In the Spotlight - Diageo Stirrings in Ireland
Drinks giant Diageo acquired the remaining stake in US premium cocktail mixer group Stirrings on Tuesday (16 June), just a day before announcing plans to cut more than 100 jobs in Ireland as part of a restructuring programme. Michelle Russell looks at the bigger picture behind both moves.
The group, which previously owned a 20% stake in Stirrings, a premium cocktail mixer group, scooped up the remaining 80% as it looks to target the growing number of consumers drinking at home in the economic downturn.
This move is all about tapping into cocktail culture.
Diageo bought the minority share two years ago in what it described at the time as "an arms length relationship". On Tuesday that arm got considerably shorter, and the company clearly has its sights set on matching up Stirrings considerable portfolio with brands such as Smirnoff, Baileys, Cuervo, Tanqueray and Captain Morgan.
Also this week, Diageo announced a tie-up with Coca-Cola Enterprises to launch a "multi-million pound" marketing campaign to drive spirit-mixer sales in the off-trade in the UK.
The moves will surely give the drinks giant a greater presence in the growing trend for entertaining at home, which has not been caused by the economic downturn but has accelerated in both the US and UK during the countries' respective recessions.
"This is a great opportunity to further grow the Stirrings brand and create more synergies with Diageo's array of leading spirits brands," said Larry Schwartz, president of Diageo USA, this week. "As people entertain more at home, they are looking for an easy way to serve bar-quality cocktails and Stirrings fits squarely within our at-home strategy."
Stirrings produces cocktail mixers, garnishes and bar ingredients, with a focus on premium and natural products. It was founded 12 years ago in Nantucket, an island off Massachusetts, by old family friends Gil MacLean and Bill Creelman.
Described as a premium cocktail mixer group, Charles Cowdery of The Examiner commented that Stirrings products are "pricier than the old familiar mixer brands" and are made with "fancy schmancy ingredients like real fruit juice, triple purified water and cane sugar".
With signs of life in the merger and acquisitions industry so scarce right now, the deal is certain to be financially beneficial for MacLean and Creelman, who will stay on with the company as consultants.
Things aren't looking as bright in Ireland, however, as Diageo announced job cuts of around 107, with the majority from Guinness headquarters at St James's Gate, Dublin, on Wednesday.
Jobs will be lost across sales, marketing and business support rather than manufacturing and Diageo has promised to consult staff to get as many redundancies "as possible" on a voluntary basis.
The cuts are part of a cost savings programme designed to save GBP100m annually across its international business from the start of the firm's fiscal 2010.
Diageo Ireland chairman Brian Duffy said the decisions taken were "the necessary steps to maintain a sustainable competitive business in Ireland".
Some in the country have questioned the move, however.
Labour TD Mary Upton told the Belfast Telegraph that workers have "every right" to ask why the jobs were being cut when the drinks manufacturer enjoyed EUR200m profits last year and over EUR1bn in the last four years.
"The announcement by Diageo…will be very worrying to everybody associated with the company," she said.
KamCity said that management sources were reportedly unable to give assurances on the future outlook for the remaining staff in Ireland and that cross-border trade had hit sales.
In early May, Diageo reported a 7% slide in organic like-for-like sales globally for its third quarter.
Ireland has been hit particularly badly by the economic downturn and had the dubious honour of becoming the first EU member state to officially declare a recession last year.
At the beginning of the year. Diageo said it was reviewing its plan to invest EUR650m in a new brewing centre at Leixlip, Co Kildare as a result of the current economic downturn.
The group said it will "conduct a re-evaluation of this brewing investment programme in order to ensure its scope remains appropriate in the changed economic environment".
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