DIAGEO STREAMLINES, SHEDDING MULTIPLE BRANDS

In General Business by Clyde Mooney

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Diageo has streamlined its vast portfolio, peeling off 19 brands in a massive deal to American independent Sazarac to focus its resources and returns.

UK-based Diageo is one of the world’s largest drinks companies, with segment-leading brands across spirits and beer categories, sold in more than 180 countries.

It has announced a $550 million deal divesting a significant portion of its portfolio in what it couches as its “clear strategy to deliver consistent efficient growth and value” for shareholders.

“This includes a disciplined approach to allocating resources and capital to ensure we maximise returns over time,” says Diageo chief executive Ivan Menezes.

“Today’s announcement is another example of this strategy in action. The disposal of these brands enables us to have even greater focus on the faster growing premium and above brands in the US spirits portfolio.”

Net proceeds of the sale are expected to be approximately £340 million, which will be returned to shareholders through the ongoing share repurchase program of up to £2bn, previously announced.

The labels involved in the deal are: Seagram’s VO, Seagram’s 83, Seagram’s Five Star, Myers’s, Parrot Bay, Romana Sambuca, Popov, Yukon Jack, Goldschlager, Stirrings, The Club, Scoresby, Black Haus, Peligroso, Relska, Grind, Piehole, Booth’s and John Begg.

Sazarac is one of America’s oldest family-owned and privately held distilleries, with operations in ten US states, as well as the United Kingdom, Ireland, France, India, Canada and Australia.

Diageo has entered long-term supply contracts with Sazerac for five of the brands for ten years each, with the others transitioning within a year of the deal’s completion.

The deal is still subject to regulatory approval, but expected to complete early 2019.

Diageo will continue to produce flagship brands Johnnie Walker, Crown Royal, JεB, Buchanan’s and Windsor whiskies, Smirnoff, Cîroc and Ketel One vodkas, Captain Morgan, Baileys, Don Julio, Tanqueray and Guinness.