NOTE: THIS WAS THE FIRST ARTICLE TO REVEAL THAT DIAGEO WAS ADULTERATING CARDHU DUE TO SUPPLY SHORTAGES, AND PASSING OFF A VATTED MALT AS A SINGLE MALT
DIAGEO is facing a civil action from other leading distillers over a “deliberately deceptive” approach to the packaging and marketing of its Cardhu Scotch whisky brand.
Driven by short-term revenue pressures and a failure to lay down sufficient stocks of 12-year-old Cardhu — a key ingredient of Johnnie Walker blended Scotch whisky — Diageo has been “passing off” a mixture of malts from other distilleries since July as if it was produced at Cardhu on Speyside.
The “Cardhu Pure Malt” is believed to be made from a blend of malts from Diageo’s Glendunnan and Auchroisk distilleries.
The London-based distiller’s controversial sourcing strategy for its 12-year-old Cardhu was prompted by surging sales for its Cardhu single malt in Spain. A spokesman said that market research indicated that Spanish consumers “did not care” if a product labelled as “Cardhu” was sourced from other distilleries.
Diageo is currently renaming its Banffshire distillery “Cardow” – the name used between its foundation in 1824 until 1981 when it was renamed Cardhu – in a bid to disassociate the Cardhu brand from any particular geographic location. But this will not be enough to satisfy rival industry players, who are incensed by the way Diageo has flouted the industry’s self-regulatory framework.
By presenting a “pure malt” — a potentially misleading term which actually refers to a mixture of malts sourced from any number of distilleries — in a bottle that is near identical to that of its single malt Cardhu brand, Diageo has ridden roughshod over industry rules on the authenticity and provenance of Scotch malts.
The subtle change in packaging, which boils down to replacing the words “single malt” with “pure malt”, will doubtless pass most consumers by, except for true connoisseurs of Scotch, who will be outraged.
John Grant, chairman of J&G Grant, the makers of the Glenfarclas single malt said: “What Diageo is doing is totally wrong. It is wrong ethically, and it is wrong morally, and totally misleading to the public. It is not just tradition that is at stake here.
“If they continue to do this, they could seriously undermine the integrity and authenticity of the entire single malt industry.”
“We certainly hope that they will see sense, hold their hands up, admit they made a mistake and then rectify it. End of story.”
So far the Scotch Whisky Association — which is usually stringent in the way it polices the labelling and provenance of Scotch whisky to ensure the product’s authenticity — has been unusually silent on the matter.
“We’re trying to find a solution to the issues that have been raised,” said Campbell Evans, for the SWA. “Talks are ongoing. It seems that the changes to the distillery signage are in train.”
But senior sources in the industry told the Sunday Herald that unless the SWA stops being “namby pamby” and stops “fence-sitting” on this issue, there could be a schism in the industry, leading to a weakening of the single malt brand identity. Several Scotch whisky companies say they are prepared to take out a civil action against Diageo.
This would take the form of a class action for “passing off” a vatted/pure malt as though it were a single malt. “It is being quietly discussed and could in theory kick off in weeks,” said one source.
Another source said: “This is the biggest issue to have crossed the SWA’s desk for some time. It is certainly stirring up quite a lot of concern and discussion within the industry. The trouble is the SWA, which derives at least 40% of its revenues from Diageo, is stuck between a rock and a hard place on this issue.”
The source added: “If we were to change the product to pure/vatted malt but keep what is essentially the same label, we would be thrown out of the SWA the next day. But the association is in an unenviable position on this one, given how it is funded.”
Tony Hunt, deputy managing director at William Grant & Sons, which produces the Glenfiddich and Balvenie single malts, said: “If Diageo continues to get away with this, consumers will cease to trust anything that has single Highland malt on the label.”
He said Grant’s is pressing Diageo to reconsider the redesignation of Cardhu. He added: “If Cardhu does this, everyone else could do it.
“Indeed Diageo has publicly stated that it is considering it for other brands in its range of classic malts. The brand associations of single malts would then suffer, profits would suffer, which would be bad both for the industry and the Scottish economy. Diageo has the most dominant role in the industry and it, therefore, also has the most to lose.
“We are optimistic that they will see sense. It is so obviously against the interests of the Scotch whisky industry and of everyone in the industry. But the Scotch Whisky Association has been having to tread a little carefully.”
Copyright 2003 SMG Sunday Newspapers Ltd.
This article was the business splash in the Sunday Herald on 2 November 2003. It broke the story of the Cardhu deceptive branding story for the first time, and was widely followed up by other media