Key facts
- Sir Dave Lewis, nicknamed 'Drastic Dave', is set to reveal a strategy review for Diageo.
- The review is expected to include significant job cuts.
- Lewis took over as CEO on January 1, following a period of challenges for the company.
- He previously halved the group's dividend to shore up the balance sheet.
- The company faces headwinds from a competitive US market and slowing sales in China.
- Lewis is also considering price cuts and smaller pack sizes to address consumer trading down.
Sir Dave Lewis, the new chief executive of Diageo, is expected to implement significant changes at the FTSE 100 drinks company, potentially including substantial job cuts, when he unveils a strategy review on Thursday. Lewis, who earned the nickname 'Drastic Dave' for his assertive management style at Tesco, has maintained a relatively low profile since taking the helm on January 1, focusing on understanding the business before enacting major reforms.
Diageo has faced a challenging period marked by waning demand and operational missteps. Lewis's predecessor, Debra Crew, departed after just two years, and the company incurred a $200 million loss from US tariffs shortly before Lewis's arrival. In February, Lewis took a cautious approach, halving the group's dividend to strengthen its balance sheet, but signaled that more drastic measures could follow.
Lewis has been visiting Diageo's global operations, emphasizing the need for a firm understanding of the business. The company's recent half-year results were affected by a cautious consumer environment in the US and slowing sales in China. Lewis has identified adapting to changing alcohol consumption habits among younger generations and improving the company's customer service as key focus areas.
Internally, Lewis has begun restructuring Diageo, reportedly instructing executives to reduce headcount, particularly in "non-revenue-generating" teams, creating what one insider described as a "funereal atmosphere." He has also started building a new top team, recruiting former Unilever colleague Marc Woodward and Procter & Gamble executive Sujay Wasan. A significant challenge Lewis faces is the consumer trend of trading down due to economic pressures, which impacts Diageo's premiumization strategy. Lewis has suggested he may consider price adjustments and smaller pack sizes to appeal to budget-conscious consumers.
Despite these challenges, there are positive signs for Diageo. Guinness has achieved strong market share gains, and the company's share price has recently shown a year-to-date gain. The upcoming full-year results could also benefit from the World Cup and anticipated seasonal increases in demand for its products.