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G8 Report : The G8 Gleneagles Summit: Diageo Plc

G8 Report : The G8 Gleneagles Summit: Diageo Plc

by / Food & Agriculture, News / 28 May 2005
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Diageo, the major UK drinks multinational which owns Gleneagles, has much to gain not only from hosting the G8 event itself but also from the policies being discussed at the Summit.

Diageo is the 11th largest company in the UK,1 with a turnover of £8.89 billion and profit after tax of £1.87 billion in 2004.2 Diageo has bases in 180 countries around the world, with growing markets in Africa, as well as substantial interests in Europe and North America. Scotland is a particularly important production base for the company. As such, it is bound to have a part to play in the corporate lobby of international governments. In 1998 Diageo was involved in the negotiations for the failed Multilateral Agreement on Investment (MAI); this agreement would have meant increased investment rights and free trade globally, and more power passing to private corporations.3

What does Diageo produce?

Diageo was created by the merger of two massive food and drink companies, Guinness and Grand Metropolitan, in 1997; a merger which involved a name-change and re-imaging as well. The company’s website explains this choice of fairly meaningless and neutral-sounding name: ‘”Diageo” combines the Latin word for “day” and the Greek word for “earth”. Together, the two words mean celebrating life every day, everywhere’.4 Whatever.

Diageo has since sold off its non-drinks companies, including Burger King, and consolidated its alcohol brands. These now include: Smirnoff vodka (and the alcopops Smirnoff Ice and Smirnoff Black Ice), Gordon’s and Tanqueray gin, Captain Morgan Rum, Bertrams VO Brandy, Jose Cuervo tequila, Archers, Bailey’s, Pimms, Guinness and a number of other beers including Harp, Kilkenny and Red Stripe, a number of wines, and significant Scotch whiskey brands including Bells, Johnny Walker and J&B as well as single malts including Oban and Talisker.

Diageo’s ties to government

The drinks industry regularly comes under fire for being responsible for health and social problems, and Diageo has recently invested heavily in PR, hiring companies such as Lexis PR (see below), Edelman’s5 and Reputation Inc, to improve the perception of the company amongst NGO’s and policy makers.6 In recent years the company has issued guidelines on ethical marketing, produced teaching guides about alcohol harm, and made statements condemning some of the problems associated with alcohol. It has also set up a charity called the Diageo Foundation7 and plays a role in business groups promoting Corporate Social Responsibility (CSR) such as the International Business Leaders Forum.8

Tony Blair has obviously been taken in: speaking at a ‘Responsible Drinking Seminar’ Diageo hosted in 2004, he agreed that ‘the industry is working hard on codes of practice’ and suggested it should be given ‘a chance to build on [its] good work’ in tackling binge drinking.9 The government’s March 2004 paper ‘Alcohol Harm Reduction Strategy’ put into practice the link between industry and government, with the conclusion that regulation ‘should initially be voluntary’ on the part of companies.10 Campaigning groups such as Alcohol Concern11 and the Institute of Alcohol Studies12 said this decision ignored the advice of health experts. Despite warnings by the Metropolitan police, licensing hours were extended in 2003,13 and in 2002 the government went back on plans to reduce the acceptable blood alcohol concentration limit for driving, after consultation by the Portman Group, an industry body Diageo is closely involved with.14

The approach favoured by the government echoes that represented by the industry. The focus is on targeting and blaming the individual consumer for misuse of alcohol, including the use of banning orders, on the spot fines for drunkenness, fixed penalty notices and ASBOs,15 while letting off the business interests of alcohol producers and distributors.

It is also worth noting that Scotland has one of the worst problems with alcohol abuse in Europe. According to the 2004-2005 annual report of Scotland’s Chief Medical Officer, since 1980 there has been a 240 per cent increase in alcohol-related deaths and the problem is now costing Scotland’s economy £1 billion a year.16

The ‘partnership approach’ in the workplace

In keeping with its image as a socially responsible corporate citizen, Diageo emphasises its ‘commitment to communication’ and ‘partnership’ with employees,17 which it has recently demonstrated by establishing new institutions for consultation at a local and international level. This has come after a very turbulent history, with a flurry of mergers, relocations and accompanying redundancies, but the recent rhetoric of respect for employees’ rights to information should not be mistaken for a genuine shift in practice. The new ‘Diageo Europe Forum’, a high profile annual meeting involving just 35 employees, is celebrated for an unusually ‘extensive’ definition of the ‘consultation’ which an EU Directive stipulates must occur between top level management and staff.18 Diageo’s definition is considered ‘extensive’ only because it states that employees must be informed before a decision is made,19 but it emphatically offers no scope for collective bargaining.20 There also seems significant potential for Diageo’s ‘partnership’ to co-opt unions and replace independent negotiation with mere ‘information’.

Meanwhile, the drive for efficiency continues at the cost of many jobs: between 2003 and 2004 Diageo cut nearly 1,000 workers worldwide,21 and between 1998 and 2000 it axed the same number of people in the UK alone.22 In February 2005, Guinness Nigeria sacked 500 people and unions claimed that the objective was to replace permanent staff with casual ones, and that this was something the company had repeatedly done.23 Although the exact figures are difficult to access, it seems that increased insecurity is a global trend: in Scotland nearly 20% of Diageo’s workforce are on temporary contracts and only 55% are unionised.24

Diageo in Africa

Diageo also has a major stake in opening up Africa for investment. It is already among the most powerful corporations operating in Africa, with its subsidiaries frequently listed among the very top companies in regional stock exchanges. As well as providing “phenomenal” economic growth,25 Africa is used by Diageo as evidence that it is a model global citizen, most notably because of its so-called ‘Water of Life’ programmes, and because it provides free AIDS drugs to its African workforce.26

As usual though, the PR myth doesn’t match up to the reality. Breweries and distilleries are among the worst consumers and polluters of water;27 alcohol has a well-documented role to play in the spread of HIV;28 and beside all the rhetoric about poverty and blighted opportunity,29 its aggressive promotion of branded alcohol is likely to have a devastating effect on the small-scale production of home-brew, which provides a valuable source of income for the poorest in society. If, as seems inevitable, the 2005 G8 summit favours the removal of barriers to foreign investment in Africa, and leaves responsibility as a matter for voluntary codes and glossy PR shoots, then Diageo will profit not only financially through its ownership of Gleneagles, but will directly benefit from its policies.

Diageo already enjoys considerable local power by virtue of its sheer size. In Kenya for instance, over 50% of the national market is controlled by just five multinationals, one of which is Diageo.30 As well as its ability to buy out competition in the form of smaller national companies, this stranglehold has been achieved by a marketing strategy which is pervasive across all areas of public life and seeks to demonise non-branded alcohol. Across Africa, beer has traditionally been brewed as a small scale commercial enterprise and it is this which the company claims can pose severe “health and social risks”.31 This, despite the fact that a report commissioned by ICAP, an organisation itself sponsored by Diageo, reported that so-called ‘illicit’ brew is generally safe and of good quality,32 as well as providing an important boost to the household and local economy.

Whilst there is nothing original about Diageo’s sponsorship of musical and educational events to target the young and wealthy,33 the creation of an entire feature length film to promote its brands was a stroke of genius. British and American reviewers didn’t seem aware of the irony when they referred to ‘Critical Assignment’ as ‘Africa’s very own James Bond’34 and a testimony to the ‘maturity of African films’.35 Perhaps it didn’t seem relevant that the ‘African James Bond’ was in fact the billboard figure for Guinness, already such a well established persona that mention of the drink wasn’t necessary to turn every minute into effective publicity.36

The company’s philanthropic projects could also be interpreted, at least in part, as an attempt to promote its brands. In education for example, Diageo sponsors small numbers of individuals through university and presents awards to literacy centres that are already succeeding,37 but without providing the kind of funds that would open universities up to far greater numbers, or support institutions which are struggling, the difference this makes can only be negligible. It is possible to detect self-interest even in the provision of AIDS drugs: the epidemic has reached such devastating proportions that is in business’ direct economic interests to address it.38 (See also above, ‘Moody-Stuart and the Global Business Coalition on HIV/AIDS’).

Far more damningly however, a Guardian article of November 2003 suggested that, at that stage at least, Guinness Nigeria had not actually implemented the drinking water projects that it boasted of.39 Interestingly enough, in March 2005, the website doesn’t seem to have been updated, still referring to most of the Nigeria boreholes in a careful future tense.40 The Guardian article also claimed that after weeks of media coverage senior spokespeople for Guinness Nigeria seemed to know nothing of the provision of anti-retrovirals for HIV positive staff, and claimed that none of the then 3000-strong workforce were infected, and that therefore the issue was irrelevant.41

Even when Diageo’s water programmes are actually happening, they sit rather uncomfortably with the company’s environmental track record. One subsidiary, Uganda Breweries, was long the target of protesters for discharging broken glass and untreated effluent directly into Lake Victoria.42 The company has since invested in treatment plants, but this was by no means an isolated incident – Tanzanian Breweries, which Diageo partly owns, is largely responsible for the fact that the Msimbazi River is almost entirely devoid of life, and seafood at the mouth of the river is also found to be contaminated.43

References

  1. Diageo Annual Report, www.diageo.com/download%5C3000—R531.pdf, p. 12, last viewed 08.03.05
  2. Ibid., p.26
  3. ‘Public Citizen’, ‘Multilateral Agreement on Investment (MAI): Background Information’,www.citizen.org/trade/issues/mai/index.cfm, last viewed 08.03.05
  4. Diageo website, ‘Who we are’ www.diageo-careers.com/WhoWeAre.asp, last viewed 08.03.05
  5. Center for Media and democracy, Sourcewatch, Edelman Profile, www.sourcewatch.org/wiki.phtml?title=Edelman, last viewed 08.03.05
  6. Ravi Chandiramani, ‘Diageo hires Reputation Inc and C&W to CSR accounts’, PR Week, 31.10.03, www.prweek.com/news/news_story.cfm?ID=193821&site=1, last viewed 08.03.05
  7. Diageo Website, ‘The Diageo Foundation’,
    www.diageo.com/pageengine.asp?menu_id=0&site_id=4&section_id=21&page_id=966, last viewed 08.03.05
  8. Corporate Social Responsibility Forum, www.iblf.org/, last viewed 08.03.05
  9. ePolitix website, ‘Diageo Great Britain Government Affairs’, www.epolitix.com/EN/Forums/DIAGEO+Great+Britain/, last viewed 08.03.05
  10. Cabinet Office 2004, Alcohol Harm Reduction Strategy for England, Section 7, ‘Supply and Industry Responsibility,’ www.strategy.gov.uk/su/alcohol/alcohol_harm07.htm, last viewed 08.03.05
  11. Institute of Alcohol Studies, ‘Alcohol Strategy,’ 2004
    www.ias.org.uk/publications/alert/04issue1/alert0401_p2.html, last viewed 08.03.05
  12. Alcohol Concern website, ‘Editorial – Strategy Comment’, 07.09.04, www.alcoholconcern.org.uk/servlets/doc/827, last viewed 08.03.05
  13. Philip Johnston, ’24 hour drinking will fuel crime,’ The Daily Telegraph, 23.03.04
    www.telegraph.co.uk/news/main.jhtml?xml=/news/2004/03/20/nbinge20.xml, last viewed 08.03.05l
  14. Hilary Abramson, ‘Big Alcohol puts on a Front’, Multinational Monitor, Volume 19, Number 12, December 1998, http://multinationalmonitor.org/mm1998/98dec/front1.html, last viewed 08.03.05
  15. Alcohol Harm Reduction Strategy for England, Cabinet Office 2004 p.57 www.strategy.gov.uk/su/alcohol/alcohol_harm07.htm, last viewed 08.03.05
  16. Louise Gray, ‘ Scotland shrugs off ‘sick man’ label’ The Scotsman, 23.3.05
  17. Diageo Scotland Corporate Citizenship Report, 2003, www.diageo.com/html/diageocorprep03/files/scotland.pdf, last viewed 08.03.05
  18. The impact of European Works Councils’ www.eiro.eurofound.eu.int/1998/07/study/tn9807201s.html, viewed 05.12.04
  19. Tony Dubbins, ‘EIRO Comparative study: Developments in European Works Councils – case of Ireland’, European Industrial Relations Observatory (EIRO), www.eiro.eurofound.eu.int/2004/11/word/ie0409202s.doc, last viewed 08.03.05
  20. ‘Diageo concludes innovative EWC agreement,’ www.eiro.eurofound.eu.int/2002/11/feature/ie0211204f.html, viewed 02.12.04
  21. Diageo Corporate Citizenship Report, 2004 www.diageo.com/download%5C3000—R532.pdf, last viewed 08.03.05
  22. John Kelly (2000), ‘The limits and contradictions of social partnership’, Communist Review 33, pp3-7, www.communist-party.org.uk/articles/2003/february/the%20limits%20and%20contradictions%20of%20social%20partnership.shtml, last viewed 08.03.05
  23. John Kolawole, Nigeria Trade Union Congress Secretary General, quoted by Chris Nwachuku, ‘Workers Reject Sack of 500 in Guinness’, This Day (Lagos), 25.02.05, http://allafrica.com/stories/200502250176.html, last viewed 20.03.05
  24. Diageo Scotland Corporate Citizenship Report, 2003, www.diageo.com/html/diageocorprep03/files/scotland.pdf, last viewed 08.03.05
  25. Diageo Africa, company profile, www.careersinafrica.com/CareersinAfrica2005Diageo.asp, last viewed 22.02.05
  26. Trades Union Congress (TUC) International website, ‘Guinness to give anti-retroviral drugs to African employees’, www.tuc.org.uk/international/tuc-7432-f0.cfm, last viewed 25.03.05
  27. Speech Delivered by Mrs. Anna Kajumulo Tibaijuka Under-Secretary-General, United Nations Executive Director, UN-HABITAT, United Nations Foundation Washington D.C., 11 February 2003 www.unhabitat.org/director/unf.asp, last viewed 25.02.05
  28. eg. International Federationof the Blue Cross: HIV AIDs and alcohol www.eurocare.org/bluecross/english/topic03eng.html, last viewed 25.022.05
  29. Diageo Corporate Citizenship Reprt 2004, ‘Focus on Africa: maximising the potential of the continent and its people’, www.diageo.com/citizenshipreport2004/africa.asp, last viewed 25.03.05
  30. ‘Corporate Governance in Africa, A Study of Publicly Listed Companies’ London Business School, UK, www.africaplc.com/typetool/uploads/main_news/docs/CGiA%20Final%20Report.pdf, last viewed 22.02.05
  31. East Africa Breweries Ltd Corporate Citizenship Report 2004, p5, www.diageo.com/download%5C-9999—R487.txt.pdf, last viewed 25.03.05
  32. Adam Jones, ‘A New Respect for Moonshine’, Financial Times 20.12.03
  33. Selling booze: alcohol marketing in Nigeria. A Paper for World Health Organisation Valencia conference, 2002. Obot, Isidore S, Ibanga, Akan J. www.ias.org.uk/publications/theglobe/02issue2/globe02issue2.pdf. Last viewed 01.03.05
  34. BBC News, Jo Foster, Africa’s very own ‘James Bond”, 17.04.03, http://news.bbc.co.uk/1/hi/world/africa/2956043.stm, last viewed 08.03.05
  35. African Theater USA, ‘Film review: Critical Assignment’ www.africantheaterusa.com/reviews.htm#acritical%20assignment, last viewed 08.03.05
  36. Isidore Obot and Akan Ibanga (2002), ‘Selling booze: alcohol marketing in Nigeria’, The Globe 2 (Global Alcohol Policy Alliance); www.ias.org.uk/publications/theglobe/02issue2/globe02issue2.pdf, last viewed 01.03.05
  37. The Corporate Socal Responsibility Newswire Service, ‘Momentum Builds for the Commonwealth Business Forum’, 11.25.03, www.csrwire.com/article.cgi/2288.html, last viewed 25.03.05
  38. Global Business Coalition on HIV/AIDS, Report of the Expert Meeting, ‘The Role of the Business Sector in Scaling-up access to Antiretroviral Therapy’, May 2003, p14, www.kintera.org/atf/cf/%7BEE846F03-1625-4723-9A53-B0CDD2195782%7D/Expert_Meeting_Report%202003.pdf, last viewed 21.03.05
  39. Rory Carroll in the Society Guardian, ‘Brewing up Standards’, 17.11.03 http://society.guardian.co.uk/givinglist/story/0,10994,1087123,00.html, last viewed 25.02.05
  40. Diageo website, ‘Project Description: Guinness Nigeria – Water of Life in the Community”, www.diageo.com/pageengine.asp?menu_id=0&site_id=4&section_id=21&page_id=977, last viewed 20.03.05
  41. Rory Carroll in the Society Guardian, ‘Brewing up Standards’, 17.11.03 http://society.guardian.co.uk/givinglist/story/0,10994,1087123,00.html, last viewed 25.02.05
  42. United Nations Environment Program (1999), ‘Environmental Impacts of Trade Liberalization and Policies for the Sustainable Management of Natural Resources: A Case Study on Uganda’s Fisheries Sector’, p.77, www.unep.ch/etu/etp/acts/capbld/rdone/uganda.pdf, last viewed 08.03.05
  43. S. Mgana and S. Mahongo (2001), ‘Strategic Action Plan for Land-Based Sources and Activities Affecting the Marine, Coastal and Associated Fresh Water Environment in the Eastern African Region’, United Nations Environmental Program (EAF/5), www.unep.org/eaf/Docs/SAPEaf5/tanzania.htm, last viewed 08.03.05