Interesting story and video on BBCBusiness website this week. Diageo, the global drinks company, is planning to cut its costs by £200 million by 2017. This is in response to a slow down in demand and hence a weakening of its profits. In particular, demand in China fell by 66% due to a policy change by the Chinese government. In an effort to reduce corruption, new rules over spending and gift-giving to government officials were introduced. Up to this point, high priced bottles of spirit, especially Scotch whiskey, were commonly given to officials as part of the political culture.
Whilst this neatly illustrates the effect one simple decision or event can play in changing how a business operates, it’s slightly frustrating that the story does not explain how Diageo will achieve these cost savings. So I thought I would check out Diageo’s website, since the BBC interview as due to the company releasing its interim financial results for the previous six months. But in their 2015 Interim Results Factsheet there is no mention of this cost cutting plan…. Curious.