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COMMENT: Diageo uproots Scotch whisky ops

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There are circumstances when tradition and heritage are to be cherished and there are others when both can hang like dead weights around your neck.

The difficulty is deciding when to cut loose, and, when you do, convincing other people that you are right.

That is one of the conundrums facing Diageo this week as it breaks cover with plans to close a packaging plant in Kilmarnock, and so breaking a tie, albeit slightly strained, with the town that gave birth to Johnnie Walker Scotch whisky in the early 19th Century.

Diageo also plans to close the Port Dundas distillery next year, pulling down the shutters on 200 years of distilling at the facility.

Diageo is not the first and most certainly will not be the last to make such moves.

Earlier this year, Heineken signalled that it would close and sell off the Beamish & Crawford brewery in the Irish city of Cork. The brewery was founded in 1792, but the site has been used for brewing since at least the mid-17th Century, historians estimate.

Then, last year, Carlsberg closed its historic brewery in Valby, Denmark. And, around four years ago, again in the UK, Scottish & Newcastle moved the brewing of Newcastle Brown Ale out of Newcastle.

It is often suggested that such policies are driven by the accounting departments of major firms, with little consideration for the product and knock-on consequences.

Certainly, there are sound reasons why breaking historical links can damage a brand. Marketing departments must privately despair at times, looking on as a good heritage "story" on a major brand is sucked into an apparent black hole of mass, banal production.

On an emotional level, most people also have a natural streak of conservatism that pricks the nerve endings when faced with a break from the past; a break from familiarity.

Then, and not least importantly, comes the potential economic impact on an area: the near certainty of job losses and all of the socio-economic baggage that comes with them.

However, sometimes it is necessary to make tough changes.

Diageo is still very clearly committed to Scotch whisky - as well as expanding the Cameronbridge grain distillery near Fife, the group still plans to open its new distillery at Roseisle on Speyside. It has invested around GBP100m in both, and remains the number one Scotch whisky maker.

Diageo has long-term strategy documents on how it believes the global Scotch market is likely to play out, just-drinks understands from sources familiar with the company.  

The group's 4,500 workforce will be reduced to somewhere nearer 4,100 if its restructuring plan goes ahead as proposed.

It is up to the group to convince the wider world that it has made the right call.


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