Diageo restructures to focus on emerging markets

May 25, 2011 - 8:45 AM

LONDON (AP) — Diageo PLC, the world's largest spirits maker, unveiled plans on Wednesday to restructure its international business to focus on fast growing emerging markets and flagged potential job losses in Europe.

Diageo, whose brands include Johnnie Walker whisky, Smirnoff vodka and Guinness stout, said it will launch two new divisions — Latin America and the Caribbean, and Africa — on July 1.

That breaks up the company's current "International" business. Its North America, Asia Pacific and Europe units remain.

"The regional variation in the pace of economic growth has created significant change and new opportunities for Diageo as a global business," said Chief Executive Officer Paul Walsh. "In order to capture these opportunities Diageo has begun a review of our operating model across the business to ensure that all our resources are deployed closer to the market and in those areas where the potential for growth is greatest."

Walsh added that the company had begun an "employee consultation process on significant changes" to the Europe division, signalling likely job losses.

The company earlier this month reported that sales rose 5 percent in the first nine months of the year, more than analysts expected, as growth in emerging markets, particularly Asia, offset a drop in Europe.

Sales were down 3 percent in Europe but up 3 percent in North America, 9 percent in Asia and the Pacific and 14 percent in all other markets.

The brunt of the job cuts is expected to be borne by countries that have underperformed in recent years, including Spain and Ireland, where U.S. President Barack Obama enjoyed a pint of Guinness just a few days ago.

Diageo Ireland Managing Director John Kennedy said Tuesday that changes were "absolutely essential to ensure that Diageo has a competitive and sustainable business in the country.

"Diageo is fully committed to Ireland, and has very significant operations here that are an essential element of our company's operations globally," he said. "However we do need to make changes and deliver greater efficiencies in some of the support functions of the business."

Support functions and marketing at the the company's flagship St. James' Gate brewing plant in the center of Dublin are expected to take a hit.

Diageo said Wednesday that two senior executives would leave the company as a result of the shakeup.

Stuart Fletcher, the president of the soon to be defunct Diageo International, and Chief Customer Officer Ron Anderson will both depart when the transition process is completed, which the company expects to happen in the middle of next year.