View from City Road: Strange taste at Guinness

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The Independent Online
Two weeks ago, Tony Greener, chairman and chief executive of Guinness, was blaming the world recession for the group's lacklustre performance; yesterday, the company was struggling to reconcile those comments with the sudden departure of Crispin Davis as head of United Distillers, its spirits arm.

Mr Davis's departure may be due more to a personality clash with Mr Greener, his predecessor at the helm of United Distillers, than to disappointment over his performance. But that does not mean the unexpected management reshuffle has no implications for the future of the group.

For Sir Anthony Tennant certainly timed his departure as chairman and chief executive perfectly. The limits to the Tennant miracle have only come to light in the year since he left.

Sir Anthony maximised profits from Scotch by raising prices, positioning brands properly, and buying up the distributors who had been making fortunes out of the old Distillers' brands.

But Guinness, unlike some competitors, had no obvious growth points and the results have shown through under his successor, the unfortunate Mr Greener: symptoms have included reduced profits, a collapsed share price, and swirling rumours over Guinness's relationship with LVMH.

The end result is the departure of Mr Davis, whose achievements in selling soap powders could not be replicated in the more peculiar world of drinks, where a marketing approach of 'buy one and get one free' does not work to any great extent.

The peculiarity of the drinks business was demonstrated again yesterday by the loss by Grand Metropolitan's IDV of the highly lucrative agency agreement to distribute Absolut vodka in the United States. IDV had possibly been creaming too much out of the brand, and the Swedes were offered a better deal by Seagram, the only liquor firm to have the size of sales force that can sell brands like Absolut to the thousands of bars like Cheers where brands are made and unmade.

There must be some sympathy for IDV: through brilliant advertising and marketing its Carillon division had turned Absolut into the most glamorous of vodkas.

There are, however, compensations: IDV still has two vodkas in its portfolio, Smirnoff and Popov, which just happen to be the two biggest-selling brands in the US.

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