Repentant Diageo backs down in Cardhu row

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Related tags: Diageo, Whisky

Talks yesterday between spirits group Diageo and the rest of
the Scotch whisky industry over the future of the Cardhu brand
unexpectedly led to the company agreeing too major changes to the
packaging and marketing of the whisky.

Diageo recently relaunched Cardhu 12-year-old single malt as a vatted or pure malt - a blend of malts from different distilleries - in order to maintain brand sales despute a serious shortage of the single malt whisky, But the brand name and image remained unchanged, with simply a change of name from 'single malt' to 'pure malt', a move which led to an angry reaction from other whisky makers.

Right up to the start of the meeting, held yesterday at the Scotch Whisky Association​'s headquarters in Edinburgh, both parties had expected the stalemate over the repositioning of Cardhu single malt as a pure malt to continue. Diageo had rigorously defended the move, saying it was necessary to keep drinkers' interest in the market, but other distillers warned that it was undermining the industry by presenting a lower quality product as a single malt.

But faced with the prospect of an investigation by the Office of Fair Trading or the European Commission if it did not agree to the demands of its fellow distillers, Diageo backed down, pledging to make significant changes to the packaging of the product, including changing the colour from brown to green, as well as carrying out additional promotional activity explaining to consumers the nature of the new product.

Most importantly, perhaps, is the pledge from Diageo not to reformulate any of its other single malts in a similar manner and a commitment to work with the rest of the industry to try and set down definitions for different segments of the Scotch whisky category in the future.

The SWA, which has tried to remain neutral in the matter but was clearly under considerable pressure from the majority of its members to take a stance against Diageo, said that it welcomed Diageo's move, but that the whole affair had highlighted the need for greater clarity on the definition of Scotch, one of the most fiercely protected denominations of origin in the world.

"The matter has focused attention on the need for the industry to clarify for consumers the various categories within the Scotch whisky market. To this end, the [SWA's] Council agreed to press ahead urgently with work designed to set out definitions with most immediate focus on single malt Scotch whisky. Diageo will continue to review its packaging in the light of this completed work,"​ the SWA said in a statement.

As for Diageo, the company admitted that it might have managed the frequently volatile consultation process with the SWA more effectively, and that it was sorry to have been the cause of such disturbance. "It is now time to put this episode behind us, and we look forward to continuing to work within the SWA and growing the Scotch whisky industry as a whole,"​ the company said in a statement.

"Diageo's commitment to Scotch whisky is absolute. We employ some 3,300 people in our Scottish supply business. Our asset base in Scotland is around £1.7 billion, over £1 billion of which is maturing Scotch whisky. We would not do anything that might in anyway undermine the integrity of the Scotch whisky industry. We want the Scotch whisky category to expand to reach more consumers in more markets around the world. This makes sound business sense for Diageo, for the SWA, and for the industry."

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