Drinks giant Diageo has offered to sell the majority of its Whyte & Mackay whisky business to appease competition authorities.
Last year Diageo agreed to buy a controlling stake in India’s United Spirits – which owns Whyte & Mackay – for $2.1bn (£1.3bn). But retailers raised concerns with the Office of Fair Trading over potential price rises in the UK whisky market because Whyte & Mackay also makes own-label whisky for supermarkets and Diageo owns Bell’s, a key competitor in the blended whisky sector. The OFT’s investigation found that the deal could lead to a substantial reduction in competition in the retail sector between Bell’s and Whyte & Mackay whiskies.
Chris Walters, the OFT chief economist, said: “These companies are two of the leading suppliers of blended bottled whisky in the UK, especially to supermarkets and other large retailers. Our investigation considered a wide range of evidence and we concluded that the likely loss of competition could give rise to higher prices for retailers, and ultimately consumers.”
Diageo has offered to sell the bulk of the business with the exception of the Dalmore and Tamnavulin distilleries.
One analyst said of the potential buyers: “These are brands at the lower end of the market so you won’t see a Pernod Ricard coming in. It will probably go to a private equity buyer.”
The United Spirits deal is crucial to Diageo’s Indian-born chief executive Ivan Menezes’ plans to lift liquor sales in emerging markets.