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Diageo Embarks On Restructuring, Eyeing Cost Cuts, Faster Growth

May 25, 2011

Diageo ceo Paul Walsh has initiated a review of the drinks giant’s operating model across its global business, intending to “focus on growth and create a more cost effective organization.” While few specific changes have been unveiled, Walsh did reveal that two longtime Diageo executives, Stuart Fletcher, president of Diageo International, and Ron Anderson, chief commercial officer, will be leaving the company.

Diageo’s International division, led by Fletcher in recent years and encompassing its Latin America & Caribbean, Africa and Global Travel Retail & Middle East (GTME) units, is being broken up. On July 1st the Latin America & Caribbean and Africa units will begin functioning autonomously (Diageo didn’t immediately respond to a question on plans for GTME). Walsh said the change reflected “the regional variation in the pace of economic growth,” and the company’s intention “to ensure that all our resources are deployed closer to the market and in those areas where potential for growth is greatest.” The International unit has performed well for Diageo of late, with organic net sales rising 14% in the nine months through March.

Also among the changes will be the embedding of Diageo’s central sales and commercial organizations—recently led by Anderson—into its market companies. Fletcher and Anderson will stay on through the transition, expected to be completed midway through its fiscal 2012, which ends June 30 of next year.

Today’s announcement follows word yesterday that Diageo had begun an employee consultation process on “significant changes which are proposed to our organization in Europe.” Except for a revamp of its Ireland business, including some job cuts, those changes remain unspecified. Walsh said he expected to make an announcement as to the full extent of Diageo’s global operational overhaul in August.

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