Diageo India reports 51.6% profit increase in Q1

Reuters reports India’s food regulator FSSAI warned Diageo’s unit United Spirits that its Royal Challenge whisky label claiming “matured in American oak casks” was misleading, saying most of the product was not matured. FSSAI also banned some Diageo and Inbrew brands for artificial flavouring. Diageo said it is engaging FSSAI and expects no financial impact.

India’s FSSAI banned Diageo’s Royal Challenge whiskies and rum brands over concerns about artificial flavoring. Reuters reviewed Royal Challenge labels showing “nature identical” flavoring substances. Diageo said Royal Challenge sells over 4.5 million nine-liter cases annually. A 375ml bottle reportedly costs about 360 rupees ($3.78) in Uttar Pradesh.

Diageo, maker of Guinness, Don Julio, and Smirnoff, reported annual net profit down 26% to $1.74B for the year to June 30. It cited a $1.5B impairment tied largely to Turkey hyperinflation and write-downs including Don Papa. Total sales fell to $27.76B. The company plans $1B cost cuts over three years; shares rose about 7% in London.

Diageo’s CEO Dave Lewis outlined a $1 billion cost-cutting plan over three years, targeting weak growth and reallocating savings to investment and growth initiatives, including price reductions on some brands and expansion in areas like Guinness and canned cocktails. Diageo shares rose up to 11% and closed 5.6% higher. The plan is expected to save $1B but cost $1.2B, with 70% of costs already incurred; net revenues were $19.64B.

Diageo, maker of Guinness and Smirnoff, said it will cut costs to save $1 billion over three years under CEO Dave Lewis after weaker sales and profits. For the year to June, net sales fell 3% to $19.6 billion, with North America down 9.1%. Restructuring may affect up to 150 Irish jobs and includes $1.2 billion restructuring costs.

Diageo, the London drinks group, said CEO Dave Lewis will nearly double Guinness production and cut jobs across its roughly 30,000-strong workforce, though he did not specify the number. In its full-year results, Diageo reported net sales down 3% to US$19.64B and organic operating profit up 2% to US$5.68B. The shares rose 8.7% after the update.