Diageo books $752M of $1.2B in restructuring costs
David Lewis, the executive now leading beverage maker Diageo, unveiled a plan this week to save $1 billion over the next few years through a restructuring that includes job cuts. Lewis declined to reveal how many jobs Diageo has cut and will ultimately lose, according to The Wall Street Journal.
The company said it has already booked $752 million out of the $1.2 billion in planned restructuring costs for its fiscal year that ended in June, while last year’s expenses included severance costs of more than $500 million.
Lewis told investors the savings would be reinvested. “The intention is that we are going to invest that back into advancing some innovation, selectively improving our competitiveness and, indeed, protecting…underlying profitability,” he said.
The move draws on a leadership playbook Lewis developed over a career that includes nearly three decades at Unilever, where he earned the nickname “Drastic Dave” for his decisive moves. He used the same approach to pull British retailer Tesco out of a serious slump.
In a 2017 speech, Lewis described “four very simple lessons” for turning around or changing a company. The first was practicing “brutal objectivity,” which he called “the easiest to say and the hardest to do.” He said “a business that finds itself in trouble finds it very difficult to objectively face into the fact of why it’s in that position.”
Second, he said, is crafting a competitive strategy by identifying a maximum of three “differentiating competencies in your business.” He posed the question: “What do you have to be better than anybody else at in order to drive that change and drive that turnaround?”
Third was developing followership. “Everybody talks about leadership…but actually the most important thing is followership,” Lewis said. One way to build it, he said in a 2021 podcast, is a relatable purpose. At Tesco, that was “to serve Britain’s shoppers a little better each day,” which he said 96% of people across the company understood, felt motivated by, and saw the role they played in supporting.
Fourth was making improvements last. “It’s always possible to improve a business for a very short amount of time,” he said in the speech. “The crucial thing is do they stay successful afterwards?”
Many of those rules surfaced in the latest announcement. On objective assessment of Diageo’s position, Lewis said: “It’s fair to say our North American business has been underperforming for quite a while. The growth of tequila covered up some of that. We now need to face into some of the realities.”
The company also adopted a new purpose statement: “Crafting iconic drinks chosen for life’s moments.” “The purpose and the way we set the magnetic north of the organization is massively important to me,” said Lewis, who dedicated much of the day to strategic changes.
Investors welcomed “Drastic Dave’s” plans, with Diageo shares rising nearly 5%.