By Dave Broom

Diageo Says Farewell to Bushmills

Bushmills sold for a large shot of tequila
Here's a question. What would you do if you had an 800,000 case brand which earned you £57m in the last year? Back it? What if it also had deep stocks, a proven track record, and was in a whisky category which is predicted to grow to 12 million cases by 2020 [ISA figures]? Give thanks to the god of whisky and back it to the hilt? Or would you say, "Naaah…" and sell it? Welcome to the world of big business, Diageo style.

When the news came in I wasn't that surprised. There had been mutterings and I had also begun to wonder quite what Diageo was doing with its Irish brand. Bushmills is multifaceted, playing in standard and premium blend, and single malt - and is Irish and therefore hot - but which has been surprisingly quiet. From being the last piece in a whisky portfolio which covered Scotland, Canada and the US, it had increasingly seemed to be the odd one out, and while investment took place in plant and warehousing there was little noise generated by the brand itself. When compared to Jameson, Tullamore DEW and Kilbeggan, it was drifting.

It is only two months ago that William Grant declared its long-term commitment to the Irish category by building a new distillery. Now a major rival has pulled out completely. One firm has got this right. The Grants (and IDL, Beam Suntory and the Teelings) must think that Christmas has come extremely early. The signals sent out by this is that Diageo has no faith in Irish whiskey and while it may be no more than unfortunate timing, coming so soon after the slowing of its distillery expansion programme in Scotland, this withdrawal could suggest that there is a wider recalibration of its whisky strategy underway.

It also reminds me of the time when the firm sold all of its American whiskey interests (bar Dickel) including production facilities, just at the point when bourbon was starting its renaissance. The resulting volte face may have seen belated but welcome investment in Dickel and the building of a new distillery for Bulleit, but still leaves Diageo behind the ball in bourbon. Another chance to buy a significant Irish brand is unlikely to come along.

Oddly, the Bushmills news came just as I came back from New York where I was co-presenting a seminar with Jack McGarry of Dead Rabbit and Gerry Graham, the hard-working Bushmills ambassador to the States (now there's a man who believed in the brand) which outlined how Irish whiskey is back. Gerry poured the 10 Years Old Bushmills malt. It was really gorgeous, a real hidden gem…and that was the problem. The juice was there, the guys who made it believed passionately in Bushmills' quality, but there wasn't the commitment from higher up. There again, Bushmills has always been a pawn in a larger game. It was the makeweight when Seagram [RIP] was trying to get into Irish whiskey. It was sold to Diageo so that the firm wouldn't queer Pernod's takeover deal of Allied Distillers [RIP]. It was the stuff of realpolitik, and this decision does make you wonder if Diageo ever really wanted it.

What does Diageo get out of this? USD$408m, thank you very much, and the remaining 50 per cent of super-premium tequila brand Don Julio. Announcing the move, Diageo's Ivan Menezes said: "This transaction delivers two key objectives…we have secured our position in the growing super and ultra-premium segments of the tequila category and further strengthened our global footprint by expanding our leading position in Mexico where the growth of spirits has great potential. It delivers our strategy: to build our presence in the world's fastest growing markets and lead the industry in the biggest growth opportunities." Y'see? Realpolitik.

But let's be positive. Cuervo might well be the perfect partner for Bushmills. Being part of a smaller portfolio might allow it to have the attention it deserves. It will take time though for the new owners to work out their vision for the brand. My advice? Get over there, listen to the guys. Bushmills doesn't need fixing. It just needs love. I hope it finally gets it.