Diageo is the world’s largest spirits company. Its huge portfolio of brands includes numerous top sellers, including Smirnoff vodka, Tanqueray gin, Captain Morgan rum, Bulleit whisky, Crown Royal Canadian whisky, Don Julio tequila, and numerous other staples, as well as major beer and wine brands, including Guinness stout. Diageo’s scotch holdings are particularly impressive: in addition to the Johnnie Walker and J&B brands, it owns twenty-nine distilleries in Scotland. The conglomerate’s Italianate name is actually a mashup of the Greek word for “through,” dia, and ge, the root of the Greek name for the earth.
The company, which is based in the United Kingdom, was formed on May 13, 1997, when Grand Metropolitan and Guinness merged. (Guinness dates back to 1759, when founder Arthur Guinness agreed to a now legendary nine-thousand-year lease for his eponymous Dublin brewery.) The deal, according to the New York Times, was worth $22.27 billion and the fifth largest merger in history at the time. The paper wrote that this was done out of necessity, since the two firms were facing “a steady decline in liquor consumption in their traditional markets.” The Times went on to say, “The driving force behind the surprise announcement today is the generational divide that has plagued the liquor business for years. Basically, distilled spirits are popular with people 60 and older, while younger drinkers tend to prefer wine, wine coolers, beer or nonalcoholic drinks—a trend that does not bode well for future growth.”
While the paper’s forecast couldn’t have been worse, the new combined company was certainly perfectly set up as spirits sales started to take off in the new century. Despite opposition from chief rival Seagram, the merger went through. To satisfy regulators, Diageo did have to sell off Dewar’s and Bombay gin to Bacardi for $1.9 billion in March of 1998. See Dewar’s and Bacardi. (That move helped Bacardi grow from a top rum and vermouth producer to a major company in the wider liquor business.) Diageo also had to satisfy Bernard Arnault, the head of LVMH, who held a sizable piece of both Guinness and Grand Metropolitan. LVMH received $810 million as well as a lucrative distribution deal. At the start, the new company sold much more than just alcohol. Grand Metropolitan brought to the deal a number of major food brands, including, reportedly, nearly ten thousand Burger King locations, frozen-food line Green Giant, Pillsbury, and Häagen-Dazs Ice Cream. Despite initial promises not to sell off these businesses, over the next few years Diageo shed nearly all its non-alcohol investments and used some of the revenue generated to buy more liquor brands when Seagram liquidated its holdings.
It now has production facilities in more than thirty countries around the world. Diageo continues to grow by both creating new alcohol brands, such as Ciroc vodka, as well as acquiring other brands, such as Casamigos tequila. The company has also built large new distilleries for existing brands, including Bulleit’s large new facility in Kentucky.
See also Captain Morgan; Crown Royal; Don Julio; Gordon’s; Johnnie Walker; Smirnoff; and Tanqueray Gordon & Co.
Hays, Constance, L. “Diageo May Sell Dewar’s to Bacardi for $1.9 Billion.” New York Times, March 30, 1998.
Steinhauer, Jennifer. “International Business: LVMH Now Backs Merger of Grand Met and Guinness.” New York Times, October 14, 1997.
Ibrahim, Youssef, M. 1997. Guinness and Grand Met in $22 Billion Deal. The New York Times, May 13.
By: Noah Rothbaum