Comment – Wehring's Way – Walsh on his Way at Diageo
Paul Walsh will stand down as CEO of Diageo in July
Like a royal's obituary, I could have penned this item about Paul Walsh's departure from Diageo quite some time ago. After all, it has been widely known in industry circles for the better part of two years that Walsh was going to call time on his tenure either this year or next.
Nor is the news that Walsh will be replaced by Ivan Menezes, Diageo's COO, a surprise either. Menezes' promotion to the newly-created role a year ago was also seen by many as the first step towards his accession.
So, at the age of 58, and with his second marriage set for later this month, Walsh has deemed that the time is right to hand over the reins.
When looking back at a CEO's tenure, agreeing a definition of 'success' is key.
If success is measured by a company's share price performance, then Walsh certainly gets a tick in the plus column: In a note today, Investec calculated that, since his appointment in September 2000, GBP100 invested in Diageo has grown to GBP538 today, relative to only GBP148 for the FTSE 100.
If success is measured by growth in emerging markets, then again Walsh comes up trumps. When Diageo stated its aim to source 50% of its net sales from emerging markets by 2015 (today it's at around 42%), the firm set about securing large footprints in markets like Brazil - through Ypioca - Vietnam - through Halico - and India - through United Spirits. That the question “where next?” has been regularly put to Walsh suggests that there aren't that many major markets left for the drinks giant to target.
Of course, it's not all rosy. Walsh will leave Diageo at a time when it has two sizeable gaps in its spirits portfolio, in Tequila and Bourbon. Of course, the company could have plugged both by securing a deal with the Beckmann family over Jose Cuervo and by making a move for Beam Inc. Financial conservatism precluded both, however, and I'm sure Walsh will point both to the organic growth of smaller brands like Ciroc vodka as a way to cover the Tequila and Bourbon bases, and to Diageo's healthy balance sheet as it baulked at unrealistic price quotes.
Many seasoned observers will also bemoan Diageo for coming across as a corporate, profits-above-all-else, impersonal organisation that is not in keeping with the drinks industry as a whole. The plea to this one would have to be guilty, I believe. But, to maintain a FTSE-100 status and to grow as quickly and as confidently as Diageo has done under Walsh's tenure, is there really any alternative to being 'corporate'?
I've met Walsh on many occasions over the last ten years, mainly at full-year results time. I've also interviewed him one-on-one a couple of times. (I've even had him swear at me once, but that's a story I shall save for another day.) Each time that I have met him, he has been more than happy to go off the record and, in his northern English accent, let me know exactly what he thinks of an issue, a company, a category, even a person.
With the media-savvy Alex Ricard set to take the helm at Pernod in early-2015 and the equally clued-up Menezes due to move up in July, I hope we'll see that candour continue.
For now, though: Cheers, Paul. It's been fun.
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