkish business. Without the one-off impact and other charges such as debt interest, operating profit would have been slightly ahead of analysts’ forecasts at USD 5.7 billion.

Group sales were down by 2 percent to USD 19.6 billion amid continued weakness in China and the United States. Mr Lewis said he expects the North American business, Diageo’s largest region by revenue, to take two years to return to growth.