The largest company behind the Scotch whisky industry was United Distillers, which was renamed Diageo in 2002. In the industry, United Distillers simply went by the acronym UD. In 1997, the world's largest spirits producer became even larger as a division of Guinness through a merger with Grand Metropolitan Hotels (Grand Met, 1995 turnover EUR 12 billion). The result was the Diageo Plc. group.
The beginnings of Diageo
Before this merger could come true, however, Guinness and Grand Met had to assert themselves against the resistance of the industry, especially against the interests of the French luxury goods group Louis Vuitton Moet Hennessy LVMH with its chairman Bernard Arnault. Bernard Arnault briefly increased his shareholding in Grand Met to 11% in order to be able to assert greater influence. However, as this action required about DM 1.3 billion at the time, he had to reduce the shareholding in Guinness from 14.2% to 12.5%. Bernhard Arnault's intention was to split up the Grand Met and Guinness food groups and, together with his Moet Hennessy branch, to create a three-way marriage between the three drinks divisions of the groups. However, this was not crowned with success and Bernard Arnault left the board of Guinness, of which he had been a director since 1989.
Grand Met brought International Distillers & Vintners Ltd (IDV) , another large spirits company, into the marriage between UD and Guinness . The two spirits subsidiaries, UD and IDV , became UDV, which was represented in more than 200 countries around the world. At the time, UDV sold almost one billion litres of spirits per year. The new company had four major 'Food and Drinks' divisions: UDV, Pillsbury, Guinness and Burger King.
Diageo's biggest brands
The major spirits brands represented by Diageo include:
- Smirnoff, the No. 1 in vodka
- Johnnie Walker, the number 1 in blended whisky
- J & B, the number 2 in blended whisky
- Tanqueray, one of the leading gins
In total, 19 of the world's top 100 spirits belong to the UDV (Diageo) group. The biggest whisky brands from UDV are:
- Bell's 8 Year Old
- Black & White
- Cardhu
- Dimple (USA: Pinch)
- Glen Ord
- Grand Old Parr
- Haig
- Johnnie Walker
- J & B
- Knockando
- VAT 69
- White Horse
- Classic Malts and Classic Malts Distillers Edition
- Cragganmore
- Dalwhinnie
- Glenkinchie
- Lagavulin
- Oban
- Talisker
- Rare Malts Selection
Diageo distilleries include more than 50 of the single malt distilleries in Scotland.
Diageo 's biggest competitors included Allied Domecq Plc (Laphroaig, Ballantine's, Teacher's, Long John) and Pernod Ricard (Chivas, Glenlivet, Longmorn), for which the 2002 sales figures (in million 9 litre cases) are shown in the graph below. It can clearly be seen that Diageo is larger than its two following competitors combined. UDV 's turnover in 1996 was about EUR 10 billion, 47% of Diageo Plc 's turnover. Its pre-tax operating profit was a whopping 20%. By German standards this is an excellent result, and Diageo certainly does not have to hide internationally either.
But even though UDV 's (Diageo) sales figures looked overwhelming, UDV sold only 5% of the world's spirits and only 1% of the world's wine production. The opportunities for Diageo to continue to grow were still immense, something that Paul Walsh, Diageo 's Chief Executive Officer, was also committed to.
However,Diageo is aware that alcohol can also be abused. Diageo will continue to be at the forefront of efforts to promote the moderate and responsible use of alcohol. Diageo supports organisations such as 'The Century Council' in the USA; 'The Portman Group' in the UK and also the 'DIFA Forum' in Germany.
Origins and history of Diageo
How did such a concentration come about? The origins of Diageo go back to the Distillers Company Limited (DCL) , which was founded in 1877 and was taken over by Guinness in 1986 in a spectacularly hostile and - as we now know - illegal manner.
The history of DCL began with a merger of six companies on 1 May 1877 and represents an extraordinary succession of growth, acquisitions and diversifications.
The merger of the six companies had been preceded by the formation of the Scotch Distillers' Association in 1865 to counteract the distillery craze of the time.
| D. McFarlane & Co. | Port Dundas |
| John Bald & Co. | Carsebridge |
| John Haig & Co. | Cameron Bridge |
| McNab Bros & Co. | Glenochil |
| Robert Moubray | Cambus |
| Stewart & Co. | Kirkliston |
In the first years after its foundation, the DCL created The United Kingdom Distillers' Association (UKDA) . This association, which soon became known as the Whisky Parliament , was dedicated to the promotion of Patent Still distilleries and developed classic cartel behaviour, which also led to its demise in 1888.
In 1884/85, the Caledonian distillery was taken over.
Nothing more exciting happened at DCL until 1899. After the company narrowly escaped bankruptcy in 1899 through accumulated debts to a whisky trading company, Pattisons Ltd , a period of steady expansion of the business began.
By the 1920s, DCL already dominated the Scotch whisky industry. By 1925, DCL had taken over the three major blenders James Buchanan, John Dewar and Johnnie Walker . The takeover of the companies had been preceded by many years of preparation (since 1909) by Price Waterhouse .
By 1934, the following malt distilleries belonged to DCL under the umbrella of Scottish Malt Distillers (SMD) :
| Highlands Aberfeldy Aultmore Balmenach Banff Benrinnes Brechin Clynelish Coleburn Convalmore Craigellachie Dallas Dhu Dalwhinnie Glendullan Glenlossie Glentauchers Knockdhu Linkwood | Lochnagar Oban Ord Parkmore Pulteney Teaninich Tobermory Lowlands Glenkinchie Linlithgow (St Magdalene) Rosebank Islay Caol Ila Lagavulin Lochindaal Port Ellen |
Other malt distilleries belonged to the DCL , but their names no longer have any significance today and are therefore no longer listed here.
In 1927, the DCL 's share of Scottish malt production was already 50% and was to increase even further. In 1935, 51 malt distilleries belonged to SMD. DCL 's importance increased to such an extent that it was able to rise from rank 39 of the 50 largest British companies in 1905 to rank 4 in 1948. In the same period, the company's capital rose from GBP2m to just under GBP130m.
The next few years were characterised by an international expansion of the distribution network, slowed only by Prohibition in America and the Second World War.
While in 1924 only 2% of DCL 's profits were generated by activities other than alcohol production, this was followed in the years to come by a strong diversification and the founding of a separate chemical division, which specialised in acetone and butanol chemistry and thus gained a foothold in the solvent sector. A long battle with ICI was to begin. But this is another story...
