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Diageo

By dkeith330 Feb 25, 2013 1691 Words
Diageo comes from the Latin for day (Dia) and the Greek for world (Geo) Diageo is a global alcoholic beverage company headquartered in London, United Kingdom. It is the world's largest producer of spirits and a major producer of beer and wine. Their mission statement is “Our strategy is to drive organic growth in premium drinks. We will invest to take leadership positions in every category, market and consumer occasion in which we choose to compete” (Diageo, 2011). Diageo's brands include Smirnoff (the world's best-selling vodka), Johnnie Walker (the world's best-selling Scotch whisky), Baileys (the world's best-selling liqueur) and Guinness (the world's best-selling stout). It is also the exclusive international distributor of José Cuervo (the world's best-selling tequila) and owns 34% of Moët Hennessy, which owns brands including Moët & Chandon, Veuve Clicquot and Hennessy. The Company also brews and sells other companies’ beer brands under licensing, including Budweiser and Carlsberg lagers in Ireland, Heineken lager in Jamaica and Tiger beer in Malaysia. It sells its products in over 180 countries and has offices in 80 countries. Diageo has a primary listing on the London Stock Exchange and is a constituent of the FTSE 100 Index. It has a secondary listing on New York Stock Exchange under the symbol DEO.

Diageo was formed in 1997 from the merger of Guinness and Grand Metropolitan. The creation was driven by the two executives Anthony Greener and Philip Yea at Guinness plus George Bull and John McGrath of Grand Metropolitan. Since the start of this company in 1997 they have experienced much grow and added products to their product mix through acquisitions and licensing. They had a brief time in the food market but that ended in 2005 with Diageo selling its final stakes in General Mills making their exit from the food market. In 2002, Diageo sold the Burger King fast food restaurant chain to a consortium led by US firm Texas Pacific for $1.5 billion. Diageo also owned Pillsbury until 2000 when it was sold to General Mills. The Company competes with Pernod Ricard, Bacardi, Fortune Brands, Brown-Forman, Heineken, SABMiller, Coors Brewing, Carlsberg Anheuser-Busch, Brown-Forman Corporation, and Davide Campari-Milano Co. As June 30th, 2011 Diageo have over 20,000 employees worldwide in 80 countries. They have many brands across the beer, wine and spirits market with such brands being involved in 180 markets around the world. As of June 30th, 2011 they have made 15 billion dollars in sales with 4.6 billion dollars in revenue. During the fiscal year ended June 30, 2009, Diageo sold 113.4 million equivalent units of spirits , 24.7 million equivalent units of beer and 3.2 million equivalent units of wine. The corporate governance of Diageo consists of the typical board of governors but also has three sub committees. The committees are titled as such, Remuneration Committee, Nomination Committee, and the Audit Committee.

In regards to outside relationships Diageo seeks and benefits from diverse people and perspectives. They strive to create mutually fulfilling relationships and partnerships. Diageo has great relationships with their employees as well. They believe that the unique skills, diversity and hard work of their people should be celebrated and rewarded. But because they have operations across the world, there are a number of different benefit packages. They offer competitive salaries that take account of the markets they operate in and reflect the experience, performance and contribution of their employees. “This alcoholic beverage company made alternative work arrangements far more available to its employees in 2010, after it gave all of them new computers with instant messaging and video-conferencing...” (Working Mother Magazine, 2011) The Diageo lifestyle is all about ways to celebrate life and achievement. So for example, they offer a generous core annual leave entitlement in addition to statutory holidays, with the opportunity to flex this allowance in some regions and roles. Long-term health and well-being is also a priority for us. That’s why they offer a range of health-related benefits for employees and their families. This is a great way to give their people a long-term stake in the success of their business. For example, they have share option plans, which links performance to their long-term success reflected through share price growth. Whenever possible, they offer employees the opportunity to participate in profit sharing schemes, and they give access to voluntary share participation schemes through savings and purchase plans that enable their people to buy discounted shares - and then benefit from their share price growth. They are committed to allowing you to realize your potential within a demanding and exhilarating performance culture. So, their online Academy gives access to self-development resources, e-learning and online booking for classroom courses around the world, while their online career shop enables you to actively manage your careers through search agents, giving you access to job opportunities globally. They provide a range of competitive retirement savings plans, such as pensions, to enable you to save and plan for the future. These include related benefits such as life assurance.

They have their markets set up in four distinct area’s; North America, Europe, Asia Pacific, and International. They have also broken their products down into four groups. The typical beer, wine and spirits but, they broke the spirits category into two sub categories as Global Priority and Reserve Brand Products. Their global priority brands are their largest brands and those which either have, or are expected to have a critical presence in a significant number of their markets around the world. If you go into a bar in many of the world’s major cities, you’ll see consumers seeking a luxury experience when they order a drink. Their reserve brand’s team is dedicated to capitalizing on this trend. This leads me to believe that they use a matrix approach in the organization’s management, being that they have four different markets but also have many products.

Diageo aims to drive brand growth by exploiting complete category participation opportunities, rather than solely focusing on individual brands within categories. Key categories include Scotch whisky, vodka and rum. Their focus on their global priority brands in their most profitable markets helps drive growth of their global brands; Johnnie Walker, Smirnoff, Captain Morgan, Baileys and Guinness. They look to invest more resources into these and other brands with the best growth prospects. As part of their innovation agenda, they place an increased emphasis on premium brands, striving to build the best premium brands collection in the industry. They will look for opportunities and to build scale in developing markets to drive growth tomorrow. Finally, they seek out selective acquisitions to support their business’s growth; they invest behind innovation and focus on customer strategies where they can add long term shareholder value. With regard to their customer and consumer’s, their insights form the basis of their growth. They cherish their brands and they are creative in pursuing their full potential. Moreover, they recognize the integral role of the customer, and their ambition is to build a culture where the customer sits alongside the consumer at the heart of their business. As a sustainable business, they understand that consumers must trust Diageo, the quality of their brands and the information they provide to them. “We focus on quality through our quality management system that aims to ensure, among other things, that our people are properly trained, responsibilities for quality are clear, quality is monitored and targets are set for improvement. Through our Perfect Plant programme, we aim to create and maintain a culture of continuous improvement in the effectiveness and quality of our manufacturing. The programme, launched in 2008, now applies to over 60% of the 186 processes identified at our production sites.” (Diageo, 2011) In the years to come there will be a shift in the balance of economic power from the developed world – principally North America and Western Europe – to the emerging markets of Africa, Latin America, Asia and those in Eastern Europe. Growth in these regions in the next decade is likely to exceed that in the markets in which they have traditionally been strong. Very “Africa aims to develop policies on alcohol, to enable the inhabitants to enjoy the benefits and pleasures of drinking, while also taking appropriate measures to protect against all the ill effects of alcohol.” (Ghosh, 200) In regards to their social responsibility and the problems associated with alcohol consumption they must counter that with programs to maintain a healthy relationship with the stakeholders and consumers. They support programmes, practices and policies that address issues related to the misuse of alcohol. “We also aim to provide consumers with the information they need to make responsible choices regarding alcohol. One such effort is DRINKiQ.com.  Launched in 2008, DRINKiQ.com is a global initiative, with an additional 18 national websites in 8 languages, aimed at raising awareness and sharing information with others interested in reducing the harm caused by alcohol misuse. It also houses nutritional, allergen and alcohol content information for all of our wholly owned Diageo brands.” (Diageo, 2011) This shift in global economic power will benefit Diageo and its stakeholders over the long term, and in May 2011 they announced a reorganization to position themselves and their resources to take advantage of this opportunity. “Alcoholic beverage stocks aren't falling off the wagon either. Diageo and Brown-Forman are up 14% and 13%.” (Krantz, 2011). With news of vice stocks on the rise I don’t see any future problems for this company to sustain growth and continue to be a major player in alcoholic beverages.

Works Cited
Diageo. (2011). Home Page: Diageo. Retrieved December 5, 2011, from Diageo Corporation Website: http://www.diageo.com/en-row/Pages/default.aspx Ghosh, S. K. (200). Alcohol and Emerging Markets. Oxford Journals , 411-412. Krantz, M. (2011, December 4). Investors going for sin stocks: Tobacco, alcohol, gambling. Retrieved December 6, 2011, from USA Today: http://www.usatoday.com/money/markets/story/2011-12-02/sin-stocks/51643118/1 Working Mother Magazine. (2011). 2011 Working Mother 100 Best Companies. New York: Joan Sheridan LaBarge.

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