Shares in Diageo surged after it hired the former boss of Tesco to revive its fortunes.
Dave Lewis – whose reputation for cost-cutting has earned him the nickname ‘Drastic Dave’ – will take over as chief executive of the struggling drinks giant at the start of next year.
The appointment sent shares up 5.2 per cent, or 90p, to 1816.5p as investors backed him to emulate his success at Tesco and turn the Guinness and Smirnoff maker around.
Jefferies analyst Ed Mundy hailed the arrival of ‘a heavyweight leader’ while Richard Hunter, of Interactive Investor, described it as ‘a potential inflection point’ for Diageo.
The FTSE 100 giant, whose brands also include Captain Morgan and Johnnie Walker, has struggled since the death of former boss Ivan Menezes in 2023 amid weak demand and sluggish sales.
His successor, Debra Crew, lasted just two years before leaving abruptly in the summer, and shares crashed to a ten-year low last week following a bleak trading update under interim boss Nik Jhangiani.
Sir Dave Lewis spent almost three decades at Unilever before taking over at Tesco
Analysts believe the slump in value – to below £40billion last week from a peak of £90billion at the end of 2021 – has left it vulnerable to predators looking to snap it up on the cheap.
It also underlines the scale of the task facing Lewis, who is credited with turning Tesco around during his six years as chief executive from 2014 to 2020 and will be paid £1.5million a year plus bonuses at Diageo.
He previously spent nearly three decades at Ben & Jerry’s and Marmite firm Unilever and, since leaving Tesco, has held a string of non-executive jobs.
Dan Coatsworth, head of markets at AJ Bell, said convincing him to return to being a chief executive ‘will have been a challenge’, adding: ‘The salary is certainly tasty, but Lewis is more likely to have been driven by the size of the task – pull off a second business recovery of this scale and he’ll become a legend in the business world.
‘Diageo has pulled a blinder by hiring the man who saved Tesco. Dave Lewis is ‘Mr Fix-it’ as far as the market is concerned. This is a significant hire and a pleasant surprise. The share price jump says it all.’
Lewis, 60, will stand down as chairman of consumer healthcare giant Haleon to take up the role at Diageo, while Jhangiani will resume his job as finance chief.
Lewis was dubbed ‘Drastic Dave’ at Unilever due to his ability to make bold decisions. At Tesco, he lived up to his reputation by cutting jobs, closing underperforming stores and selling off areas of the business.
Speculation is mounting over what he will do at Diageo. The Mail on Sunday this weekend revealed the company is braced for an activist investor to climb aboard and push for the sale of the Guinness business – worth as much as £14billion.
‘Investors will be keen to know if Lewis will split the company into two: beer and spirits,’ said Coatsworth. ‘There is a lot of talk about Guinness potentially being sold, but that’s not a decision that will be taken lightly.’
Diageo chairman Sir John Manzoni said Lewis ‘has the extensive CEO experience and the proven leadership skills in building and marketing world-leading brands that is right for Diageo at this time’.
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