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Diageo

Last edited by crocodyl on April 23, 2008 - 11:38am
Company Snapshot: 

Diageo plc (LSE: DGE, NYSE: DEO) is the largest multinational beer, wine and spirits company in the world. The Company produces and distributes a collection of branded premium spirits, beer and wine. It produces and distributes a range of premium brands, including Smirnoff vodka, Johnnie Walker Scotch whiskies, Captain Morgan rum, Baileys Original Irish Cream liqueur, JeB scotch whiskey, Tanqueray gin and Guinness stout.

Ownership status: 
Publicly traded
Number of employees worldwide: 
22,333
Chief executive officer: 
Lord Blyth of Rowington
Website: 
Diageo
Corporate accountability
Accountability overview: 

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

'Every day, everywhere, people enjoy our brands. Together we celebrate life responsibly.'

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). 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;

• assisting a shift towards casualisation of employment terms;

• Specific instances of environmental damage and irresponsible marketing;

• 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).

• 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).

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 Crimes section of this profile.

Market share, importance

Diageo PLC is a British multinational alcohol company, selling alcohol in 180 countries, with a substantial presence in 30 countries. 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. The company's turnover was £8.89 bn in 2004, with a total profit of £1.87 bn after exceptional items and tax. 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.

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

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 everyday, everywhere.’)
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.

Location(s)

Diageo plc
8 Henrietta Place
London, W1G 0NB
United States
See map: Google Maps
Financial information
Stock ticker symbol: 
DEO
Total revenue: 
7,481.00 Million GBP
Fiscal year: 
2007
Net Income: 
624.00 Million GBP
Fiscal year: 
2007
Miscellaneous
Other Information: 

Who, where, how much

# 3.1 Diageo's sites
# 3.2 Company Structure/ Ownership
# 3.3 Company Officers
# 3.4 Subsidiaries
# 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.

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

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.

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. Operating profit before exceptional items and was £1.91 bn in 2004, down from £1.96 bn in 2003.

3.3 Company officers

'''Executive Committee''' • Paul Walsh
• Nicholas Rose
• Stuart Fletcher
• Jim Grover
• Rob Malcolm
• Ivan Menezes
• John Pollaers
• Andrew Morgan
• Tim Proctor
• Gareth Williams

'''Board of Directors''' • Lord Blyth of Rowington
• Lord Hollick of Notting Hill
• Laurence Danon
• Maria Lilja
• Dr. Franz Humer
• Nick Rose
• Philip Scott
• Paul Walsh
• William Shanahan
• Todd Stitzer
• 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 Corporation, Non-Executive Director of Centrica PLC (amongst whose brands are British Gas and a number of other suppliers of gas, electricity and telecommunications), and Governor of Henley Management Centre. 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 Power and Non-Executive Director of Moet Hennessey SNC in France, which has joint ventures with Diageo.

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;
John Pollaers - President of Diageo Asia Pacific;
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. 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. In addition Lord Blyth was Non-Executive Director of British Aerospace from 1990 to 1994. 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. 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, 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. 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. 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. 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. From 1995-7 he was a non-executive Director of Channel 5 Television Group Ltd. He is also Governor of the London School of Economics.

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'.

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, 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.

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

3.4 Subsidiaries

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

Gleneagles Hotels Ltd

Gleneagles Hotel
Auchterarder
Perthshire, PH3 1NF

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

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).

3.5 Auditors

Diageo's auditors are KPMG Audit Plc

Specialized Information
Major brands: 

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.

Key Global Brands:

• Smirnoff vodka and Smirnoff ready to drink products
• Johnnie Walker scotch whiskies
• Captain Morgan rum
• Baileys Original Irish Cream liqueur
• JεB scotch whisky
• José Cuervo tequila (agency brand in North America and many other markets)
• Tanqueray gin
• Guinness stout

For a full list refer to the 20-f report attached below.

More detailed description of business strategy: 

    Diageo is the world’s leading premium drinks business and operates on an international scale. It is one of a
small number of premium drinks companies that operate across beer, wine and spirits. Diageo is the leading premium spirits business in the world by volume, by net sales and by operating profit and it manages 8 of the world’s top 20 spirits brands as defined by Impact Databank. Diageo’s beer brands include the only global stout brand, Guinness, and together these beer brands account for approximately 21% of net sales while Diageo’s wine brands represent approximately 6% of Diageo’s net sales. Diageo’s size provides for scale efficiencies in production, selling and marketing. This enables cost efficiencies and the dissemination of best practices in business operations across markets and brands, allowing Diageo to serve its customers and consumers better. 

    Diageo’s business has a high return on invested capital and low capital intensity and therefore
generates high levels of free cash flow. 

    All of the above factors enable Diageo to attract and retain talented individuals with the capabilities
to contribute to the delivery of Diageo’s strategy, which is to focus on premium drinks to grow its business through organic sales and operating profit growth and the acquisition of premium drinks brands that add value for shareholders. 

    Diageo’s brands have broad consumer appeal across geographies and the company and its employees
are proud of the responsible manner in which the brands are marketed and the role that moderate consumption of these brands plays in the lives of many people. 

    Diageo recognises, however, that excessive or irresponsible patterns of alcohol consumption may
cause health or social problems for the individual or society as a whole. Diageo seeks to be at the forefront of industry efforts to promote responsible drinking and combat misuse and works with other stakeholders to combat alcohol misuse. Diageo’s approach is based on two principles: set world class standards for responsible marketing and innovation; and promote a shared understanding of what responsible drinking means in order to reduce alcohol related harm.

Source: 20-f Form attached below.

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Diageo 20-f Form.pdf2.01 MB
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