1. Overview

DIAGEO PLC

A Corporate Profile

By Corporate Watch UK
Completed May 2005

1.The Company

  • Summary
  • Market share, importance
  • History
  • Strategy

  • '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:

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

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

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

  • 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).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).

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    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.

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    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

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    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.

    References
    1 Paul Walsh, Diageo CEO, The London Business School Summit on Global Leadership, 28.06.04
    www.diageo.com/download%5C3000---R495.pdf - viewed 18.01.05
    2 Diageo website: www.diageo.com/pageengine.asp?site_id=0§ion_id=0&page_id=1015 - viewed 24.01.05
    3 Diageo website, www.diageo.com
    4 Jo Revill, 'Mid-life drinkers who booze at home risk disease,' The Observer, 23.01.05; http://observer.guardian.co.uk/politics/story/0,,1396586,00.html - viewed 07.02.05
    5 Julia Finch, 'Brewing a set of Standards,' The Guardian 17.11.03, http://society.guardian.co.uk/givinglist/story/0,10994,1087122,00.html - viewed 25.01.05
    6 Diageo Annual Report 2004, www.diageo.com/download%5C3000---R531.pdf p. 12 - viewed 24.01.05
    7 Diageo Annual Report 2004, www.diageo.com/download%5C3000---R531.pdf - p.26 - viewed 24.01.05
    8 http://uk.biz.yhoo.com/p/d/dge.1.html - viewed 02.01.05
    9 http://finance.yahoo.com/q/pr?s=DEO - viewed 02.01.05
    10 Diageo website www.diageo.com/download%5C3000---R532.pdf p.16 - viewed 02.01.2005
    11 Diageo website
    www.diageo.com/pageengine.asp?status_id=3000&page_id=22&site_id=3§ion_id=24. - viewed 24.01.05
    12 Diageo website www.diageo.com/pageengine.asp?menu_id=4§ion_id=; Thalidomide UK, www.thalidomideuk.com/ - viewed 04.02.05
    13 Mike Verdin, ‘Guinness Four fail in fight for acquittal,’ BBC News Online 21.12.01 http://news.bbc.co.uk/2/hi/business/1723136.stm - viewed 26.11.04
    14 Diageo Careers, www.diageo-careers.com/WhoWeAre-DidYouKnow.asp+distiller+diageo&hl=en - viewed 26.11.04
    15 Paul Walsh, Diageo CEO, The London Business School Summit on Global Leadership, 28.06.04
    www.diageo.com/download%5C3000---R495.pdf - viewed 18.01.05
    16 Diageo Careers, www.diageo-careers.com/WhoWeAre-DidYouKnow.asp+distiller+diageo&hl=en - viewed 26.11.04
     
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