South Korea: Diageo accepts applications for voluntary retirement amid deteriorating profitability

Diageo Korea, the purveyor of Windsor and Johnnie Walker, has recently carried out large-scale restructuring to cope with its deteriorating profitability, the U.K.-based distiller's local subsidiary said on August 1.

According to the top whisky maker in the Korean market, it accepted applications for voluntary retirement last month from its employees who have worked for the company for more than five years.

Over 30 employees including executives and branch managers reportedly applied.

This is the first time in five years that Diageo Korea has carried out such a program.

The liquor firm agreed with its union to give severance pay and additional compensation to the retirees, according to industry officials.

"We have actually reshuffled our organization every year, but it has been a long time since we accepted applications for early retirement," a Diageo Korea spokeswoman said. "The reason for the recent reform is to enhance our efficiency and revitalize the company."

Diageo Korea posted 325.7 billion won ($293 million) in sales between July 2016 and June 2017, down 4.8 percent from 342.1 billion won for the same period from 2015. It was the company's first failure to reach 350 billion won in sales since 2007.

Its operating profit also dropped to 56.8 billion won during the same period from 80.1 billion won.

The nation's whisky consumption has continued to decline over the past few years, as a growing number of Koreans tend to drink less hard liquor. The implementation of the anti-graft law has also reduced sales of high-priced alcoholic beverages.

Data compiled by the International Wines and Spirits Record (IWSR), a drinks market research institute, showed Korea consumed 1.58 million nine-litre cases of whisky last year, down from 2.86 million in 2008.

The volume is expected to drop further, following the reduction of the maximum workweek to 52 hours from 68.

Against this backdrop, Diageo Korea has come up with various countermeasures.

In February, the company appointed Robert Rhee as its new managing director.

In addition, the company closed the Johnnie Walker House Seoul in June. It was an exclusive members-only club in southeastern Seoul, which had promoted the brand over the past five years.

It also moved its head office from Gangnam, an affluent district in southeastern Seoul where much of Korea's whisky consumption occurs, to Yeouido, July 2, apparently to save on office rental costs.

Diageo Korea, however, said it relocated its head office to improve efficiency and its working environment to cope with changing trends.

"We had the previous office for more than 15 years," its spokeswoman said. "Most of our employees are satisfied with the new Yeouido office."

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