Diageo

'Great people, great brands, holistic performance. That is Diageo.'

Name: Diageo plc www.diageo.com Industry Areas: Alcoholic drinks 1.1 Summary 'Every day, everywhere, people enjoy our brands. Together we celebrate life responsibly.'2

Diageo is a British multinational alcohol company, and one of the biggest alcohol companies in the world. 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:

1. undermining small-scale and independent alcohol production, both in the UK and in East Africa (see Corporate Crimes section of this profile);

1. assisting a shift towards casualisation of employment terms (see Corporate Crimes section of this profile);

1. Specific instances of environmental damage and irresponsible marketing (see Corporate Crimes section of this profile);

1. 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 Influence section of this profile).

1. 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 Influence section of this profile).4

Diageo is to play a prominent role in the 2005 G8 Gleneagles Summit. Not only does it own the Gleneagles Hotel where the Summit will take 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).

Back to top 1.2 Market share, importance

Diageo PLC is a British multinational alcohol company, selling alcohol in 180 countries, with a substantial presence in 30 countries.5 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.

In September 2004, Diageo was the 11th largest publicly quoted company in the UK in terms of market capitalisation.6 The company's turnover was £8.89 bn in 2004, with a total profit of £1.87 bn after exceptional items and tax.7 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).8 Diageo's own website suggests 32,392 for 2004,9 while elsewhere its 'Corporate Responsibility Report' suggests 23,720 in 2004 (as opposed to 24,561 in 2003).10 Whichever figure is accurate, they are employed in numerous small operations across the 180 countries Diageo works in.

Back to top 1.3 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.

The history of the Guinness family company is celebrated as an important part in the history of Dublin. Arthur Guinness began brewing beer in 1759. He and his family had a reputation for philanthropic activities, which included providing parks and housing for Dublin's poor in the 19th century, when governments relied on private beneficence to enable public services to exist. Diageo’s website celebrates this element of the history of Guinness and links it with its own current policy of social responsibility.11

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.12 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 (See the Corporate Crimes section of this profile for a more detailed account of these incidents).13

Back to top 1.4 Current Strategy

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.’14 This is captured in another of its catchphrases, 'every day, everywhere, people are enjoying our brands.'15

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 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.’16)

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 will take place at Gleneagles, a hotel in Perthshire in Scotland owned by Diageo.

2. 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.1

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 Scoth 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.

Pimms

Ready-to-Drinks (alcopops):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

Aperitif: Picon

Diageo also has two joint ventures with Moet-Hennessey, Hennessey Cognac and Moet Chandon.

Diageo's major competitors include Allied Domecq, Pernod Ricard, and Bacardi.

3. Who, where, how much

1. 3.1 Diageo's sites
2. 3.2Company Structure/ Ownership
3. 3.3 Company Officers
4. 3.4 Subsidiaries
5. 3.5 Auditors

Diageo is a UK-based multinational. Its principal brewing locations are in Ireland, the UK, Nigeria, Kenya, Jamaica, Malaysia and Cameroon, though it has bases and markets in 180 countries.

3.1 Diageo's sites

Diageo's Head Office: 8 Henrietta Place London W1G 0NB Web: www.diageo.com Email: Company secretary; Investor Relations

Park Royal Site: Cumberland Avenue Park Royal, London NW10 7RR 020 8965 7700

A major site for Diageo is its 'prestige office development' in Park Royal, West London, which is the head office for Diageo Great Britain, and until recently the site of brewing of Guinness for the UK, which is currently being moved to Ireland.1

Diageo Ireland: St James's Gate, Dublin 8, Republic of Ireland Tel: 01 643 5438/5683 Fax: 01 408 4814 Email: irish.register@diageo.com

Diageo Scotland ltd: Edinburgh Park 5 Lochside Way Edinburgh Lothian EH12 9DT 0131 519 2000

Diageo Great Britain: Lakeside Drive London NW10 7HQ

For a full list of Diageo's sites around the world, see the company's website: www.diageo.com/careers/index.html

Back to top 3.2 Company structure/ownership

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.

Share value

For information about Diageo’s share value see the company's Annual Review.2

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.3

Shareholders

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.

Annual turnover

Turnover in 2004 was £8.89 bn, with total profit £1.87 bn after exceptional items and tax.5 Operating profit before exceptional items and was £1.91 bn in 2004, down from £1.96 bn in 2003. 6

Back to top 3.3 Company officers7

1. Executive CommitteePaul Walsh
2. Nicholas Rose
3. Stuart Fletcher
4. Jim Grover
5. Rob Malcolm
6. Ivan Menezes
7. Andrew Morgan
8. Tim Proctor
9. Gareth Williams

1. Board of DirectorsLord Blyth of Rowington
2. Lord Hollick of Notting Hill
3. Rodney Chase
4. Maria Lilja
5. Keith Oates
6. Jonathan Symonds
7. William Shanahan
8. Todd Stitzer
9. Paul Walker

Executive Committee

Paul Walsh Chief Executive Director Diageo's CEO, Paul Walsh was listed by the Guardian as ranking 16th in the top twenty earners in Britain in 2003, with a salary of £3,457,909.8 He joined GrandMet in 1982 going on to become CEO of the Pillsbury Company in 1992. He was appointed to the Diageo Board in 1997 and became its CEO in 2000. His other appointments include Director of the Scotch Whisky Association, Non-Executive Director of Federal Express Corporation9, Non-Executive Director of Centrica PLC (amongst whose brands are British Gas and a number of other suppliers of gas, electricity and telecommunications)10, and Governor of Henley Management Centre.11 Paul Walsh on business in the UK: 'The UK's enterprise culture needs strengthening. We need those who seek to legislate, regulate, or otherwise influence opinion to see business as an inherently good thing, creating prosperity and the foundation on which the institutions of civil society can flourish. We need to change the culture of this country so that enterprise is celebrated.'12

Nicholas Rose Chief Financial Officer Nick Rose was Finance Director of UDV from 1997 and was appointed to the Diageo board in 1999. His other appointments include Non-Executive Director of Scottish Power13 and Non-Executive Director of Moet Hennessey SNC in France, which has joint ventures with Diageo.14

Other members of the Executive Committee are: Stuart Fletcher - President of Diageo International; Jim Grover - Global Business Support Director; Rob Malcolm - President of Global Marketing Sales and Innovation (who has previously held positions at Proctor and Gamble); Ivan Menezes - President of Diageo North America; Andrew Morgan - President of Diageo Europe; Tim Proctor - General Counsel (who has previously held positions with GlaxoWellcome); Gareth Williams - Human Resources Director.

Board of Directors

Lord Blyth of Rowington Chair James Blyth was appointed as a Non-Executive Director in 1999 and chair in 2000. Lord Blyth's other interests include arms sales: he ran the Defence Export Services Organisation (DESO), the UK Ministry of Defence’s arms export promotion department, from 1981 to 1985, to which he was seconded from Lucas Aerospace ltd, an arms manufacturer.15 DESO's aims are to encourage arms sales by UK companies. It is a forum for arms industry executives to enter the heart of government, through secondments, in order to help the industry sell arms with direct government support.16 In addition Lord Blyth was Non-Executive Director of British Aerospace from 1990 to 1994.17 He has also been Chief Executive of the Plessey Company, and Chair of Boots Company PLC, which he left in 2000 having been Chief Executive since 1987. He is also currently Non-Executive Director of Anixter inc.18 and Vice-Chair of Greenhill inc., a global investment banking firm. Sir Anthony Greener, Chair of Diageo until 2000, announced Lord Blyth's appointment congratulating 'his experience with government,' an 'excellent qualification for the next chair of Diageo,' pointing to the value to the company of a director with experience of working with government,19 given its priorities at that time.

Lord Hollick of Notting Hill Senior Non-Exeutive Director As well as being Senior Non-Executive Director of Diageo Clive Hollick has numerous interests. An active Labour Party member, he was a founding trustee of the Institute for Public Policy Research, a 'centre-left' think-tank that has been very influential on New Labour's policies.20 His work at the IPPR included establishing and being a member of the IPPR's Commission on Public Policy and British Business, which reported in 1997 and 'was subsequently influential in setting Labour's business policy for its first term.'21 The IPPR also organised a forum on responsible drinking in May 2004 which was hosted by Diageo and included speakers from Diageo as well as from government ministries, including Tony Blair.22 Lord Hollick was also a member of the House of Lords Committee on Science and Technology 1995-6, a special advisor to the President of the Board of Trade and the Secretary of State for Trade and Industry 1997-8, and an advisor to successive leaders of the Labour party since 1987, including Margaret Becket and Peter Mandelson. In 2000 he established a cross-party and business group 'Britain in Europe' campaigning for UK's adoption of the Euro.

Lord Hollick is Chief Executive of United Business Media PLC, an international business information group with publishing, broadcasting and market research businesses. He was Managing Director of MAI PLC, a major international media and financial services group which merged with United News and Media PLC in 1996. He is chair of London's South Bank Centre.23 From 1995-7 he was a non-executive Director of Channel 5 Television Group Ltd.24 He is a Governor of the London School of Economics.25

In 1998 Lord Hollick was placed as ranking 32nd in a 'power list' put together by Fulcrum TV, and voted by a panel, of 'Britain's most powerful people'.26

Rodney Chase

Rodney Chase retired as Senior Non-Executive Director at the 2004 AGM. He has also been Non-Executive Director of Tesco PLC and Deputy Group Chief Executive of BP PLC.

Maria Lilja Non-Executive Director of Diageo Maria Lilja is a Non-Executive Director of Diageo. She was head of American Express Europe 1996-2000. She is also Non-Executive Chair of Mandator AB and Non-Executive Director of Bilia AB, Intrum Justitia AB, Observer AB and Poolia AB, all in Sweden.

Keith Oates

A Non-Executive Director before retiring at the 2004 AGM, who was also Senior Advisor to Coutts Bank, Monaco, Deputy chair of Marks and Spencers PLC before 1999, a BBC Governor, and Non-Executive Director of BT PLC;

Jonathan Symonds Non-Executive Director Jonathan Symonds, Non-Executive Director, is also a member of the Accounting Standards Board, joint Chair of the Business Tax Forum, and Chair of the 100 group of Finance Directors. He is also Chief Financial Officer of AstraZeneca PLC,27 which he joined in 1997. Before that he was a partner at KPMG.

William Shanahan Non-Executive Director A Non-Executive Director, William Shanahan has also been President of the Colgate-Palmolive company since 1992.28 He was appointed Non-Executive Director of Diageo in 1999.

Todd Stitzer Non-Executive Director Todd Stitzer, a Non-Executive Director appointed in 2004, is also Chief Executive of Cadbury Schweppes PLC, a role he was appointed to in 2003.29

Paul Walker Non-Executive Director Paul Walker, a non-executive director, is chief executive of the Sage Group PLC,30 which he joined in 1984, and a non-executive director of MyTravel Group PLC.31

Back to top 3.4 Subsidiaries

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

Gleneagles Hotels Ltd32 33

Gleneagles Hotel Auchterarder Perthshire, PH3 1NF

The Gleneagles hotel will be the venue for the G8 summit hosted by Diageo in July 2005. 34

Brighton Grand Hotel Company Ltd

Haagendazs UK35

6 The Market The Piazza London WC2E 8RA

Haagendazs is a large American company producing ice cream. Some of their products have been investigated for GM products (see 'Corporate Crimes' section).36

3.5 Auditors

Diageo's auditors are KPMG Audit Plc 37

4. Influence

1. 4.1 PR and CSR

       * 4.1.1. Corporate Social Responsibility
       * 4.1.2. Public Relations (also PR and the G8)

1. 4.2 Lobbying

       * 4.2.1. Lobbying Groups
       * 4.2.2. 'Social Aspect Organisations'

1. 4.3 Diageo's policy on 'Responsible Drinking'

       * 4.3.1. Self Regulation of Marketing
       * 4.3.2. Influence on Education

1. 4.4. Diageo's links with government

       * 4.4.1. Impact on policy

Summary

A big part of Diageo's recent activity has been influencing the UK Government's policies on alcohol. Diageo has developed close ties with government policy makers in an effort to limit the statutory regulation of alcohol, and to steer government policy into protecting its own interests. It has achieved this through a huge investment in public relations and in its promotion of 'corporate social responsibility' (CSR) as a business strategy as favoured by New Labour, and through publicly speaking out against alcohol harm. In practice, this has resulted in policies which target individual misuse of alcohol rather than corporate liability or regulation.

Diageo promotes the idea that the major problem with alcohol is the anti-social behaviour caused by binge-drinking. Many health experts dispute this industry assumption, suggesting that long term health problems caused by sustained drinking are more serious - liver failure caused by sustained drinking accounts for the majority of people treated in Accident and Emergency for alcohol-related problems.1 The UK government's policy has followed the industry line, to the criticism of many health experts and groups (please see the 'Impact on policy' section for further details).

This section will explore Diageo's CSR projects, PR campaigns, lobbying and the 'social aspect organisations' which it is involved in. It will also explore what Diageo hopes to achieve through self-regulation and investment into education initiatives. It will also investigate the forums through which the company influences policy and the ways in which Blair's government's policy reflects industry interests.

4.1 PR and CSR

4.1.1. Corporate Social Responsibility

Diageo has been involved in and sponsored a number of projects in areas unconnected to alcohol, in order to improve its reputation and push an image of itself as an ethically responsible company. The investment in CSR, while making a positive impact in a number of projects, is clearly oriented towards business needs:

'We know our actions as a corporate citizen can differentiate us from our competitors in the hearts and minds of all our stakeholders'2

1. This section will look at some of the projects which Diageo has developed:International Business Leaders Forum
2. Tomorrow's People
3. The Diageo Foundation

International Business Leaders Forum (IBLF) This is an international not-for-profit organisation promoting responsible business practice. Its line is that in developing or unstable countries, where trust in governments may be low, corporations could take on some social roles typically carried out by the state. In doing so it can ‘reduce the social risks of operating in developing and transition economies, confer competitive advantage, win support of employees and customers, and contribute to vital societal infrastructure.’3 Diageo is a founding member of the IBLF, and Diageo's CEO Paul Walsh is a deputy Chair. The IBLF’s website, which is sponsored by Diageo, suggests that ‘the organisation has become recognised as an authority on global corporate social responsibility and on facilitating partnership projects between businesses, NGOs and government agencies, and more recently with business schools’. 4 Other principle members of the IBLF include Coca Cola, Nestle, GlaxoSmithKline, BP, and Shell.5

Diageo sponsored the IBLF’s ‘Millennium Campaign on Human Capitalism’ which ‘aimed to establish responsible business practice as a mainstream strategic issue on the corporate agenda,’6 and make it look like corporations can 'respond to the perceived downsides of development and globalisation.’ It would also allow them a greater public involvement, so that they could play 'an increasingly pivotal role in shaping not only economic development, but also social and environmental progress.'7 The campaign ran from 1999 to February 2001.

Tomorrow’s People Tomorrow's People8 is a charity set up by Diageo's parent company Grand Metropolitan PLC in the 1980s, with the professed aim of helping unemployed people into work by being an ‘expert intermediary between government, businesses and job-seekers.’ The idea behind the charity is that 'it makes good business sense to reduce unemployment.'9 In that sense, the charity clearly illustrates that CSR serves business needs: boosting social and economic conditions will benefit revenues. Such projects also benefit the company's reputation and its links with government agencies. The charity has been praised from some quarters for its work.10

The charity is 'independent,' but funded by Diageo. Its Board of Trustees include Diageo staff (including Geoffrey Bush, Diageo's director of Corporate Citizenship), and other business representatives.11 Because of this, priorities in dealing with employment issues will be those of the private sector, though it can apply for government funding to carry out its projects:

'Tomorrow's People would urge the Government to engage the private sector in interventions that are business-led, community focused and individually tailored.'12

In the mid-1990s Tomorrow’s People were involved in Project Work, a pre-Blair precursor to the New Deal, which had little credibility with trade unions and local authorities, many of which boycotted it. In January 1997 20 people occupied the offices of Grand Met in London over its involvement in Tomorrow's People. Tomorrow's People withdrew their involvement in Project Work in March 1997.

Once again, we see business attempting to blur the line into what should be public policy. Serious questions should be asked as to why business, which is totally unaccountable and un-democratic, believes it has a right to operate in this sphere.

The Diageo Foundation The bulk of the company's investment in community projects (a commitment of 1% of pre-tax profits, currently about £19 million) is orchestrated through the Diageo Foundation,13 a charity set up by the company 'to offer 'kick-start' funding and expertise for projects within priority themes around the world'.14 (See the 'Africa' section under 'Corporate Crimes' for more details on the philanthropic projects Diageo supports).

Back to top 4.1.2. Public Relations

1. Diageo has consulted a number of PR firms in recent years. The remit of the firms Diageo has consulted, corresponds well with the company's aim of avoiding criticism and regulation.Edelman, the largest independently owned PR company, is a US firm which specialises in advising its clients on how to liaise with NGOs in order to avoid opening themselves to criticism from those NGOs.15
2. Circulation Experti is a US PR, advertising and marketing consultancy firm dedicated to developing links between companies and ethnic minority communities in the US.16
3. Cohn and Wolfe, a large US PR firm,17 was hired in 2003 to steer Diageo's CSR programme along with Reputation Inc. Cohn and Wolf was given the remit of promoting CSR initiatives to consumers.

1. In particular, Diageo has invested in PR to boost its relationships with governments, and gain from promoting its CSR work to those who might create legislation regulating alcohol sales and marketing. Firms specialising in this include: Quinn, Gillespie and Associates (QGA), a 'bipartisan public affairs firm that provides strategic advice, public relations services, and government representation to corporations, trade associations and issue-based coalitions.'18 19
2. Reputation Inc, which was charged with representing the company on issues of alcohol reform such as licensing laws and taxation, and with communicating the CSR message to governments and NGOs.20

The alcohol industry has taken a dramatically different stance to that of a comparable industry, the tobacco industry, which was heavily regulated by governments around the world once the associated health risks were revealed. In avoiding such a situation, investment in CSR and PR by companies like Diageo and industry bodies, has played a significant role.

4.2.1.PR and the G8

Diageo shares PR company, Abbott Mead Vickers, with the Make Poverty History coalition. It also shares Lexis PR, with the Foreign and Commonwealth Office who have employed Lexis to organise corporate sponsorship for the G8.

Back to top 4.2 Lobbying

4.2.1. Lobbying Groups

Diageo is involved in a number of lobbying groups in the US and UK devoted to presenting the interests of the alcohol industry to governments. The role played by lobbying groups supplements the role played by PR in establishing networks of relationships between government and industry. In 2003, Diageo spent over £1.3 million on lobbying in the US Senate alone.21

UK

1. All Party Parliamentary Beer Group, UK

Diageo is one of the companies funding the British parliamentary group, giving it an annual sum of £4100. The aim of the group is to promote the role of beer and the pub in British society.22 The group, as it turns out, is the biggest industry group in the House of Commons, with 275 member MPs.23

1. Whitehall and Industry Group, UK

Diageo is a member of this group that aims to bring together private and public sector interests in the UK, to ‘improve understanding and co-operation between the public and private sectors.’24

US

1. American Legislative Exchange Council, US

A membership organisation of state legislators drafting model legislation that often becomes law in the US,25 with a leaning towards big business interests and against environmental regulations. It was condemned by the Defender of Wildlife and the Natural Resources Defence Council in 2002 as constituting a way for corporations to influence state legislative activities. Members of the Private Enterprise Board include Kenneth Lane of Diageo.

1. Congressional Wine Caucus, US

The Congressional Wine Caucus includes 250 members of Congress from all 50 US states.26 It holds meetings which host ‘tastings’ funded by the alcohol industry,27 and holds high profile fund-raising events for ‘good causes’ unrelated to alcohol, such as The Children’s National Medical Centre.28 Parallel to this, the function of this caucus is to ‘lobby colleagues on wine-related issues,’29 which, for example, in 2000 meant pressing governments to allow wine bottles to print labels showing the health benefits of alcohol, and to permit alcohol companies to employ ‘temporary immigrant agriculture workers’,30 who, we can assume, would work at lower rates of pay and with less job security. (See the Corporate Crimes section, 'Squeezing out Small Businesses' for more information on Diageo's activity in California).

Back to top 4.2.2. ‘Social Aspect Organisations’ (SAOs)

'The influence of the alcohol industry is exercised through social aspect organisations' -Global Alcohol Policies Alliance 31

Diageo plays a prominent role in various industry groups that have the professed aim of promoting responsible drinking, but are tied to industry interests and disseminate research on alcohol that promotes an industry agenda. In effect, they occupy an ambiguous space with a role not totally separate from that of the lobbying groups.

1. The Portman Group (UK)
2. The International Centre for Alcohol Policies (US)
3. The Amstardam Group (Europe)
4. The Mature Enjoyment of Alcohol Society (Ireland)

These SAOs share Diageo's stance that moderate consumption of alcohol is beneficial, and that only irresponsible drinking patterns make alcohol dangerous. They also advocate industry partnership in shaping alcohol policy.32 Alcohol campaigning groups have raised concerns over the use of research funded by the industry. A 1996 report by Alcohol Policies Project provided evidence that there is a clear difference in attitudes between those organisations which do or don't accept funding from the alcohol industry. It concludes that there are ‘serious ethical and political issues concerning the funding of community-based alcohol prevention organizations by entities related to the alcoholic-beverage industry.’33 The Global Alcohol Policies Alliance sees SAOs as 'created by the beverage industry to promote its interests' though 'presented to the public as impartial and objective bodies.' 34

Unlike many NGO's, SAOs are extremely well funded, drawing on substantive industry contributions.

The Portman Group

'The Drinks industry has a legitimate and important role to play in combating alcohol misuse' -The Portman Group 35

A British body of alcohol industry representatives that promote responsible drinking, focusing on education to target the minority of those who misuse alcohol.36 Central to the activities of the Portman Group are the beliefs that ‘the consumption of alcohol in moderation... is compatible with a healthy lifestyle.’ The group suggests that ‘targeted measures are more effective than blanket controls in a society where alcohol misuse is a minority problem.’37 Research supported by the Portman Group in November 2004, suggested that alcohol in moderate quantities is healthy, and that it is the way it is drunk rather than the amount that is dangerous.38 Despite the massive industry funding behind this research, this assumption has been adopted by the UK government whose alcohol policies suggest that binge drinking is the only problematic aspect of alcohol consumption.

International Centre for Alcohol Policies (ICAP)

'Health, quality of life, and responsible drinking are interconnected' -'Permission for Pleasure', a 1998 conference hosted by ICAP and based on a book by its president Marcus Grant.39

A US-based international SAO aiming at 'helping reduce the abuse of alcohol worldwide through dialogue and partnership involving the beverage alcohol industry.'40 Diageo is a founder, sponsor, and current Chair of ICAP. Similarly to the oil industry approach to climate change, ICAP emphasises the complexity and controversy of the issue under the banner of a 'balanced approach.'41 For example, its research suggests that there is 'no causal relationship whatsoever' between alcohol and violence, and plays the usual industry line that 'how people drink is at least as important as how much they drink.'42 Its report into drink-driving downplays the importance of blood alcohol level regulation by stressing the lack of consensus around what is an acceptable level;43 a study into mandatory health messages on alcohol labelling highlights uncertainties about the effectiveness of labelling;44 and the Alcohol and Pregnancy report claims that there is ‘insufficient evidence regarding moderate consumption’ for governments to make recommendations.45

In 1995, ICAP entered into a partnership with the US Health department's Centre for Substance Abuse Prevention (CSAP), which received severe financial cuts from Congress that same year,46 allegedly due to an assault on it by the alcohol industry.47 CSAP and ICAP formed a 'working group' which produced a joint publication on alcohol terminology,48 which applauded its role as a 'non-traditional partnership' between the 'alcohol industry and the public health community.'49 In discussing terminology, the report attempted 'to highlight the controversies inherent in' terms such as 'binge drinking'50 and 'abuse,'51 which allegedly are 'laden with judgement or emotional baggage', so should be 'used with a high degree of awareness about the prejudices' involved.52 The report also outlines the industry's objections to stigmatising social drinkers by referring to alcohol as a 'drug.'53

This approach is far from CSAP's previous image when it was condemned by neo-liberal thinkers for its ‘aggressive’ anti-alcohol behaviour,54 its promotion of 'alcohol excise taxes, restrictions on advertising, and destruction of private billboards’55 and its wish to ‘incorporate principles of social justice’ and direct attention towards ‘populations that have been traditionally disenfranchised',56 by directing federal funds to grassroots campaigning groups.

The Amsterdam Group (TAG) A European-wide group, of which Diageo is a member. TAG suggests that ‘only a balanced approach, where the drinks industry is part of the solution, can help reducing the negative impacts of alcohol abuse on society.’57 TAG’s website contains a section on ‘Scientific Developments’ which ‘covers scientific information on reported potential benefits of moderate alcohol consumption for non-scientists.’58 TAG states that alcohol problems are related not to per-capita consumption but to problematic drinking behaviour, and that collective regulation should not replace individual responsibility.59 In 1998, TAG asked the EC to let it take court action against France’s regulations banning the screening of sports fixtures featuring alcohol advertising.60

Mature Enjoyment of Alcohol in Society Ltd (MEAS) MEAS is an Irish organisation which ‘envisions an Irish society where alcohol is enjoyed in a mature, sensible and appropriate manner’ and aims to ‘promote the mature enjoyment of alcohol amongst consumers.’ It states that ‘you can have a great time while respecting alcohol and respecting yourself.’61

Other SAOs which Diageo is a member of around the world include: Goda (Denmark), Enterprise et Prevention (France), FISAC (Mexico), STIVA (Netherlands), ARA (South Africa), FAyS – (Spain), TBAF - (Taiwan), SASPI - (India), REACT - (Thailand), which was founded by Diageo.

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.

Back to top 4.3 Diageo's Policy on Responsible Drinking

'Where alcohol is consumed excessively or irresponsibly, this can create health or social problems for the individual or society’ - CEO Paul Walsh 62

Central to Diageo's position on alcohol is the idea that while alcohol can cause problems, these are the result of misuse by irresponsible individual consumers, not integral to the drug (See the introduction to the Corporate Crimes section, for a contradiction of this stance by the World Health Organisation). It is in the context of the possibility that 'alcohol beverages may be consumed irresponsibly,' that alcohol creates problems. In fact, Diageo's policy on responsible drinking focuses on the positive, suggesting that drunk in moderation, alcohol can be healthy. The website boasts that 'alcohol beverages bring pleasure to millions of adults every day,' and play 'a unique part' in the 'social lives and celebrations of many cultures.'63 According to another statement on Diageo's website, ‘excessive alcohol consumption can lead to medical, psychological and social problems' but 'a belief in the health benefits of moderate consumption of alcohol has been part of the folklore of many cultures' and 'many independent researchers have concluded that there is a scientific basis to some of these beliefs.’64

1. This idea that alcohol can only be bad for you when operating in an inappropriate context is reflected throughout Diageo's policy on a number of issues, which highlight individual responsibility:On under-age drinking, Diageo's policy acknowledges that 'it is very important for young people to be educated about the nature and effects of alcohol,' but qualifies this by shifting the responsibility onto individual families, stating that 'best way for parents and other role models to influence the likely drinking behaviour of their children is to set an example...by drinking responsibly.’65
2. On binge-drinking, Diageo claims, in response to the suggestion that marketing has an adverse effect on binge drinking and under age drinking, ‘independent research suggests that many influences besides advertising shape young peoples’ drinking attitudes and behaviour, especially parental and peer influences.’66
3. And on drink driving, likewise, ‘individual responsibility is paramount.'67

This concern with the effects of alcohol gives the company, in its opinion, a say in formulating government policy on alcohol: 'The public health community has an obvious role to play in helping governments to develop policies and strategies which aim to promote responsible drinking and reduce the incidence of alcohol misuse. Diageo believes that the drinks industry also has an important role to play in support of this effort.’68

Diageo's presentation of itself as a responsible company benefits its ability to market a product it sees as normalised and non-problematic. By singling out irresponsible misuse of this product, the potential for suggesting that the product itself is not a problem for health and society is protected and even strengthened. This in turn has given the alcohol industry a voice in policy formulation, allowing it to present to the British government a platform which normalises alcohol and criminalises its misuse - a platform the government has been responsive to. The emphasis on education, likewise, supports a shift to 'choice' and individual responsibility rather than regulation. Similarly, in choosing to market the alcohol 'responsibly' by disassociating it from dangerous or anti-social behaviour, the separation is strengthened between the product and its misuse (See 'Marketing' under the Corporate Crimes section of this profile on advertising to young people). Overall, a platform is presented which is not inimical to the commercial interests of the company and its shareholders, and which is allowed to be propagated to, and to exert an influence on, government.

Back to top 4.3.1. Self Regulation of Marketing

Alcohol companies have been anxious to self-regulate and co-operate with government on marketing. This can be seen as an attempt to stave off governmental regulation of alcohol marketing, which compared to tobacco marketing, is subject to little regulation.

Diageo has a Code of Practice on Marketing Alcohol (see also section on 'Marketing' under 'Corporate Crimes'), written in 1998 and updated in 2003.69 There is also a Code of Practice on the Naming, Packaging and Promotion of Alcohol Drinks produced by the Portman Group, an industry body Diageo is closely involved in, written in 1996 and updated in 2003 (see section on the 'Portman Group' above).70

The focus of these codes of practice is to protect the industry from complaints and regulation. A conference on 'marketing alcohol drinks' in September 2004 had as its aim introducing 'greater creativity to the marketing process to pre-empt aggressive legislation,' and offering ideas on 'how marketers can target two audiences successfully - government and consumers.'71 The Portman Group's code 'reflects the industry's determination to make self-regulation work,'< so that it 'fulfils a dual purpose of protecting the public and also 'protecting the industry from the threat of legislative clampdown that inevitably would arise if self-regulation were to fail,' so that the 'socially responsible promotion of alcoholic drinks' can continue.72

Alcohol support and campaigning groups express concern that the voluntary, self-imposed system of marketing and advertising regulation is not enough. According to Eric Appleby, Chief Executive of Alcohol Concern, 'we’d also like to see them consider bringing the present voluntary code for marketing, packaging, naming and web promotion of drinks – currently run by the trade’s Portman Group – under a regulatory regime independent of the drinks trade.'73 Likewise, former health minister Frank Dobson sees the Portman code of marketing as a 'code for rapacious booze producers.'74

www.portman-group.org.uk/codeofpractice/152.asp 4.7 Diageo's Influence on Education

Diageo 'is actively involved in community-based alcohol education projects, as well as educating and informing consumers.'75 The company sees education on responsible drinking as a central forum for tackling alcohol related problems, in line with their view of these problems as brought about with individual irresponsible behaviour. Diageo is involved with projects promoting responsible drinking in many countries including Brazil, Peru, South Africa, Uruguay, Chile, Germany, the US, Scotland, Ghana, Seychelles, Thailand and Norway. The idea is that educating about alcohol will allow people to drink in the right way, with catchphrases used such as 'intelligent consumption'76 and 'celebrate wisely.'77

The Alcohol Education and Research Council 78 A British body focusing on education relating to alcohol, which includes representatives from the industry as well as from public health and research communities. A Diageo representative is joint Vice-Chair of its Developing Peoples and Organisations Committee.79

Diageo sponsors three publications for teachers, produced by the Teacher's Advisory Council on Alcohol and Drug Education (TACADE), aimed at educating young people about alcohol.81 Vanessa Williamson, Social Responsibility Project Manager at Diageo GB, is a member of the 'TACADE peer alcohol education project advisory group.'81

In Australia, Diageo is the main sponsor of the 'Think Before You Drink' website, which aims to teach teenagers about the effects of alcohol. The emphasis on the website is on pleasure: there are online games unrelated to the education programme, and the encouragement for children to read the material is that the games' high scores will only be displayed if they correctly answer a question based on the material.82

Back to top 4.4 Diageo's Links with the Government

Diageo has also appointed a ‘Government Affairs Director’ in the UK for 'closer liaison' with government. This is Tim Rycroft, former 'special advisor' to the Secretary of State for Health,83 and therefore, we can imagine, able to give the company influential contacts and knowledge within the department most likely to want to impose regulation.

Diageo has also been boosting its links with government through its participation in forums, conferences and seminars in which industry representatives come together with government ministers to play an active role in policy making.

For example, a 'Responsible Drinking Seminar' was held on 20th May 2004, which led ministerial policy on alcohol.84 The conference was commissioned and hosted by Diageo. A further link was through the Institute for Public Policy Research (IPPR), which organised the conference, whose founder and leading trustee Baron Hollick is also Diageo's senior non-executive director.(See <www.corporatewatch.org/?lid=1707">Who, Where, How Much section of this profile.)85 The conference spearheaded the government's policy of partnership with the industry, and the focus on social rather than health problems associated with alcohol. It was attended by the Prime Minister Tony Blair, who said that binge-drinking was in danger of becoming 'the new British disease,' as well as by Home Office Minister Hazel Blears, Public Health Secretary Melanie Johnson, and representatives from the police and health services.86

On 7th September 2004 a Westminster Diet and Health Forum National Seminar was held on 'Alcohol, Advertising Regulation, Licensing and Public Health,' to examine reform on alcohol regulation, and contribute to comprehensive briefing documents for senior policy makers. Speakers at this conference included Tim Rycroft, Diageo's 'Government Affairs director,' as well as other members of the Portman Group.

Back to top 4.4.1. Impact on Policy

‘Public health policies concerning alcohol need to be formulated by public health interests, without interference from commercial interests.’87 World Health Organisation, 2001

This section will look at the case of current British alcohol policy, which has proved amenable to industry interests, to the severe concern of alcohol campaigning groups and health experts.

The government has issued statements that echo the language used by the industry. In January 2005 the government stated that alcohol policy 'requires partnership working at both national and local level,' including with 'the drinks industry,' and expressed the aim of creating 'a culture where drinking sensibly is the norm.'88

Tony Blair, speaking at the IPPR 'Responsible Drinking Seminar' which Diageo hosted in May 2004, sounded not unlike Paul Walsh, Diageo's CEO, in his attack on irresponsible binge drinking and defence of moderate drinking and industry partnership:

'Millions of people drink alcohol responsibly every day. No-one wants to stop that pleasure. But there is a growing problem on our town and city centre streets on Friday and Saturday nights...I know the industry is working hard on codes of practice... I want to give the industry a chance to build on the good work that I know is already out there and to prove that it is committed to tackling the problems of binge drinking.'89

The section will look first at the generalised strategy of the Blair government on alcohol, released in March 2004, and its priorities, then at specific items of legislation over the last few years, then at general trends in the corporatisation of politics:

1. National Alcohol Harm Reduction Strategy
2. Blood Alcohol Level, 2002
3. Increase in Licensing Hours, 2003
4. Measures Targeting the Individual, 2004-5
5. Corporate Involvement in Policy

Partnership with the Industry: National Alcohol Harm Reduction Strategy, 2004

On 15th March 2004 the government published its ‘Alcohol Harm Reduction Strategy for England and Wales.’ The focus of the policy was on self-regulation, and it structured its proposals around the interests of the alcohol industry. The strategy was underpinned by the idea of cooperation with the industry, which it saw as 'a substantial and valuable part of the UK economy and society,' with 'a valuable role in helping to prevent and tackle the harms caused by alcohol misuse.' The Report congratulated the industry's self regulation and formulated a scheme of further self-regulation, participation in which 'should initially be voluntary' as 'we are keen to allow the industry to demonstrate its willingness to abide by best practice.'90 This overlooked advice to regulate rather than cooperate with the industry. Martin Plant, Professor of Addiction Studies, said that:

‘voluntary agreements have a tendency to result in token or minimal compliance. The latter is unacceptable in relation to such an important health and social policy issue as alcohol.’91

Public health and voluntary sector experts criticised the policy, seeing it as 'a disappointment and a sop to the industry' (Professor Christine Godfrey, advisor to the Strategy Unit).92 Allegedly, the industry responded with relief to the policy, Jean Coussins, Chief Executive of the Portman Group saying 'I am pleased that the government has recognised that it can build on the good practice already in place amongst leading companies within the industry.’93 In line with industry suggestions and against public health advice, the strategy targets a minority of binge drinkers rather than overall consumption of alcohol, taking up the industry's emphasis on 'public order' rather than health, and the industry's assumption that harm is caused not by alcohol consumption itself but the amount consumed and behavioural patterns of those drinking.

Many health experts dispute the industry assumption about alcohol harm, suggesting that liver failure caused by sustained drinking, rather than anti-social behaviour caused by binge-drinking, account for the majority of people treated in Accident and Emergency for problems caused by alcohol.94 Alcohol Concern suggested that 'the failure of the strategy to tackle per capita consumption represents a failure of political will and a breakdown of 'joined-up government', with departments working with the industry winning a flawed strategy over those responsible for protecting the nation’s health.’95 Richard Doll, a leading epidemiologist pointed to a 1000% increase in liver cirrhosis over the last 30 years, which was left out of the report, and stated that:

'Every scientific committee I have ever sat on has concluded that reduction in harm caused by drinking can only be achieved by reducing our overall consumption. It just doesn't work to target a minority. The only people I have seen recommend this are the strategy unit.'96

The effective result of these priorities are policies which include partnership with the industry, education campaigns, and targeting of individual anti-social behaviour. Those measures which could have harmed the industry, including targeting of drinking venues, advertising and drinks prices, were ignored despite their preference by health experts.97 The overall attitude of the government was summed up well by home office minister Hazel Blears:

'I respect the scientific view, but it wasn’t for us. We needed practical measures.’98

Back to top

Blood Alcohol Level, 2002 In March 2002 the UK government went back on its 1998 plan to reduce the blood alcohol concentration limit for drink-driving from 0.08% to the EU level of 0.05%. A House of Lords Committee noted that 'this decision [not to reduce the level] contradicts all the evidence we have received' and that 'the Department's position coincides with that of the alcohol industry,' despite opposition from 'local authorities, the police, the British Medical Association, the Automobile Society, the Royal Society for the Prevention of Accidents, the Transport Research Laboratory, and the Parliamentary Advisory Committee for Transport Safety.'99 The decision not to reduce the acceptable level came after meetings between the department and the Portman group, who despite their anti-drink-driving campaigns100 were against the reduction when it was proposed in 1998,101 and the government drew on research carried out by the Portman Group in their 2002 decision.102 Allegedly, The chair of the House of Lords Committee, a Labour peer, noted that he 'was surprised by the apparent influence of the drinks industry.'103

Back to top

Increase in Licensing hours, 2003 In 2003 the government extended potential licensing hours, with local authorities able to grant a license for up to 24 hours from February 2005.104 This despite substantial concerns about binge-drinking and widespread belief that extended licensing hours would contribute to it. The government department responsible for licensing hours is the Department for Culture, Media and Sport (DCMS), which makes it separate from other areas of alcohol policy under the Home Office and Office of the Deputy Prime Minister (ODPM), a concern of tourism and entertainment rather than health or crime. Journalists, the wider public, statutory agencies and alcohol campaigning groups have expressed concerns that the extended licensing hours will lead to an increase in crime and violence associated with alcohol. A report by the Metropolitan Police contradicts the government claims for the new Licensing Act, forecasting an increase in drink-driving due to the lack of late night public transport, a growth of illegal taxis, and greater disturbance to residents,105 and suggests that 'with the drinking culture that is firmly entrenched in the country, the relaxations in permitted hours will for the foreseeable future fuel this culture.'106

Although the 2003 Act states that license extensions will 'still need the licensing authority's agreement,' after objections have been made by the police and local people,107 the DCMS published a Draft Guidance in March 2004 which restricted the scope of licensing authorities. In the view of researcher, Robin Room, the guidance reveals a successful campaign on the part of the industry to ensure government limits the possibilities open to local authorities and thereby ensure their interests are protected from local authorities who may be less flexible towards them than central government.108 In the guidance, the first stated aim of the act is to 'give business greater freedom and flexibility.'109 The remit of licensing authorities is limited to a certain scope and cannot be 'aspirational,' 'for example, conditions may not be attached which relate solely to the health of customers rather than their direct physical safety,' as that is not a concern of this piece of legislation.110 Additionally, once people are 'beyond the vicinity of the premises' concerned, their behaviour is a matter 'for personal responsibility of individuals under the law.'111

On 21st January 2005 the government announced measures to counteract the possible dangerous effects of the licensing overhaul, including banning orders on people persistently drunk and disorderly, and charges on pubs to pay for further policing in areas judged as 'alcohol disorder zones,' after a warning.112 Srabani Sen of Alcohol Concern, suggested the charges would be insufficient, with the taxpayer continuing to pay for increased policing needs.113

Measures Targeting the Individual114

Alcohol policy reflects the ideological affinities of the Blair government including its tendency to define social problems in individual terms without reference to their social context, and to find solutions which focus on the behaviour of the individual. This correlates well to the alcohol industry's focus on individual misuse of alcohol, which the government has adopted in the policies described above. At the heart of the policy is a range of measures aimed at the individual which suggest their blame for these problems and the industry's innocence. These include on-the-spot fines in the form of fixed penalty notices (FPN) and penalty notices for disorder (PND),115 acceptable behaviour contracts, and anti-social behaviour orders (ASBOs).116 On January 21st 2005, the government announced a system of drinking banning orders for anyone who had had three on-the-spot fines or convictions, to function similarly to ASBOs.117 According to Home Office Minister Hazel Blears, 'it is very much built on the idea that it will be a swift punishment for people.'118

Corporate Involvement in Policy

The involvement in policy formulation given to companies, whose interests will always focus on profit however much they are committed to social responsibility, fits in well with the business-oriented priorities of Britain's New Labour government. As shown in the above examples, alcohol campaigning and support groups as well as public health experts believe that this amount of influence is inappropriate where a serious health issue is at stake, and that Diageo and the industry bodies it is involved in are dictated by corporate needs. On the influence of social aspect organisations on policy, the Global Alcohol Policy Alliance state that,

'the view of Social Aspect Organisations that they have an equal place at the policy table fails to recognise that the evidence that they bring to the table is not impartial and favours the commercial interests of the beverage alcohol industry.'119

• Diageo: Corporate Crimes
• Diageo: Further Resources and Information
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