Leading global excellence in procurement and supply

1

CIPS Member Event 27 March 2014 Diageo, Edinburgh

Leading global excellence in procurement and supply

2

Introductions and Agenda Moira Glencross MCIPS East of Scotland Branch Committee

Leading global excellence in procurement and supply

3

East of Scotland Branch Committee Martin Murray - Shin-Etsu Handotai Europe Ltd [Chair] Susan Gallacher - Shin-Etsu Handotai Europe Ltd Moira Glencross – Oracle Scotland Ltd Chris Mowbray – Scottish Government Jennifer Holden – Royal Bank of Scotland

Introductions

Leading global excellence in procurement and supply

4

Phil Spencer MCIPS - Global Process Owner Diageo plc Angus Duncan - Head of Procurement – ISC Diageo plc

Leading global excellence in procurement and supply

5

17.45 - Registration and refreshments 18.15 - Phil Spencer MCIPS, Global Process Owner, Diageo plc 18.30 - Angus Duncan, Head of Procurement - ISC, Diageo plc 19.15 - Drinks / Networking - a finger buffet will be provided 20.30 - Event close

Agenda

Welcome!!

Angus Duncan – Head of Procurement International Supply Centre

Agenda

• Diageo overview

• The International Supply Centre

• Procurement insights – Size / scale / benchmarks – Key focus areas

• Capital expenditure programme

– Procurement learning’s

The world’s leading premium drinks company

Source: Impact Databank Top 100 premium spirits by value, March 2013.

Diageo

Other

Bacardi Brown Forman Beam

Pernod

• #1 Spirits company in North America

• #1 International spirits company in Asia Pacific and Latin America

• The largest premium drinks company in Europe

• A leading beer and spirits company in Africa

• 13 strategic brands reflecting our category approach

Number of brands in Top 100 premium spirits

Diageo’s Brands

Category breadth to deliver on consumer trends in all regions

Six months ended 31 December 2013. Corporate represents 1% of total Diageo net sales.

0%

20%

40%

60%

80%

100%

North America Western Europe Africa, EasternEurope and

Turkey

Latin America &Caribbean

Asia Pacific

OtherRTDsWineBeerLocal SpiritsLiqueursTequilaGinVodkaRumWhisk(e)yScotch

% of regional net sales

32 % of Diageo net sales 20 19 15 13

A track record of consistent delivery

0

3,000

6,000

9,000

12,000

0

2

4

6

8

10

03 04 05 06 07 08 09 10 11 12 13

Net sales*, £m

Net sales organic growth, %

0

500

1,000

1,500

2,000

2,500

3,000

3,500

0

2

4

6

8

10

03 04 05 06 07 08 09 10 11 12 13

Operating profit, £m

Operating profit organic growth, %

Year ended 30 June 2013. Percentage increases are organic growth movements before exceptional items and have not been restated for accounting changes. *Net sales is after deducting excise duties. 2001-2004 as reported under UK GAAP. 2005 restated for IFRS. 2009 restated for IFRS.

Step up our executional focus

Six ʺMUST DOsʺ

Build and then constantly extend our advantage in route to consumer

Strengthen and accelerate our premium core brands

Drive out costs to invest in growth

Innovate at scale to meet new consumer needs

Win in reserve in every market

Ensure we have the talent to deliver our performance ambition

#1

#4

#5 #6

#3

#2

The International Supply Centre (ISC)

Our Business: Our Footprint

PLANNING

60 Sites

53 Lines

765m Litres Filled

Produce 11 out 13 Global Brands

Our Business: Our contribution to Diageo

50% of Diageo’s sales volume Over 50% of Diageo NSV 300m cases of future sales held within Inventory Source of all Scotch, Baileys Bushmills and Guinness GFE to Diageo Group

Over 350 innovation projects launched in markets annually

Almost 1/5 of All Diageo Talent base

http://www.google.co.uk/url?sa=i&rct=j&q=uk+and+ireland+map&source=images&cd=&cad=rja&docid=6ygbtIDCMKtB9M&tbnid=SeXK7iedrJQJAM:&ved=0CAUQjRw&url=http://www.antiquestradegazette.com/calendar/&ei=ImDUUeDiN-OK0AX48oDAAw&bvm=bv.48705608,d.d2k&psig=AFQjCNGKjEYxs8GWkb8amwAc4XrjezzV_A&ust=1372959084325984

Our Business: Scale & Complexity

700k tonnes of cereal

c2,500 suppliers

24bn drinks produced annually (40 bottles /second)

52k containers shipped (more delivery routes than British Airways)

Fixed asset cost base £1.8bn

9m casks over 40 locations

Cost base £2.4bn p.a

Over 5,500 SKUs (glass PET, cans, Kegs & pouches)

4,500 employees (and up to 1,000 temps)

http://www.google.co.uk/url?sa=i&rct=j&q=uk+and+ireland+map&source=images&cd=&cad=rja&docid=6ygbtIDCMKtB9M&tbnid=SeXK7iedrJQJAM:&ved=0CAUQjRw&url=http://www.antiquestradegazette.com/calendar/&ei=ImDUUeDiN-OK0AX48oDAAw&bvm=bv.48705608,d.d2k&psig=AFQjCNGKjEYxs8GWkb8amwAc4XrjezzV_A&ust=1372959084325984

To deliver outstanding performance, growth and best cost for our 21 markets

Delivering the Diageo performance ambition: ISC and Procurement mission

• World class performance • Exceptional service • Enable new growth opportunities

ISC Procurement – Basic Facts

• £1.5Bn spend per year – £1110M goods and services – £400M capex

• Team of 55 people supported by global category expertise for

circa 70% of spend

• Circa 2500 suppliers

Areas of Spend £M

461

352 145

125

380

Packaging

Raw Materials &IngredientsLogistics

Utilities & Energy

Capex / MRO

Basic Benchmarks

• Savings as % of spend = 4%

• Diageo downtime attributable to supplier performance

Key Strategic Initiatives • Commodity Price Risk Management (CPRM) • Supplier segmentation • Driving the luxury segment • Supplier performance management • Supporting scotch expansion

Investing In The ISC What we are Doing & Procurement Learning’s

Impact of Growth in Sales (1) More casks and filling / disgorging capacity

(2) More maturation warehouses

(3) More Malt Distilling capacity

(4) More Grain Distilling capacity

Diageo Investment in ISC

• £1.2Bn investment over 5 years

• £700M in capex

• £500M in maturing inventory

The Start of the Journey – Roseisle

Existing Distillery Expansion

Glen Elgin Dailuaine

Caol Ila

Bio Energy – Glenlossie and Dailuaine

Dailuaine

Glenlossie Glenlossie

Glenlossie

Maturation Warehousing - Midtown Blackgrange

200 litre American Barrel

250 litre Hogshead

500 litre Sherry butt

200 litre American Barrel

250 litre Hogshead

Maturation Warehousing – Cluny Bond

http://www.bing.com/maps/?cp=56.16756675777826~-3.1227748393285282&lvl=12&style=h&where1=

Cambus Cooperage Cambus Automated Cooperage

http://mike-wilkinson.photoshelter.com/gallery-image/Diageo-HRH-Cooperage/G0000AFR1lJIDtbs/I0000yW2SX2_OUb0http://mike-wilkinson.photoshelter.com/gallery-image/Diageo-HRH-Cooperage/G0000AFR1lJIDtbs/I0000yW2SX2_OUb0http://mike-wilkinson.photoshelter.com/gallery-image/Diageo-HRH-Cooperage/G0000AFR1lJIDtbs/I0000yW2SX2_OUb0

Expanding Leven

New Guinness Brewery

http://processengineering.theengineer.co.uk/attachment?storycode=1017221&attype=P&atcode=2043466

Procurement Journey - Good to Great

• Get the basics right – on time, in full

• Business partnering

• New ways of contracting

• Aggregation / Standardisation

• Drive up addressable spend

• E-Sourcing

• Strengthen SPM process

A New Way of Working

Super T The Journey Continues……….

Thank You

Questions

Slide Number 1Slide Number 2IntroductionsSlide Number 4Agenda��Welcome!!�AgendaThe world’s leading premium drinks companyDiageo’s BrandsCategory breadth to deliver on consumer trends in all regionsA track record of consistent deliveryStep up our executional focusThe International Supply Centre (ISC)Our Business: Our FootprintOur Business: Our contribution to Diageo Our Business: Scale & ComplexitySlide Number 17ISC Procurement – Basic FactsAreas of Spend £MBasic BenchmarksKey Strategic InitiativesInvesting In The ISC��What we are Doing & Procurement Learning’sImpact of Growth in Sales Diageo Investment in ISCThe Start of the Journey – RoseisleExisting Distillery Expansion Bio Energy – Glenlossie and DailuaineSlide Number 28Slide Number 29Slide Number 30Expanding LevenNew Guinness Brewery Procurement Journey - Good to Great A New Way of WorkingThe Journey Continues……….Thank You��Questions