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Diageo makes biggest saving through staff cuts
Despite seeing a £1.1 billion decline in sales in 2013/14, Diageo made its biggest savings through redundancies and other reduced staffing costs.
In its latest financial results, Diageo has said that its most significant savings have come from staff cuts
Deirdre Mahlan, chief financial officer (CFO) for the UK drinks group, said that the Diageo had progressed with its aim to “de-layer” its business and cut costs by £200 million a year until 2017.
The move comes after Diageo revealed its financial difficulties in the emerging markets in January this year, particularly in China as a result of the country’s anti-extravagance measures.
As such, the group announced this week that China’s slowing market had “severely impacted” its 2013/14 financial results, which saw a net sales decline of £1.1 billion. In particular, Diageo’s Shui Jing Fang baijiu brand experienced a massive 78% decline in the country.
In order to offset widespread declines, Diageo endeavoured to streamline its business, resulting in a undisclosed number of staff redundancies.
“The biggest savings made were in staff costs,” said Mahlan. “Delayering reduced the headcount but teams also looked at the way things were done, which meant not all vacancies had to be filled.”
Diageo also cut its staffing costs by reducing travel expenditure, installing a new video conference facility as an alternative to face-to-face meetings.
“We have always been good at identifying opportunities to reduce costs through structural changes but it’s in the day-to-day spending decisions that we want to get tighter and this year we did get better,” said Mahlan.
She added that of the £200m total savings, she expects Diageo will achieve £110m in the fiscal year 2015, while about £30m of this will be reinvested in the business.
In 2014/15, Diageo will aim to save about £15m to £20m in each of its regions, mainly through reducing staff and corporate costs.
At a press meeting in London yesterday, Ivan Menezes, CEO of Diageo, said that while Diageo does not disclose specific job loss numbers, the company is “adding a lot of jobs” and that re-allocations are taking place in Western Europe.