Trade Resources Company News Diageo Has Confirmed It Is Considering Selling Most of W&M Whisky Distilleries

Diageo Has Confirmed It Is Considering Selling Most of W&M Whisky Distilleries

Global drinks giant Diageo has confirmed it is considering selling most of the Whyte & Mackay (W&M) whisky distilleries it gained by taking over India’s United Spirits.

Diageo is offering a deal to offset competition concerns about its whisky interests

The move is an attempt to assuage the Office of Fair Trading’s (OFT’s) concerns the deal might give Diageo too much of a stronghold in the bottled blended Scotch whisky sector.

Diageo proposes to sell W&M’s Invergordon, Jura and Fettercairn distilleries in Scotland, plus all of its central operations, to address the issue. While W&M also owns and distributes other spirits, such as vodka, rum, liqueur and pre-mixed drinks, it primarily supplies whisky.

Diageo’s whisky interests also include Johnnie Walker, the world’s top selling whisky brand, Talisker, Buchanans and J&B.

The deal would not include management and staff at the distilleries under the hammer and any supply arrangements currently in place related to the two sites, according to the OFT.

In a statement, the OFT said: “A number of retailers expressed concerns to the OFT about possible price rises for bottled blended whisky sold in the UK as a result of the merger.

‘Substantial competition’

“The OFT's investigation found that there is substantial competition in the retail sector between Bell's whisky, a Diageo label, and Whyte & Mackay's own-label and branded blended whisky.

“After analysing evidence including data on consumer switching between brands, economic modelling and internal documents, the OFT found the merger may lead to a substantial lessening of competition in the supply of blended whisky to retailers.”

The OFT added that it believed if Diageo held on to all W&M assets, rival manufacturers did not have the capacity to compete in the same whisky sector.

“We are now considering Diageo's offer to sell the bulk of the Whyte & Mackay business with the exception of two malt distilleries, to address our concerns,” said Chris Walters, OFT chief economist and decision maker in the case.

Shore Capital analyst Phil Carroll told FoodManufacture.co.uk the offer was “pretty much as I had expected” and that its divestment proposal would not represent a major blow. Referring to W&M’s own-label interests, he said: “I don’t think it’s a business they [Diageo] particularly want to own.”

More ready cash

A sell-off would obviously generate more ready cash, but it would not represent a big deal in relation to the size of Diageo, Carroll said.

The remaining Dalmore and Tamnavulin malt distilleries and brands supply United Spirits and primarily international markets and would be kept within the United Spirits group, said Diageo.

While the offer was on the table, any referral of the deal to the Competition Commission was on hold, the OFT confirmed.

“Diageo will be assisting the OFT with its on-going work,” said a Diageo spokesman. “A further announcement will be made in due course and we are not in a position to comment further at this stage.”

Diageo announced its acquisition of a controlling stake in United Spirits on July 4.

Source: http://www.foodmanufacture.co.uk/Business-News/Diageo-mulls-sale-of-Whyte-Mackay-distilleries
Contribute Copyright Policy
Diageo Mulls Sale of Whyte &Amp; Mackay Distilleries