Diageo stalks LVMH brand

Liquor giant sets sights on Hennessy cognac and denies plans to dispose of Burger King chain

Diageo Plc, the merged Grand Metropolitan and Guinness business, wants to buy LVMH's best-selling cognac Hennessy - provided the price and time are right - in a bid to bolster Diageo's position as the world's biggest liquor company.

John McGrath, who will be Diageo's chief executive, said selling a major liquor brand in the US to gain regulatory approval for the merger would cost no more than 5 per cent of operating profit.

And while Mr McGrath denied Diageo plans to sell its Burger King fast- food chain, he acknowledged it may consider such a move.

"If, at some time in the future, any part of the business, including Burger King, would be better in alternative ownership, we would consider that," said Mr McGrath, currently chief executive of Grand Met.

Analysts have long speculated Grand Met will sell Burger King because it doesn't fit with the rest of the company.

Diageo will have more than 1,100 subsidiaries, ranging from liquor, beer and packaged food to hamburger and ice-cream parlour chains.

Diageo's most vocal - and biggest - shareholder, LVMH's chairman Bernard Arnault, who will have about 11 per cent of the combined company, has argued the group is too disparate.

Mr McGrath disagrees. "There are only four basic businesses," he explained. "We believe we're good managers and the key is to have focus in those four businesses with high-quality management."

Diageo, which owns the Johnnie Walker and J&B brands, Smirnoff vodka and Guinness stout, has no cognac brand. LVMH's Hennessy could fill that gap.

Earlier this year, Mr Arnault offered to sell Diageo his Moet Hennessy champagne and cognac brands, fold them into Diageo's combined liquor businesses, and spin that off into another company.

Mr Arnault also asked for a 35 per cent stake in the new company, a request that was rebuffed by the UK companies.

"Arnault has the idea Hennessy is worth more, and that's a stumbling block," said John Keele, a drinks analyst at UBS. "One would have to surmise that he's keen - but not that keen - on selling and he doesn't want to sell cheap."

While cognac sales have suffered from declining Japanese demand, Mr McGrath said he is still interested.

"There's room for the [cognac] brand in our portfolio at the right price and at the right time," said Mr McGrath. "But we would be unlikely to buy it at what I think [Arnault] thinks is the right price."

The company is unlikely to make liquor acquisitions ahead of merger approval from US authorities expected at the end of the month.

The company may be forced to sell some brands in the US because owning both Dewar's and Johnnie Walker could be considered anti-competitive.

The company has already been required by EU officials to sell Ainslie's whisky and Dewar's for approval of the merger in Europe.

Mr McGrath said the new company won't be greatly exposed to weakening South-east Asian economies, which provide "just under" 12 per cent of total profits.

Mr McGrath said the stronger British pound will dent profit. Every one-penny change in the pound's value against the dollar affects profits by "about pounds 4m one way or the other on the Grand Met side, so it will be more than that," he said. "That's life."

Suggested Topics
Alan Bennett has criticised the “repellent” reality shows which dominate our screens
tvBut he does like Stewart Lee
Life and Style
The Google Doodle celebrating the start of the first day of autumn, 2014.
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
David Moyes and Louis van Gaal
Life and Style
Vote with your wallet: the app can help shoppers feel more informed about items on sale
lifeNew app reveals political leanings of food companies
Former Governor of Alaska Sarah Palin, left, with her daughter, Bristol
newsShe's 'proud' of eldest daughter, who 'punched host in the face'
New Zealand fly-half Aaron Cruden pictured in The Zookeeper's Son on a late-night drinking session
Arts and Entertainment
Salmond told a Scottish television chat show in 2001that he would also sit in front of a mirror and say things like,
tvCelebrity Trekkies from Alex Salmond to Barack Obama
Life and Style
Carol O'Brien, whose son Rob suffered many years of depression
healthOne mother's story of how London charity Maytree helped her son with his depression
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
The cover of Dark Side of the Moon
musicCan 'The Endless River' carry on the tradition? See for yourself
Life and Style
food + drink
Rob Merrick's Lobby Journalists were playing Ed Balls' Labour Party MPs. The match is an annual event which takes place ahead of the opening of the party conference
newsRob Merrick insistes 'Ed will be hurting much more than me'
A cabin crew member photographed the devastation after one flight
A new app has been launched that enables people to have a cuddle from a stranger
voicesMaybe the new app will make it more normal to reach out to strangers
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Quantitative Risk Manager

Up to £80000: Saxton Leigh: My client, a large commodities broker, is looking ...

Day In a Page

Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits