Diageo retains a range of interests in wine from a cheap and big-selling French brand, Le Piat d Or, to a prestigious Californian estate, Beaulieu. But Jack Keenan, the boss of United Distillers and Vintners, the drinks arm of Diageo, is fairly dismissive of the role of wine in his company s strategy. Dispiriting However, when he puts his business hat on, he becomes a pragmatist. Diageo will certainly retain its interests in wine, he says, because it wants to have a presence in all alcoholic drinks. But as a company, if you re looking at whether to invest in spirits or wine, it s got to be spirits every time.
Spirits have big international brands, which command higher sales and margins than wine can offer.
But that is not the only reason. With wine, however, casual consumers often prefer the taste of the cheaper products. That makes it difficult to build a market for the grander wines. This gloomy view of the profit potential of the wine business appears to be shared by venture capitalists outside the industry. I started seeing the wine industry through their cold, cruel spectacles.