The group says it will invest some of the funds in premium drinks and return some to shareholders. While there are opportunities in the wine market, the ‘premium drinks’ part of this is most likely to be the spirits business. This has been the focus of previous acquisitions; indeed, Diageo allowed Pernod Ricard to take the lion’s share of Seagram’s wine business.
UK: Comment – Diageo prepares to spend
Diageo can breathe a sigh of relief after offloading Burger King which it sold yesterday to Texas Pacific, Bain Capital and Goldman Sachs for $2.26 billion. But what should it do with the money? Investing in the core spirits offering seems like the best plan. In the absence of major Seagram-style acquisition opportunities, it may snap up some smaller brands - but much of the spending should go on strengthening its marketing and distribution capabilities.