Diageo CEO Crew steps down as company pursues turnaround, cost cuts

By Pushkala Aripaka and Emma Rumney

(Reuters) -Diageo (DEO) CEO Debra Crew has stepped down after two years in the job, the world's biggest spirits maker said on Wednesday, with finance chief Nik Jhangiani taking over in the interim as the company strives to boost its performance and cut debt.

Shares in the maker of Johnnie Walker whisky and Guinness beer rose as much as 4.5% after the Financial Times first reported the news, before paring gains to trade 0.7% higher at 1309 GMT.

Diageo (DEO) said Crew, who struggled to win over investors after a bumpy start to her tenure, was leaving immediately by mutual agreement. It did not give further details but said it was maintaining its forecasts for fiscal 2025 and 2026.

The company is in the midst of a turnaround drive and in May unveiled a plan to cut $500 million in costs and make substantial asset sales by 2028.

Diageo's (DEO) woes began with falling sales, particularly in Latin America, where a stock build-up triggered a November 2023 profit warning and shook investor confidence.

Since Crew took over in June 2023, sales have continued to fall across the sector as high inflation and interest rates prompted consumers to cut spending. Diageo (DEO) has struggled to revive growth in key markets like the United States.

Crew's departure comes just months after John Manzoni took over as chairman of the board.

"CFO and Interim CEO Nik Jhangiani has to be a candidate for the permanent role, but whoever gets it, we don't think Diageo's (DEO) problems will be easily resolved," RBC Capital Markets analyst James Edward Jones said.

Jhangiani was among the most highly-respected finance chiefs in the sector, who has been regarded as potential CEO material for a while, Jones added.

Under Crew, Jhangiani joined Diageo (DEO) as chief financial officer in September.

Crew and Jhangiani did not immediately respond to requests for comment on LinkedIn.

However, in an internal memo seen by Reuters, Crew said she loved her time at the company and was grateful to its employees.

Jhangiani thanked Crew for her partnership. "I'm convinced that Diageo's (DEO) best days are ahead of us and I can't wait to get started," he wrote.

TRICKY TIMES

The company's shares lost about 44% of their value during Crew's tenure amid a sector-wide downturn.

"Debra has been unfortunate in that she took the reigns at a really tricky time," said Fred Mahon, fund manager at Diageo (DEO) investor Church House, adding new leadership could reinvigorate performance.

But he added: "We'll wait and see the results rather than conclude they've turned a corner."

Despite their losses, Diageo's (DEO) shares have been among the better performers in the European wine and spirits sector, which has struggled since the end of a pandemic-era boom when people drank more at home.

Rivals including Pernod Ricard and Remy Cointreau have also grappled with this reversal in fortunes.

Remy, maker of Remy Martin cognac, has also seen its CEO depart. Pernod, which makes Jameson whiskey and Absolut vodka, has scrapped targets and launched a restructuring plan.

The industry challenges are rooted in broader economic issues, such as inflation, said Chris Beckett, analyst at Diageo (DEO) investor Quilter Cheviot.

"Without a macro improvement in some of the key markets, I think it's a very difficult fix," he said of Diageo's (DEO) performance.

Beckett and Mahon both said Jhangiani would make a reasonable CEO appointment. However, Beckett and other analysts noted he lacked specific spirits industry experience, having joined Diageo (DEO) from the soft drinks industry.

Crew's departure is the latest leadership change in the consumer goods sector as it battles lacklustre performance, changing tastes among younger, health-conscious consumers, and fallout from U.S. tariffs and conflict in Ukraine and the Middle East. Nestle ousted its CEO last August, Unilever replaced its top executive in February, and on Monday Band-Aid and Tylenol maker Kenvue fired its CEO.

Crew was previously Diageo's (DEO) chief operating officer and took over the top job after Ivan Menezes' death in June 2023 following a brief illness. She was one of only a handful of women to lead a blue-chip UK company.

(Reporting by Pushkala Aripaka and Yadarisa Shabong in Bengaluru, and Emma Rumney and Josephine Mason in London. Editing by Mrigank Dhaniwala, Louise Heavens and Mark Potter)