Diageo PLC, the world's largest spirits maker, revealed in its annual report released on Tuesday that its average full-time workforce fell to 27,938 in the fiscal year ending this June, a reduction of nearly 2,000 employees—or more than 6%—compared with 29,860 in the prior year. The staff reductions come as part of a cost-cutting program spearheaded by new Chief Executive Officer Dave Lewis, who was knighted for his previous work. Despite the lower headcount, average employee costs rose from $2.48 billion to $2.55 billion over the same period, driven mainly by the UK government's decision to raise employer national insurance contributions and lower the threshold starting April 2025.

Lewis, nicknamed "Dave the Knife" for his aggressive cost management during his tenure at Tesco, took the helm at Diageo in January. He has pledged to slash $1 billion in costs over the next three years to reverse the group's multi-year profit slide. This initiative is expected to lead to thousands of additional job cuts, with analysts estimating the total could reach anywhere from 3,000 to 5,000 positions. Lewis has already reshuffled regional management teams and directed senior executives to implement layoffs and cost-saving measures across their respective divisions. The group's medium-term targets include low single-digit organic sales growth and mid-single-digit operating profit growth.

This restructuring unfolds against a backdrop of several years of sluggish spirits consumption. After the pandemic-era drinking boom faded, heightened health awareness and persistent inflation pushed alcohol prices higher, prompting consumers to drink less overall. The cost savings will free up capital to boost investment in mass-market brands such as Smirnoff vodka and Captain Morgan rum, a shift from the previous management's focus on premium product lines. At the same time, Diageo is aggressively expanding into the fast-growing ready-to-drink canned cocktail segment, which has gained strong traction among younger consumers.

For the fiscal year ended June 30, Diageo posted revenue of $19.6 billion, down 2% on an organic basis. Operating profit fell 27% to $3.2 billion, weighed down by $900 million in restructuring charges and a $1.5 billion impairment related to its Turkey operations.