Diageo’s reputation ‘in meltdown’ over Cardhu pure malt

ALLIED Domecq, the world’s second largest drinks company, has launched a spirited attack on its biggest industry rival, the Johnnie Walker-to-Captain Morgan group Diageo, accusing the firm of deceiving both consumers and the press in its approach to the storm over “adulterated” Cardhu.

The move forms part of a wider crescendo of criticism and dismay over Diageo’s decision to introduce a blended malt version of its Cardhu single malt whisky to continental markets including Spain.

“Diageo is in reputational meltdown because of this,” said Stephen Whitehead, director of corporate affairs at Bristol-based Allied Domecq. “In my view they are misrepresenting things continuously.”

Allied Domecq’s biggest-selling whisky is Ballantine’s but its malts, including Laphroaig and Scapa, could suffer because of Diageo’s decision to “pass off” a blend of various malt whiskies as if they were a single malt.

Diageo has defended its action, which was prompted by a shortage of supplies at its Cardhu distillery in Banffshire, by saying Spanish consumers “don’t care” whether Cardhu pure malt bottles contain any whisky distilled there. Whitehead said: “How rude of them to talk about Spanish consumers in those terms.”

Diageo has also claimed it is being “innovative” and ensuring the industry has a long-term future over its approach to Cardhu. “Why on earth do they think they are so clever when we are not?” added Whitehead.

Rival distillers hold “council of war” over Cardhu pure malt

This Tuesday, Allied Domecq and 14 other leading Scotch whisky companies will attend a “war council” in the Glasgow offices of Morrison Bowmore Distillers with a view to assessing how Diageo’s flouting of the Scotch whisky rule book can be blocked. The meeting will be attended by a leading Edinburgh- based corporate law firm who will advise on legal methods of preventing Diageo from persisting with its approach to Cardhu pure malt.

The attendees are expected to include Richard Burrows, chief executive of Pernod Ricard, Georges Nectoux, chief executive of Chivas Brothers, Paul Bowman, chief executive of Allied Domecq, Paul Neep, chief executive of Glenmorangie, John Grant, chairman of J&G Grant, Vivian Imerman, chief executive of Whyte & Mackay, and Garry Gray, managing director of Bacardi-owned John Dewar & Sons.

The aims of the summit are first of all to determine what, if anything, can be achieved through the Scotch Whisky Association. But delegates don’t hold out much hope as the industry lobby group has so far shown itself to be weak on the issue, which may be linkced to the fact that Diageo is estimated to provide 40% of the SWA’s funding. The meeting will then explore what legal pressure can be brought to bear on Diageo.

However James Thomson, owner of Edinburgh-based scotchwhisky.com website, does not hold out much hope that Diageo will reverse its decision. “The guys at United Distillers, as it was formerly known, don’t just think they own half the Scotch whisky industry,” he said. “They think they are the industry. The only thing that will stop them is a consumer backlash, and if their other major products such as Johnnie Walker begin to suffer or are boycotted by consumers.”

He warns that another long-term consequence of what has happened with Cardhu is that the brand will suddenly find itself prey to counterfeiting.

Diageo is also facing an onslaught from industry “bible”, Drinks International.

In the November issue, published this week, editor Patience Gold says Diageo has been “cynically deceptive” to consumers.

She writes: “With this one move Diageo has shown it does not give a toss about the conventions it is so flagrantly flouting it has shown its true colours; in its quest to be a consumer brand company it has ridden roughshod over the mores of the industry.”

Copyright 2003 SMG Sunday Newspapers Ltd.

This article was published in the Sunday Herald on 16 November 2003 and was a follow up to my “Cutting up rough over Cardhu” which broke the story of the Cardhu pure malt controversy.