Diageo has continued the restructuring of its US distribution system with the appointment of Judge and Dolph as its exclusive distributor for the state of Illinois.

"Ultimately, we chose Judge & Dolph based on its long-standing position in the marketplace and the quality of its business proposal," said Gilbert Ghostine of Diageo.

However, National Wine & Spirits (NWS), one of the competing wholesalers in the state which lost out to Judge & Dolph, is opposing the legality of he deal, claiming "the attempt to terminate NWS' rights in Illinois is wrongful and not in accordance with Illinois law or the terms of NWS' existing Seagram agreement."

In a statement the company said that revenue for the affected Diageo brands in Illinois for the twelve months ended November 30, 2002 was approximately US$79m, and total Diageo cases shipped were approximately 0.5 million. For the same twelve-month period, distribution of these Diageo brands in Illinois contributed approximately US$15m to the gross profit of NWS.

James E. LaCrosse, chairman and CEO of NWS, said: "We are obviously disappointed by the Diageo decision. However, we do not believe this action by Diageo to be lawful, and we look forward to resolving this with Diageo over the next several weeks and months."

LaCrosse also reported that NWS is in the process of fully evaluating the financial impact of the Diageo decision and reaffirmed NWS' financial guidance for its fiscal year ending March 31, 2003; that is, for stable to slightly lower profit and EBITDA.