Guinness marriage won't boost sales

outlook On Raising Interest Rates, The Drinks Giants' Merger And Financing The High-Speed Rail Link

When Guinness and Grand Metropolitan first announced their marriage last May, the competition obstacles and other potential difficulties with the merger looked almost too great to be surmountable. If the competition authorities in either Brussels or the US didn't get them, then Bernard Arnault, Guinness's troublesome minority shareholder, certainly would, was the general view. As it is, the couple looks like jumping all of these potential roadblocks with surprisingly little damage to the fabric of the relationship.

Brussels and Mr Arnault have already been satisfied, leaving just the US Trade Commission standing in the way. So confident are directors of shifting this one too that in anticipation they've now arranged the date of the shareholders' vote (26 November) so that the whole thing can be approved by the High Court before the turn of the year. Both Guinness and GrandMet are hopeful that the price extracted by the US Trade Commission by way of divestment will not exceed 5 per cent of their combined profits, the level at which the rules would require them to go back to shareholders for fresh approvals.

While this would actually be quite a lot, it would not be a deal breaker. Actually the divestment required is likely to be a good deal lower. Since Diageo is already being asked to divest Dewar's in Europe, it would plainly be a neat solution to the problem if that were the brand chosen for cull by the US authorities too. Analysts reckon that if the brand were disposed of lock, stock and barrel, it could fetch some pounds 500m, more than enough to cover the extra capital repayment Guinness and GrandMet announced yesterday.

So a happy ending after all. But will the couple live happily ever after? This is a merger driven primarily by its potential for cost-cutting. Nearly pounds 200m annually will be cut from the cost base on the liquor side of the group, it is reckoned. More doubtful is the claim that the complementary brand portfolios and distribution networks of the two companies will succeed in greatly enhancing sales. Claims like this have been made before for drinks mergers, notably by Ernest Saunders when in short order he acquired first Bells and then Distillers. Certainly Guinness later succeeded in putting up prices by quite a lot, but it did not succeed in selling significantly more Scotch.

The same is likely to prove true of this latest act of consolidation in the drinks industry. The benefit will all be to the shareholders in terms of lower costs and higher prices. But will it enhance consumer choice, competition and job prospects? Not a chance of it.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory
Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

Cook not the only one to be caught in The Oval mindwarp

Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

Can Benitez get the best out of Bale?

Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

Beijing witnesses new stage in the Jess and Kat rivalry

The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

Jeremy Corbyn interview: A shrewd operator desperate for power

His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

Isis executes Palmyra antiquities chief

Robert Fisk on the defender of the ancient city's past who was killed for protecting its future