Diageo

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Alcohol badge.jpg This article is part of the SpinWatch public health oriented Alcohol Portal project.
"Great people, great brands, holistic performance. That is Diageo."
"Every day, everywhere, people enjoy our brands. Together we celebrate life responsibly."[1]

Diageo is a British multinational alcohol company and one of the biggest alcohol companies in the world. It sells alcohol in 180 countries, with a substantial presence in 30 countries.[2]

Contents

Clean, friendly and ethical image

The company was created in 1997 by the merger of Guinness PLC with Grand Metropolitan PLC (GrandMet). At that stage it was a large multinational with interests in food as well as drink. Today, the company has shed most of its food interests to concentrate on alcohol, acquiring new spirit brands. It projects an image of itself as a clean, friendly and ethically-oriented company with a commitment to "corporate social responsibility" (CSR)[3]. This includes both a professed concern with the harm alcohol can cause, and statements about what a great service the company is providing by producing such well-loved brands. As a result, the company manages to gloss over a number of issues for which it has received criticism, such as:

  • undermining small-scale and independent alcohol production, both in the UK and in East Africa (see Diageo: Corporate Crimes)
  • assisting a shift towards casualisation of employment terms (see: Diageo: Corporate Crimes)
  • specific instances of environmental damage and irresponsible marketing (see Diageo: Corporate Crimes)
  • Diageo's 'ethical' image has also allowed it a significant and increasing role in formulating government policy, both individually and through various alcohol industry bodies. Diageo's networks of links with policy-makers should be especially highlighted (see Diageo: Influence)
  • Diageo promotes the idea that the major problem of alcohol harm is anti-social behaviour caused by binge-drinking. Many health experts dispute the industry assumption about alcohol harm, suggesting that liver failure caused by sustained drinking, account for the majority of people treated in Accident and Emergency for problems caused by alcohol (see Diageo: Influence) [4].
Diageo HQ, First Central Business Park, Park Royal, London

Market share and ownership

In September 2004, Diageo was the 11th largest publicly quoted company in the UK in terms of market capitalisation [5]. Diageo Plc is incorporated as a public limited company in England and Wales. It is listed on the London Stock Exchange, as DGE, and on the New York Stock Exchange, as DEO. The company's turnover was £8.89 bn in 2004, with a total profit of £1.87 bn after exceptional items and tax [6]. It is the largest spirits company in the world, with many of the leading spirits brands (see section on Products and Projects in this profile). As well as spirits, it is the manufacturer of Guinness, and has a 79% share of the stout sector in Europe.

  • Number of employees

Various figures are available as to the number of Diageo's employees. These all suggest a reduction in number in the early 2000s, in part due to the company selling many of its non-alcohol divisions. YahooBiz suggests 38,955 employees in June 2003 (down from 62,124 in June 2002) [7]. Diageo's own website suggests 32,392 for 2004 [8] while elsewhere its 'Corporate Responsibility Report' suggests 23,720 in 2004 (as opposed to 24,561 in 2003) [9]. Whichever figure is accurate, they are employed in numerous small operations across the 180 countries Diageo works in.

  • Shareholder

Capital Group Companies, Inc. are the only major shareholders, with 123 million ordinary shares (4.01% of the issued ordinary share capital) and no different voting rights. No other major shareholders are listed in Diageo’s Annual Report. According to its Annual Review, Diageo has a total shareholder return (the change in capital value over a period of time of a listed company) of 39%, which makes it rank 6th amongst its competitors [10]

  • Annual turnover

Turnover in 2004 was £8.89 bn, with total profit £1.87 bn after exceptional items and tax. Operating profit before exceptional items and was £1.91 bn in 2004, down from £1.96 bn in 2003 [11].

  • Subsidiaries

Diageo has 296 listed subsidiaries, many of which have 'Diageo' in their name, including:

  • Gleneagles Hotels Ltd (Venue for 2005 G8 summit)[12]
  • Haagendazs is a large American company producing ice cream. Some of their products have been investigated for GM products (see 'Corporate Crimes' section)[13].

History

Diageo PLC was formed with the merger of Guinness PLC, its primary parent company, with Grand Metropolitan PLC (GrandMet), a hotel chain with brewing interests, in 1997. Guinness had already absorbed a number of other companies, including Distillers PLC [14]. Diageo's parent companies were involved in a number of controversial and high-profile scandals in the second half of the twentieth century, tarnishing their reputations and perhaps providing an impetus to the re-naming and re-imaging the company underwent when the merger took place. In 1958 Distillers PLC marketed and distributed the drug thalidomide as a treatment for morning sickness, which was found to produce severe deformities in babies [15]. In the 1986 'Guinness Affair,' four people including Guinness' former Chief Executive Ernest Saunders were convicted for illegally boosting share prices in a takeover bid [16]. (See Diageo: Corporate Crimes section of this profile for a more detailed account of these incidents)

Perhaps as a result of these incidents, the merger of 1997 brought about a re-branding and re-imaging of the company. The neutral-sounding and fairly meaningless name ‘Diageo PLC’ was chosen. Diageo explains this name as follows: 'the name "Diageo" combines the Latin word for "day" and the Greek word for "earth". Together, the two words mean celebrating life every day, everywhere.’ [17]. This is captured in another of its catchphrases, 'every day, everywhere, people are enjoying our brands.' [18].

Again in 2000 restructuring was evident. Paul Walsh become Chief Executive Officer as part of a strategic re-alignment of its business, also James Blyth aka Lord Blyth of Rowington succeeded Sir Anthony Greener as Chairman.[19].

Current strategy

Their current strategy is to grow strong brands, trademark brands to ensure maximum returns and dominate market share, and continuing to invest in emerging and developing markets while maing selective take overs [20]. The company indeed has had much to celebrate in recent years:

  • It has become a world leader in spirits production;
  • It has transformed its image through a huge PR campaign since 1997 and today is viewed as a clean and ethical company, and an enthusiastic proponent of corporate social responsibility (CSR) (see Diageo: Influence section for more on this);
  • Quite possibly assisted by this PR programme, Diageo has also been successful in building a good relationship with the British government. An ethos of corporate responsibility and self-regulation, and a professed commitment to fighting the harm caused by alcohol, has allowed them, together with other companies and industry-wide organisations, to evade regulation and to be involved in government policy, which has in turn been shaped around the alcohol industry's perception of alcohol and alcohol harm (alcohol as something that helps 'celebrating life every day, everywhere.’) [21]
  • In January 2009 Diageo enlisted the support of Lewis Hamilton the English Formula One racing star to help its campaign against the Scottish Government's efforts to limit alcohol relatd harm. Rachael Robertson, head of government affairs at Diageo, said ""Lewis Hamilton is a big role model. We can use the skills we employ to sell our product to push the message of responsible drinking, to change attitudes towards alcohol and its misuse." [22]

Connections: industry, government and beyond

Diageo's close ties with government, and strong interests in lobbying it, help make sense of its involvement in the G8 summit of July 2005, which took place at Gleneagles, a hotel in Perthshire in Scotland owned by Diageo. Diageo played a prominent role in the 2005 G8 Gleneagles Summit. Not only does it own the Gleneagles Hotel where the Summit took place, it has made its presence felt in determining the policies of the G8. As one of Africa's largest corporations, the company was part of the Business Contact Group of the Commission for Africa, which has essentially recommended a further opening up of markets in Africa to foreign investment (See Corporate Watch report, 'Bringing the G8 Home: Corporate Involvement in and around the G8 in Scotland 2005). Diageo representatives participate in a wide range of governmental activities including membership on a number of groups and committees including:

Policy Groups & Relationships with Policy Makers

Industry Groups

Other SAOs which Diageo is a member of around the world include:

These SAOs all share with Diageo a platform that the harm alcohol causes coexists with its benefits, and that in moderation, alcohol can be good for you. This approach is shaped by the interests of the industry, despite claims to independence.

Revolving door

  • Lord Davies of Abersoch, former Minister for Trade Promotion and Investment Department for Business, Innovation and Skills until May 2010 took up the role of non-executive director of Diageo in July 2010. The UK government's Advisory Committee on Business Appointments saw "no reason why he should not take up the appointment subject to a waiting period of 3 months from his last day in office, on the basis that he would not draw on any privileged information which was available to him as a Minister, and the condition that, for 2 years after leaving office he should not become personally involved in lobbying UK Government Ministers or Crown servants, including Special Advisers, on behalf of the firm." [26]

External lobbying help

Diageo hired lobbying firm Hanover Communications in September 2007 as its retained UK public affairs agency, switching from Reputation Inc. The move came as the Government stepped up its efforts to curb binge-drinking. Diageo was thought to be paying Hanover at least £100,000 a year. Hanover MD Charles Lewington said at the time: ‘We will be helping Diageo to raise awareness of its ­responsible-drinking ­activities in government. We will also be ­advising on ­ongoing ­discussions with ­officials about the best way of ­promoting responsible ­consumption.’[27]

In July 2010 PRWeek reported that Diageo GB 'signed over its public affairs and responsible drinking campaigns to Edelman as it prepares to go to battle with the Government over changes to alcohol tax'. This was against the backdrop of David Cameron's planned reform of the Licensing Act along with a ban on below-cost selling and a policy decision on alcohol labelling.

The firm - one of the biggest funders of responsible drinking campaigns in the UK - and high-profile CEO Paul Walsh have in the past come out forcefully against minimum alcohol pricing and steep alcohol tax increases, as well as questioning the link between excessive drinking and advertising.[28]

Products and projects

Diageo manages 17 of the world’s top 100 premium spirits brands. Recently it has dropped non-alcohol products, selling Pillsbury, a large US firm producing baked foods and snacks, to General Mills in 2001, and selling Burger King, the fast food giant, in 2002, which has allowed the company to escape the current outcry against fast food. Diageo has bought much of the spirits division of Seagram, previously a major spirits company, and other alcohol brands, entrenching its position as a leader in spirits. This reflects a shift to consolidation evident in the spirits sector in general [29]

Board of Directors

[30]

Executive Committee

Lobbyists

  • Tim Rycroft Was Government Affairs Director UK, currently Corporate Relations Director Global Travel & Middle East
  • Ian Wright Corporate Relations Director

Others

Former Executive Staff


Key brands

Diageo's key brands include:

  • Whisky: Bell’s (UK market leader),Johnnie Walker (global market leader in Scotch whiskey), Johnnie Walker Pure Malt, J&B (European market leader in Scotch whiskey), J&B Rare Black and White, Haig, Spey Royal, White Horse, VAT 69, Buchanan’s, Dimple, Old Parr, Windsor Premier, Seagram’s 7 Crown, Seagram’s VO, Crown Royal Canadian Whiskey. Single Malt Scotch Whiskys: Cragganmore, Glenkinchie, Oban, Distillery Malts, Hidden Malts, Cardhu.
  • Vodka: Smirnoff (40% of global market share), Ciroc, Tanqueray Sterling Vodka.
  • Gin: Gordon’s (around 50% of UK market share), Tanqueray (US market leader in imported gin), Gilbey’s Gin.
  • Rum: Captain Morgan (UK market leader in dark rum), Cacique, Brandenburg, Pampero, Myer’s Rum.
  • Brandy: Bertrams VO Brandy.
  • Liquers: Bailey’s (UK market leader in liquer), Romana Sambuca, Safari.
  • Schnapps: Archers, Rumple Minze, Goldschlager, Black Haus.
  • Tequila: Jose Cuervo (global market leader in Tequila), Don Julio.
  • Alcopops & Ready mixed drinks: Smirnoff Ice (UK alcopop market leader, sharing 50% of market together with Bacardi Breezer), Smirnoff Black Ice, Archer’s Aqua, Bailey's Glide, Ruski, UDL
  • Beer: Guinness (global stout market leader), Harp, Kilkenny, Tusker, Smithwicks, Red Stripe
  • Wine: Sterling Vineyards, Piat d’Or, Periquita Wines, Justerini & Brooks Wines, Casillero Wines, Blossom Hill Wines, José de Sousa Wines , Baron Philippe Wines, Barton & Guestier Wines, Beaulieu vineyards
  • Champagne: Dom Perignon

Diageo also has two joint ventures with Moet-Hennessey, Hennessey Cognac and Moet Chandon. Their major competitors include Allied Domecq, Pernod Ricard, and Bacardi.

Resources

References

  1. Diageo website Home Page - viewed 24.01.05
  2. Julia Finch, The Guardian 17.11.03, 'Brewing a set of Standards,' - viewed 25.01.05
  3. Diageo website, About us accessed 1 June 2008
  4. Jo Revill, The Observer, 23.01.05; 'Mid-life drinkers who booze at home risk disease,' accessed 07.02.05
  5. Diageo Website , Annual Report 2004 (p.12) accessed 24.01.05
  6. Diageo Website, - Annual Report 2004 (p.26) - viewed 24.01.05
  7. Yahoo Business Website Diageo - viewed 02.01.05
  8. Yahoo Finance Diageo - viewed 02.01.05
  9. Diageo website Diageo Pdf (p.16) - viewed 02.01.2005
  10. Diageo Annual Review 2004, - Annual Report 2004 p.5 - viewed 24.01.05
  11. Diageo Annual Report 2004, - Annual Report 2004p.26 - viewed 24.01.05
  12. FAME Database Diageo- viewed 01.12.05, subscription required, accessed 01.12.05
  13. FoodComp Home - viewed 10.10.04
  14. Diageo Website Our History accessed 1st June 2008
  15. Thalidomide UK Website Diageo - viewed 04.02.05
  16. Mike Verdin, BBC News Online 21.12.01 ‘Guinness Four fail in fight for acquittal,’ - viewed 26.11.04
  17. Diageo Careers, Who We Are - viewed 26.11.04
  18. Paul Walsh, Diageo CEO, The London Business School , 28.06.04 Summit on Global Leadership - viewed 18.01.05
  19. Diageo Website Our History accessed 1st June 2008
  20. Diageo Website Our Strategy accessed 1st June 2008
  21. Diageo Careers Who We Are - viewed 26.11.04
  22. Richard Bath and Kate Foster, Scotland on Sunday 25th January Lewis Hamilton joins drive against booze restrictions accessed 1st march 2009
  23. House of Commons Register of All Party Groups Country Groups: All-Party Parliamentary Group on Nigeria accessed 16th June 2008
  24. ALEC Website ALEC Board Members Accessed 25th August 2008
  25. Scottish Parliament, Cross-Party Groups in the Scottish Parliament- Registration Form, no date given, accessed 5th October 2011
  26. Advisory Committee on Business Appointments, Twelfth Annual Report, 2010-2011
  27. Diageo hires Hanover as alcohol concerns grow, PR Week, 20 Sept 2007
  28. Matt Cartmell, Drinks giant Diageo hands 'responsible drinking' brief to Edelman, PR Week UK, 22 July 2010, accessed 14 October 2011
  29. Keynote reports p.5 - Diageo annual review 2004 - viewed 20.01.05
  30. Diageo Website Board of Directors accessed 1st June 2008
  31. Centrica Management Accessed 26th August 2008
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