Cardhu row could go to higher authorities

- Last updated on GMT

Related tags: Whisky, Diageo

Scotch whisky producers are expected to present a united front
today in calling for Diageo to withdraw its Cardhu brand from the
market or switch it back to a single malt. But with Diageo expected
to refuse, the distillers have already warned that they will take
the case to higher authorities.

Diageo announced earlier this year that it was to relaunch Cardhu as a pure malt - a blend of malts from different distilleries - because it was running out of stocks of its 12-year-old single malt due to the recent success of the brand in markets such as Spain and France.

Faced with limiting supplies over the next 12 years while new batches of single malt matured, the company decided instead to switch to a pure malt - but with only a minor change to the packaging and design of the whisky, a move which other distillers claim will confuse consumers and cause irreparable damage to a product which relies heavily on its quality image.

Crisis talks due to take place at the Scotch Whisky Association's offices later today aimed at solving the problem are unlikely to resolve the stalemate, with Diageo standing by its decision, which it claims was also designed to revitalise sales by attracting - and keeping - younger drinkers.

But with virtually every other distiller - and the SWA itself - seemingly ranked against it, Diageo is not likely to be let off the hook. Reports in the UK press suggest that other whisky makers are already looking into the possibility of asking the Office of Fair Trading in the UK, or even the European Commission, to rule on the matter.

With Scotch whisky playing such an important role in the economies of Scotland, the UK and the EU - in particular because of its huge export potential - what might otherwise have been a spat between rival brand owners has become a cause of major debate in both the Scottish and UK parliaments, with MPs calling for greater powers to police the market in a bid to protect the £2.3 billion export markets.

But with Diageo claiming that its move will in fact benefit the industry rather than hamper it - by keeping existing Cardhu consumers drinking whisky rather than switching to other products when supplies run low - the question is far from clear cut. Diageo has conceded that it perhaps did not do enough to distinguish pure malt Cardhu from the single malt variant, and has agreed to change the packaging and extend marketing campaigns explaining the difference, but it continues to refute claims that the move is somehow damaging single malt sales as a whole.

Whether the OFT or the EU would see it that way is unclear, but with one or both of these bodies likely to become involved in the affair in the near future, Diageo may yet be forced to retreat from the moral high ground and bow to the will of the industry as a whole.

Related topics: Market Trends

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