Diageo targets US$1B in savings as North America sales decline, profit outlook weakens

IRELAND – Diageo has announced plans to deliver approximately US$1 billion in savings over the next three years as the Guinness and Johnnie Walker maker seeks to strengthen profitability amid weaker sales in key markets. 

The company said around US$850 million of the savings will come from a redesign of its operating framework, with roughly 40% expected to be realised in the upcoming financial year and the remainder in fiscal 2028. 

A further US$150 million is expected from supply chain initiatives, with about a quarter of the savings becoming effective in the new financial year and the balance delivered in subsequent years. 

The new savings target is higher than the US$625 million cost-saving plan announced a year ago. Diageo unveiled the revised target alongside its financial outlook for fiscal 2027, forecasting broadly flat organic net sales growth. 

The company expects organic net sales in North America to decline by a mid-single-digit percentage, assuming the market contracts by around 3%, while targeting improved share performance compared with fiscal 2026. 

Diageo is forecasting low- to mid-single-digit growth in organic operating profit for fiscal 2027, including the benefits of its savings initiatives. Over the medium term, it expects low-single-digit organic net sales growth, accelerating as it stabilises and grows its North American market share. 

The company also expects medium-term organic operating profit to increase at a mid-single-digit rate, “reflecting the benefit of savings and more favourable mix over the period”. 

For the year ended June 30, Diageo reported a 3% decline in reported net sales to US$19.64 billion, while organic net sales fell 2%. Operating profit declined 27.2% to US$3.16 billion, although adjusted operating profit increased 2%, supported by cost savings that were partly offset by adverse mix and tariffs. 

North American organic net sales declined 8.4% to US$7.5 billion, with volumes falling 6.7%. In Asia Pacific, organic net sales decreased 6.3% to US$3.33 billion, while volumes declined 2.4%. 

Diageo said weaker US spirits sales were only partly offset by growth in Diageo Beer Company USA. In Asia Pacific, lower Chinese white spirits sales were partly offset by growth in India. 

The company also recorded US$1.5 billion in impairments, including approximately US$786 million related to its Türkiye operations. It said the charge was largely due to hyperinflationary accounting on carrying values combined with lower forecast growth assumptions. 

Diageo also recorded a US$287 million impairment linked to Don Papa rum and US$908 million in restructuring charges.  

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