Tuesday, May 27, 2003

Oligopoly brief: Diageo Diageo is a five-year-old company that specializes in adult beverages. It calls itself the "leading vendor of premium drinks." It specializes in alcohol, and its roster contains a number of catgeory-leading brands. Diageo has made its business to collect some of the top liquors, and uses a strong marketing campaign to get the most out of them. In 1992, it earned over $17 billion, selling its products in over 200 countries. The company was formed in 1997 by a merger of Guinness, the Irish brewer, and GrandMet, a European holding company. Guinness owned United Distillers; GrandMet owned International Distillers and Vintners. GrandMet at the time also owned both Pillsbury and Burger King. The liquor operations merged soon after, Diageo sold Pillsbury to its rival General Mills in 2001. Burger King was sold to an American investment group in 2003. The company also unloaded a number of liquor brands, including Dewar's, Bombay (Gin), Metaxa, and Cinzano, presumably at the suggestion of antitrust authorities. But Diageo also picked up brands in 2002. It acquired some of the Seagram's liquor assets, which Vivendi discarded after it bought out the Seagram's media business. Diageo's main rival in the liquor business, Pernod Ricard, acquired other Seagram brands. Diageo subsequently sold off the Malibu liquor brand to Allied Domecq. The company has a close relation to LVMH (Louis Vuitton Moet Hennessy), and in a joint venture sells Moet & Chandon champagne and Hennessy cognac. The company is going beyond tradition in several ways. One is the collection of wine brands. Until now, wine has been a very unconcentrated market, with little outside ownership of brands. Diageo and a few other companies may be changing that slowly. Second, the company has been involved in alcopops, fruity and fizzy alcohol drinks, mostly aimed at novice drinkers. The Smirnoff Icebrand has been particularly successful, along with other ready-to-drink brands. Diageo's approach has been deliberate, keeping with a few top-shelf brands. And discarding distractions like restaurant chains and food manufacturers have been smart moves. It will be interesting to see how Diageo and the other emerging oligarchs of the liquor market play their cards. Category Brands Beer Guiness, Harp, Kilkenny Irish, Red Stripe Cognac Hennessy (joint venture) Gin Gilbey's, Gordon's, Tanqueray Liquers Archers, Baileys, Pimm's Ready-to-Drink (RTD) Smirnoff Ice, Smirnoff Black Ice, Smirnoff Mule, Archers Aqua, J&B Twist, Johnnie Walker One Rum Bundaberg, Cacique, Captain Morgan, Myers's Tequila Cuervo, Don Julio Vodka Citroc, Smirnoff Whiskey Bell's, Crown Royal, J & B, Johnnie Walker, Seagram's 7, Seagram's VO Wine Barton & Guestier, Beaulieu Vineyard, Blossom Hill, Piat D'Or, Moet & Chandon (joint venture), Sterling Vineyards 7:05:54 PM

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