Magazine article Marketing

Diageo Battles for Booze Brands

Magazine article Marketing

Diageo Battles for Booze Brands

Article excerpt

Diageo is concentrating on leading alcohol brands, but it will have to fight for the favourites that Seagram puts up for sale. Camilla Palmer reports

It may be late July, but Diageo's been spring cleaning. The owner of H[ddot{a}]agen-Dazs, the Burger King Whopper and Guinness is busily tidying its larder, chucking out tins past their sell-by date and stocking up on booze.

By selling two-thirds of the US subsidiary Pillsbury to General Mills and bundling its Guinness beer and UDV wines and spirits divisions into one trolley, Diageo is speaking very clearly about its intentions. The largest alcohol manufacturer in the world wants to add more brands to its impressive drinks cabinet and bail out of a rapidly consolidating food sector.

What timing. Diageo has a [pounds]2.98bn cash windfall on its way from General Mills, just as rival Seagram looks to sell its spirits division.

And Paul Walsh, who was due to take over from John McGrath as Diageo's chief executive at the end of the year, has had his start date brought forward four months to September. His first task will be to oversee the merger of UDV and Guinness, which he cites as providing money, efficiency and growth.

Its so-called 'global priority' spirits brands, such as Baileys and Smirnoff, will provide the cash and it hopes to expand in this area. Cost savings will come from integrating sales and marketing teams. Thousands of jobs could go as it strives to save [pounds]130m each year. Diageo, which is considering cutting its three offices in London to one, plans to announce its restructured management team next week, but stresses job numbers should remain stable.

Massive growth

"Putting Guinness and UDV together creates a business with 12 of the leading beverage alcohol brands," says Walsh, admitting its housekeeping is long overdue. He says it was always the intention to merge the two divisions when Diageo formed from the marriage of Grand Met and Guinness in 1997.

Consumers are now reaching for those core brands which make up 85% of Diageo's profit from its alcohol business. Walsh says drinkers are demanding and are now led by occasion and brands.

West LB Panmure analyst Mike Gibbs agrees: "Marketing and advertising have transformed this sector and led to its massive growth. Diageo's main task is keeping that focus and adding more brands to strengthen its position. …

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