Shieldhall production line upgraded so it’s capable of filling 500 Johnnie Walker bottles a minute
DIAGEO, the world’s largest drinks company, is poised to also become the fastest. The company on Tuesday unveils the world’s speediest spirits bottling line at its Shieldhall plant in Renfewshire, on the southwest fringes of Glasgow.
“One line there now outstrips the industry,” says Diageo Scotland director Allan Burns. “It represents a considerable change in productivity.”
Throughput on the new Shieldhall line is to be lifted from around 350 bottles per minute to something approaching 500.
Many other industry sectors have been forced to outsource manufacturing to the low-wage economies of southeast Asia. And while whisky must, by law, be distilled and matured in Scotland to earn the sobriquet “Scotch”, the ruling does not apply to bottling.
Burns, 55, a Scot, joined Diageo in 1989 after working in production for car giant General Motors and pharma company Pfaudler. He believes that spirits bottling can easily be retained in Scotland. But he implies there are no guarantees. To be certain of that, he says Diageo’s plants north of border must remain “globally competitive”.
“We benchmark ourselves against anyone who does packaging — it could be cigarettes, detergents or foods,” he says.
The company, which grew from the amalgamation of Distillers Company, Guinness and Grand Metropolitan, has two other bottling plants in Scotland, at Leven and Kilmarnock. But it also has a bottling plant in Cheshire and at Santa Vittoria d’Alba in northern Italy.
Today the company employs 2,000 people in “supply” in Scotland — which includes bottling and packaging — over and above 1,500 in distilling. By definition the distilling jobs are safer given the legal requirement that Scotch is distilled and matured here.
Diageo currently bottles around 50 million nine-litre cases of spirits per year in Scotland, a 20% increase on 2001’s figure of 40 million. This was partly because the drinks giant opted to transfer the production of certain white spirits brands — including Smirnoff, Tanqueray and Gordon’s — to its Leven plant in Fife two years ago.
Burns says 10 million cases of Johnnie Walker, nine million cases of Smirnoff Ice, four million of J&B, 3.5 million of Gordon’s gin, 2.4 million of Windsor — a Scotch whisky for the Korean market — and two million of Smirnoff currently emanate from Scotland each year. There’s also a plethora of other Scotch blends and malts, many with tiny volumes.
Diageo gave its Scottish production business a further shot in the arm when the production of ready-to-drink brands Smirnoff Ice and Archer’s Aqua — a critical market segment for Diageo — was transferred to Leven earlier this year. The move followed a £13 million capital injection which included around £2m in Regional Selective Assistance grants.
“Leven is now the lowest cost plant in Europe for ready-to-drink products,” says Burns. He praised the ability of staff at Leven and Shieldhall to “adapt to new skills”.
Captain Morgan, a big-selling rum acquired by Diageo from Seagram last year, will also start being bottled at Leven from March 2003. The spirit itself will continue to be sourced from the Caribbean.
Burns, formerly production director at Diageo, believes keeping a constant eye on productivity at sites including Sheildhall is the only way of ensuring Diageo continues to favour Scotland as a packaging and supply base.
He was headhunted by what was then United Distillers in 1989 because, he says, “of my experience in rationalising and downsizing businesses”.
Because the business had grown amorphously through a series of mergers and acquisitions, and because Distillers Company Ltd was notoriously badly managed, there was plenty of “low-hanging fruit” for Burns to pluck. He said that one of the first things he did was “close four plants and restructure three”.
“It’s all about asset utilisation,” explains Burns. “I saw plenty of opportunities to get cost out and leverage the sales and marketing effort.”
Overall he cut the workforce by 35% reducing staff levels from 6,000 to 3,500 in production and 500 in support.
But Burns resents parallels with “Chainsaw” Al Dunlap, the infamous American turnaround specialist who radically downsized Sunbeam before being sacked as its chief executive in 1998.
“I found it extremely harrowing [to have to lay off that many people],” says Burns. “It was a terrible waste of human resources. Even after six years of restructuring, we still were not as competitive as we should have been. There is no room for complacency and you need to keep reinventing things to stay ahead.”
Burns describes Paul Walsh, who became Diageo’s CEO in September 2000, as inspirational. “This is a different Diageo to what it was like four years ago. It’s become an even more exciting place to be and there is a definite collegiate spirit at the top.”
The spirits of Christmas
Trinidad-based Angostura’s formal offer for Burn Stewart Distillers should be wrapped up by Christmas, according to Burn Stewart’s chief executive Ian Bankier, who said technical issues involving the Trinidad stock exchange were behind the delay. Burn Stewart said in September that Angostura would be in a position to make a formal offer in “the next few weeks”.
But last week Britannic Asset Management, which has a 4% stake in the East Kilbride distillers, expressed concern about continuing delays to the formal offer.
“The deal is agreed and in bed,” said Bankier, “it just needs to be processed.”
This article was published in The Sunday Herald on 1 December 2002