...where distraction is the main attraction.

Monday, September 30, 2013

A Diageo boycott: The Brands

Four weeks ago, Diageo dropped their annual single malt Special Release pricing turd into the market.  It is likely that price bloating -- such as Port Ellen's boost from $500 to $1000 to $2400 over the past three years -- was intended to try to silence the secondary market.  If their customers can buy an official PE for $500 then immediately sell it at auction for $1000, why would Big D want to lose out on that extra $500 revenue?  This is a drug after all, so an addict and his money are soon separated, thus without pause people were flipping their PEs for $1500.  So this year Diageo raised the price even higher to make sure that this secondary market wouldn't sap any of their potential income.  I'm sure that such a hike will accomplish a bit of what they've set out to do, but I can't help but think that this pricing will do a number on the primary market as well.  The industry is constantly testing to see how much we will spend on all of our whisky, including the stuff at Trader Joe's.  So if folks will continue to pay 10%-20%-30% more each year for a 25-year-old malt, then let's see if they'll do the same at each step in the brand rung.  And we are.

After reading the press release for the new limited releases, I was reminded that I was supposed to be discussing my Diageo boycott idea one of these days soon.  In fact, I said that I'd do so after the Summer of 2013.  It is after the Summer of 2013.  So let's talk about it.

Diageo PLC (DEO; NYSE) has a market cap near $80,000,000,000 (or for folks who like to go by Enterprise Value, it's nearing $95,000,000,000).  Its annual revenue will likely top $18,000,000,000 in 2013.  Its stock value has tripled since a low point in mid-March 2009 and they still give out a nifty dividend of two to three percent to their investors.  Diageo's nearest competitor (though it doesn't really have one) in the whisky industry is Pernod Ricard SA.  Pernod as a whole is valued at less than half (possibly closer to 40%) of Diageo's worth, turns half as much profit, and has considerably less cash on hand.

So really, if I stop buying Diageo's products it's not going to mean a darned thing to their books.  It's more a personal choice: To which company would I like to hand my money?  The answer is not Diageo.  The reasons are legion and I intend to attempt to list them later this week.  But for today, I'm going to list their brands (not including Scotch Whisky), in order to demonstrate what's theirs on the store shelves and thus what I wouldn't purchase under such a boycott.

Because Diaego owns 34% of LVMH's (Louis Vuitton Moët Hennessy) drinks unit -- and are looking to buy it out in its entirety -- I am including their brands with a parenthetical.  Though there was much discussion of Diageo buying out Beam last winter, nothing has yet come of it so I won't include Beam's brands here.

Please note, this does not include brands distributed by Diageo, nor the 130+ Indian brands absorbed via the purchase of United Spirits Limited.

Brandy and Cognac
Hennessey (via LVMH)


Liqueur, Schnapps, and Aperitif
Rumple Minze
Sirop de Picon
Yukon Jack

10 Cane (via LVMH)
Captain Morgan

Don Julio

Belevedere (via LVMH)
Ketel One

Irish Whiskey

Canadian Whisky
Crown Royal

American Whiskey
George Dickel
Jeremiah Weed
Seagram's Seven

Red Stripe

Blossom Hill
Canoe Ridge
Chateau d'Yquem (via LVMH)
Dom Perignon (via LVMH)
Domaine Chandon (via LVMH)
Justerini & Brooks
Krug (via LVMH)
Mercier (via LVMH)
Moet & Chandon (via LVMH)
Moon Mountain
Navarro Correas
Plat d'Or
Rosenblum Cellars
Ruinart (via LVMH)
Veuve Cliquot (via LVMH)

Seeing some familiar names up there?  These brands often take up more than half the shelf space at small bars, grocery stores, and corner liquor counters.  So if one wanted to stop buying Diageo products cold, one would need to consider his or her drinking experience without those bottles.

For me, there's not a lot being sacrificed from this list.  Of the gins, Tanqueray is the only one I've bought.  I've been trying to buy gins from smaller companies, and the results have been pretty good.  The craft companies seem to be having more luck with gin than whiskey so far.  For the liqueurs, I don't drink 'Schlager or Bailey's anymore.  In the rum category, I haven't had Captain in years.  Having been a vodka drinker in a previous life, I have purchased all of their brands.  Though if I never drink vodka again, I won't be too disappointed.  Whiskey-wise, I was just starting to dabble in some Bushmills, but I'm not convinced it will be that much of a loss.  Nor will Crown Royal.  I like Bulleit, especially at its price range, but there are many other non-Diageo brands that use similar juice.  As you may notice, LVMH holds most of the good wine brands on the list.  Some fun champagne in there, but I'd rather support smaller producers.

The beer section is the tough one for me.  Guinness is a mainstay in our home and it is divine when served in Ireland.  Harp and Red Stripe are also favorites of mine.  Tusker is a beer I share with my dad when I see him, ever since we drank tons of it in the Kenyan heat thirteen years ago.  So that's the sensitive spot.

Again, look at the big ol' list above.  How hard would it be for you to part with all of those brands?  This isn't about snobbery, it's about what tastes good to you.  And would the pleasure those brands bring be worth giving up if their company's policies and corporate actions offended you?

It's something I've been considering.  The beer brands are one of my weak points.  The other?  Scotch whisky.  That list follows tomorrow.