DRINKS giant Diageo has unveiled plans to restructure its global supply operations in a shake-up that is expected to lead to job losses among its 4,000 employees in Scotland.
The maker of Johnnie Walker whisky and Smirnoff vodka said the overhaul, which is aimed at giving local management more responsibility in balancing supply and demand, is designed to save £60 million a year.
Diageo, headed by chief executive Paul Walsh, said the move will lead to one-off costs of about £100m as responsibility for local operations transfers to the group’s 21 “key” markets, and regional supply structures are reduced.
While a spokesman acknowledged that some jobs could be at risk as a result of the review, he said it was too early to tell what the impact will be.
He added: “Further work will be required to establish the exact nature of the reorganisation but there is likely to be some impact on employees.
“Therefore, as decisions are made, these will be shared with our employees and their representatives first and foremost.”
Unite’s national officer for the drinks industry, Jennie Formby, said the union noted yesterday’s announcement with “some trepidation” as it follows Diageo’s decision in 2009 to close its Johnnie Walker bottling works in Kilmarnock and the Port Dundas distillery in Glasgow with the loss of about 850 jobs.
She said: “Workers and communities are still smarting from the brutal decision to close those sites to cut costs. We will be looking for early assurances from management that our members won’t pay the price for this restructuring.”
Diageo said the shake-up of its supply operation, which spans the purchasing of raw materials and services through to production and distribution, follows a review of its entire operating model two years ago and is a result of its “increasing presence” in fast-growing markets across Africa, Asia, eastern Europe and Latin America.
These regions accounted for some 42 per cent of Diageo’s net sales during the first half of its financial year, pushing up demand for Scotch brands such as Buchanan’s. However, sales of J&B fell by almost a third as demand eased in France and Spain. To overcome falling sales across western Europe, the group is looking to tap into growing demand from the burgeoning middle classes in emerging economies such as India, where the alcohol sector is predicted to expand by 15 per cent annually over the next five years.
Last year, Diageo agreed to pay £1.3 billion for a majority stake in Vijay Mallya’s United Spirits, which owns Whyte & Mackay and has a 41 per cent share of the Indian market. It is also spending £23m to form a joint venture with Mallya to run United National Breweries’
traditional sorghum beer business in South Africa.
But the group surprised the market in December by pulling the plug on long-running talks to acquire Jose Cuervo, the world’s best-selling tequila, worth an estimated $3bn (£2bn).
It has since unveiled plans to develop its own tequila brand using a similar strategy to Ciroc, the premium vodka launched by the company in 2003 that enjoyed growth of 62 per cent last year.
The group did not give any timescales for the completion of its supply chain overhaul, which is expected to see some layers of management removed across its global operations.
It said: “An initial review has already established that efficiency-driven cost savings can be delivered which, together with savings from footprint changes and cost reductions in respect of the regional supply organisations, are expected to amount to approximately £60m per annum.”