In October, when federal regulators moved to block Diageo's
purchase of certain Seagram assets, it was a setback for the world's
largest producer of spirits - but one it will find a way around, most
observers agree.
The Seagram deal, along with jettisoning its non-booze businesses
(Pillsbury and Burger King), is part of a plan for London-based Diageo
to focus on what it does best: market alcoholic beverages.
Diageo's North American arm, Guinness UDV NA, has been working hard
toward what EVP of external affairs Guy Smith calls "the normalization
of the products" - getting wine, beer, and spirits to be seen as regular
consumer items, and not potential social pariahs.
A major part of what Smith and his team does is push the company's
social responsibility messages. In addition to both external and
internal communications, the external affairs operation oversees
government affairs and public policy.
Guinness UDV distributes over 200 spirit brands, in addition to wine and
beer. The biggest of those include Smirnoff vodka, Johnnie Walker Scotch
whisky, Tanqueray gin, Guinness stout, J&B Scotch whisky, Bailey's
Original Irish Cream liqueur, Malibu rum, and Jose Cuervo tequila.
"They have over 25% market share in the US," says David Fleming,
executive editor of Impact, a wine and spirits industry publication.
"There's Diageo, and then there's everyone else."
Diageo was formed when Guinness merged with Grand Metropolitan in
December 1997. Last year, it combined its Guinness and United Distillers
& Vintners operations into one alcoholic beverage business: Guinness
UDV.
Obviously, all that merging and restructuring meant changes. Guinness
UDV created five "in market companies," or IMCs, throughout the country
to get closer to local marketplaces. About a year ago, it spread its
communications and a lobbying staff into those IMCs, and they report
both to their IMC president and to Smith. Smith emphasizes that the
company hires people with broad experience so they can work across
disciplines. He says the decentralized system makes the company more
nimble.
Communications is obviously important to Guinness UDV. Smith, second in
command in the US, reports to president and CEO Paul Clinton, who
himself has a marketing background.
Smith, 52, joined Guinness UDV in April 2000. He started his career as a
newspaper reporter, and worked as press secretary to the mayor of
Knoxville, TN (his home town) in the 1970s. In 1975 - when "the citizens
threw us out," as he puts it - he went to work for the Philip Morris
Companies, including the tobacco division. In 1992, he left to become
COO of Hill & Knowlton. He has also owned an agency, and has led
disaster responses in places like Sarajevo, North Korea, and Iraq as
vice chairman of AmeriCares.
Before heading off to Diageo, he worked on communications strategy for
President Bill Clinton's impeachment defense team. "Crisis management
was most of my career," he says, "and of course, that was the mother of
all crises."
Focus on brands
Much of Guinness UDV's communication is done through the brands. "We
work with each of our brand marketing groups," says Smith. "Our part of
that is some of the publicity, but not all, and all of the social
responsibility elements. We're involved in every piece of advertising.
It's quite horizontal and integrated."
The product PR means lots of events. Guinness UDV has an especially big
minority events program. And in November last year, Smirnoff sponsored a
"Ballot Bash Campaign 2000 Recount Party" for reporters in Tallahassee,
FL. "We had all these people in the media with not much to do once they
filed their reports," Smith says.
Not all the company's publicity efforts have been successful. In
September, Jose Cuervo lost out to a local dairy in a bid to buy the
naming rights of a theater at a Dallas Hispanic cultural center -
apparently over community concerns about alcohol. Smith says the company
had originally been approached by community leaders. "They changed their
mind, which was fine. While it was disappointing in one sense, it was
not part of our strategic plan."
A major communications vehicle is its own newspaper, American Mix, which
launched in January, and publishes four times a year. A million people
have signed up to get it. It features articles by best-selling authors,
and Smith says it's a significant portion of the external affairs
spending, which he declines to disclose. The company also has a similar
internal publication called The Main Ingredient.
As for government affairs activities, Smith says Guinness UDV worked to
change a California regulation that prevented companies that didn't make
their products in-state from advertising their brands in ballparks.
In Texas, it helped get a bill passed that lifted a ban on the sale of
50-milliliter airline bottles.
The big deal
Then there's the Seagram deal. Diageo is divvying up Seagram's wine and
spirits business with Pernod Ricard SA. But the FTC has objected that
the move would give Diageo too much of the US rum market. Observers say
the company will probably sell either its Malibu rum or Seagram's
Captain Morgan spiced rum, which is number two behind market leader
Bacardi. Diageo has committed to Seagram owner Vivendi Universal to
complete the deal by year's end. (Smith declined to comment because the
company is in negotiations with the FTC.)
So, have the regulatory steps been a distraction? "Those kinds of big
deals restrict a company's ability to communicate the way they'd want
to," says Impact's Fleming. "There's so much stuff they can't comment
about and have to be careful about. Just as they got the reorganization
from the merger settled, they entered into this Seagram deal. Prior to
(the FTC ruling), there wasn't a whole lot they could say about the
strategic future of a lot of the brands."
But Smith denies that his team has been hindered. It's part of the
reason he hires people with multiple disciplines, he says. "We have a
huge task, but with the way we're structured and the kind of talent we
have in place, we can get a lot done."
One of the most important tactical programs that comes out of the
company's strategic planning is its stress on social responsibility. A
major part of that effort concerns combating underage drinking and drunk
driving.
Guinness UDV has an extensive marketing code that says all promotional
messages, including ads, must have responsibility taglines such as,
"It's even smoother when you drink responsibly." And all advertising
must be targeted to audiences with at least 70% adults.
"We feel our marketing code is the most stringent in the industry,"
Smith says. "The consumer understands that if you enjoy what we make in
a responsible way, it can give great pleasure and be a lot of fun. If
you abuse what we make, it can cause great harm. They fully expect the
manufacturer to remind them of that."
Guinness UDV is part of The Century Council, a group funded by leading
spirits makers to combat underage drinking and drunk driving. In April
2001, the company participated in a Washington, DC, press conference
with Mothers Against Drunk Driving to announce that The Century Council
and the industry would support lowering the legal driving limit on blood
alcohol concentration to .08%.
And this year, Smirnoff Ice - the hugely successful vodka-and-lemon
drink introduced in January - sponsored a NASCAR racing team, and took
the unusual step of having an anti-drunk-driving message painted on the
vehicle.
"They've decided they're going to grow an adult beverage company on
social responsibility," says Lou Colasuonno of Westhill Media
Strategies, an agency that works with Guinness UDV. "Their attitude is,
'We need to be more responsible than anybody.' Many companies that don't
take the seriousness of their product to heart will not be treated
fairly in the market. And they shouldn't be."
GUINNESS UDV
Executive VP, external affairs: Guy Smith
VP, corporate communications: Jeannine Dowling
Director of communications and media relations: Gary Galanis
Agencies: Westhill Media Partners and The Hawthorn Group (external
affairs); Bragman, Nyman & Cafferilli (Smirnoff Ice and beer brands
Guinness, Harp, Bass, and Red Stripe); other agencies for specific
brands and individual projects
PR budget: undisclosed
