UK: Diageo to grow and buy to fill portfolio holes
Walsh was speaking at a press conference yesterday following Diageo's H1 results
Diageo is looking to adopt a “mix and match” strategy to plug perceived gaps in its global spirits portfolio.
Recent speculation has linked Diageo with a move for Beam Inc in the US, to bolster the firm's niche presence in the the Bourbon category and to make up for Jose Cuervo's departure later this year. Diageo owns the Bulleit Bourbon brand and distributes Don Julio Tequila in the US. Both brands operate at the higher value end of their respective categories.
Speaking at Diageo's H1 results briefing yesterday (31 January), CEO Paul Walsh said that he is keen both to evolve existing brands and to acquire brands from elsewhere. “You can't go paying for extensions to your house if you're not making the payments on the house you already own,” he told journalists.
“Value creation is around building what you already have. Once you've done that, you are afforded the ability to broaden your portfolio by acquisition. I think we've demonstrated our credentials in that regard.”
Several industry observers have suggested that Beam Inc is the ideal target for Diageo, thanks to the former's Jim Beam Bourbon and Sauza Tequila brands.
“Regarding gaps,” Walsh countered, “six years ago, people could have criticised us for not having a stronger presence in ultra-premium vodka. Look at what we have done with Ciroc: That was an organic play. We have created the value of that brand by our own work. We didn't buy it from anybody.
“We will mix and match organic and inorganic plays if we see that there is a gap in our portfolio,” he added. “But, I would say that there aren't many gaps.”
Bulleit was highlighted in the half-year results as having doubled its sales in the six months to the end of December. Volumes sit at around 300,000 cases per year in the US.
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