Paul Walsh has rung the bell on his spell as CEO of Diageo – and quite a spell it’s been.
Walsh started at Diageo before it was Diageo, joining GrandMet’s brewing division in 1982. He became finance director in 1986 and – after Diageo was created from the merger of GrandMet and Guinness – stepped up to the role of COO and then CEO in 2000. He will stay with the company until June next year to complete the handover to Ivan Menezes, who has himself been with Diageo since 1997.
It’s been a hugely successful 13 years: Diageo’s share price has risen 234% under Walsh’s tenure, which has been marked by massive expansion into emerging markets and a long list of acquisitions. Diageo picked up Seagram’s wine and spirits biz in 2000 and followed this up with – among others – swoops on China’s Sichuan Chengdu Quanxng group and Brazil’s Ypioca, as well as taking a controlling stake in India’s United Spirits. The spending spree came to a halt last year, with a failed bid to take over Jose Cuervo.
The emphasis on emerging markets has served Diageo well – closer to home, business in Europe and the UK is far tougher than when Walsh stepped up to the plate.
Guinness sales are down and have been for some time – last year volume sales of the black stuff in the UK fell 15.8% year-on-year [Nielsen 52 w/2 15 September 2012]. A heavy, mainstream stout isn’t quite on message with current market trends, which have been leaning towards lower-strength and lighter beers, while sales of Smirnoff Ice dropped 19.1% in 2012 as consumers of traditional RTDs got a taste for fruit-flavoured ciders.
But it’s not all doom and gloom. Britain’s number-one spirit brand, Smirnoff Red Label, was up 7.7%, and Gordon’s up 7.6%. Last year, Diageo announced a £1bn investment in Scotch whisky production to meet global demand, with construction set to begin on a £50m distillery in Teaninich.
As for the incoming CEO, we can expect “more of the same”, reckons Neil Shah, global head of research at Edison Investment Research: “The key to Menezes’ success will be in ensuring Diageo remains a prime mover in India, China and other large fast-growing emerging markets.”
It seems as though Walsh – who was named the first UK business ambassador from the food and drinks industry and took number two on The Grocer’s Power List last year – has set the tone for Diageo for some time to come.