Supply Chain Review to Save Diageo 60 Million Pounds Annually

LONDON -- Diageo  (LSE: DGE  )   (NYSE: DEO  )  is set to reorganize its supply chain operations as "a consequence of [its] increasing presence in new faster growth markets," which it hopes will lead to savings of 60 million pounds every year. 

The world's biggest distiller is looking to reduce regional structures and focus on a country level, while responsibility for local operations will be transferred to 21 of the company's key markets. Footprint changes and "cost reductions in respect of the regional supply organisation" will lead the savings.

The news follows Diageo's changes to the reporting for geographic segments back in Nov. 2012, with results for the year ending June 30, 2013 set to break down into North America; Western Europe; Africa, Eastern Europe, and Turkey; Latin America and Caribbean; Asia-Pacific; and Corporate.

The review of Diageo's supply and procurement operation, which is hoped to be completed within three years, will initially cost around 100 million pounds but will reap rewards in the long term.

A spokesman for the spirits group commented:

With the emerging markets getting bigger and acquiring companies with big local footprints, including their own supply basis, it makes sense to be operated where the demand side is.

Today's announcement was met with a positive reaction by the market, with Diageo's shares lifting 14 pence to reach 2,008 pence in early trade -- increasing more than 2.5-fold in the last five years from a low of 733 pence in 2009. 

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