Diageo is to cut $1bn in costs over the next three years, as new CEO Dave Lewis revealed plans to overhaul the company after several years of underwhelming sales.

The drinks giant behind brands including Guinness, Smirnoff and Johnnie Walker said it would invest $1.2bn in redesigning its operating framework and supply chain model to deliver the savings, likely to result in thousands of job losses. Around 90% of markets will have the new operating model in place by September.

“These savings are significant. They’re very important as we chart the turnaround of Diageo,” Lewis said. “They will allow us to invest in innovation selectively where we need to improve our competitiveness, but they also allow us to do so without needing to reduce operating profit.”

The announcement comes after Diageo recorded a 2% decline in organic sales, to $19.6bn, in the year ended 30 June 2026, slightly ahead of the 2.1% decline forecast by analysts. Operating profits before exceptional items, meanwhile, climbed by 2% organically to $5.6bn, thanks to cost savings from Diageo’s previous cost savings programme Accelerate.

“Fiscal 26 has been a mixed year with good momentum in Europe, Latin America and Africa but with the challenges in North America and Asia Pacific that we’ve talked about through the year,” said Diageo CFO Nik Jhangiani.

In North America, Diageo’s sales fell by a hefty 8.4% organically, driven by a 21% decline in tequila sales. Europe, however, saw sales climb 3%, thanks to double-digit growth for Guinness in Great Britain.

The full-year results also included $2.4bn in exceptional operating charges. Some $1.5bn in impairment charges related to hyperinflation in Turkey and writedowns to the Don Papa brand, while a further $900m in restructuring costs from Accelerate were also recorded. Taking these into account, Diageo’s operating profits fell 27% to $3.2bn. 

Accelerate had delivered $540m in cost savings for Diageo in FY26, Jhangiani revealed.

Savings had mostly come from “a focus on driving efficiency and effectiveness from A&P investment, supply and overheads”, he said, adding Accelerate would now be closed off and replaced by the new two-year restructuring programme.

Severance costs relating to FY26 totalled $514m, Diageo said. Meanwhile, some Diageo teams are cutting around 20% to 30% of their staff, according to a recent report by Reuters.

Speaking to media following the publication of FY26 results, however, Lewis declined to put a figure on job losses.

”I don’t want to talk about a number,” he said. “I don’t think that’s the right way for me to be talking about colleagues who are impacted by this change. In Europe we’re still in consultation, so it would be inappropriate [and] I don’t even have that final number.”

The former Tesco boss revealed the brunt of reductions would come from back office functions, rather than frontline teams in market, however. 

“The change that is happening in Diageo is around that simplification and standardisation of back office processes,” he said. “So in our corporate functions, how do we get ourselves to what you would recognise in other global fmcg businesses as central global business services that truly support the businesses?

“If people are concerned that I’m going to be taking people out of markets, that’s not where the big changes are…at the minute I’ve got massive duplication in each country, each region, and then globally across a whole bunch of processes. So that’s where it comes out.”

Elsewhere, overinvestment by Diageo in its supply chain between FY22 and FY25 was now being “right-sized”, with some distillery assets facing production shut-downs and even closure, Lewis revealed.

“We, and the industry, invested in greater capacity,” he said. “Diageo had a growth algorithm at that point of 5%-7% [annual organic net sales growth]. That growth has not come. 

“We’re now in the supply chain having to right-size that capacity against the new market reality.”

Looking forward, Diageo said it expected to report flat organic net sales growth in FY27, with North America organic net sales down by mid-single digits. Organic operating profit growth, meanwhile, would increase by low to mid-single digits.

Between fiscal 27 and 29, organic sales growth would increase by low-single digits, with organic operating profit growing by mid-single digits, it added. 

Diageo shares were up 6% in lunchtime trading on Thursday (6 August).