Introduction, Company Profile and Current Strategy

Diageo is one of the world’s largest alcoholic drinks companies, leading the global market in flavoured alcoholic beverages (such as Smirnoff Ice), and spirits. In this regard it is still very similar to several of its major rival companies, including Allied Domecq, Pernod Ricard or CCU, all of who have varied alcoholic drinks portfolios. Where Diageo has differed from its rivals in recent years, however, is the way in which its wine business has been somewhat overlooked in comparison to the development of its global priority brands, which have mainly been centred on spirits, as well as its flavoured alcoholic beverages. The strategic review undertaken in the case study has the potential to alter this state of affairs, and the company may wish to look at possibly extending its presence in the premium New World wine segment, taking on its rivals head on.

Diageo’s decision will likely depend upon several factors, with the key factor, likely to support growth in wine, being the growth potential of premium wine, particularly in the light of recent health claims made about the benefits of drinking red wine and dangers of spirits consumption. In addition, the company has endured a decline in its flavoured alcoholic beverage business, again like its competitors which have seen this particular sector begin to lose its fashionable appeal. However, through extending its wine offering, Diageo will intensify the competition between itself and companies such as Pernod Ricard or Allied Domecq, as well as more wine-centred companies including Kendall-Jackson or Constellation Brands. All four of these companies have portfolios which are similarly prioriti