Diageo CEO leaves impressive legacy

“Diageo is a very fine racehorse but it can’t have two jockeys,” said chief executive of Diageo, Paul Walsh.

Paul Walsh

Speaking in an exclusive interview with the drinks business before his retirement was announced, Walsh spoke of his plans to step aside for Ivan Menezes, who became chief operating officer last year – and who will become CEO from 1 July.

However, Walsh himself won’t retire until 30 June 2014 – when it’s widely believed he will become chairman of Unilever – allowing for a year-long handover period.

”I will be around and do whatever I can to make Ivan and this company continually successful,” Walsh told db, adding, “But I must step aside and let Ivan ride this horse.”

As part of a three-year programme in anticipation of Walsh’s retirement, Diageo set a goal of earning 50% of its revenue from newly developing markets by 2015.

Walsh says he will meet that target earlier.

Such a belief stems from current growth rates in sales of premium spirits in countries such as Brazil, China, India, Indonesia, Korea, and Russia.

“We could be entering a new golden age for spirit consumption,” stated Walsh.

“Just look at the number of consumers who can now afford or will afford our brands over the next 10 years… It is like a raging torrent.”

“And when you have strong demographics that are economically empowered we will do well,” he said.

Illustrating the impact of an enlarging middle class keen to express their new-found wealth, Walsh recorded the success of Diageo’s top-end labels.

“Four years ago our Reserve Brands [Johnnie Walker Blue Label, Gold Label Reserve, and Platinum Label whiskies, Ketel One vodka, Zacapa rum, Don Julio Tequila, Cîroc vodka and Tanqueray No. Ten gin] were worth more than £400 million in sales.

“In the last set of full-year numbers, they were worth £1.1 billion in sales. That will double in the next three to four years.”

Walsh speaks from a position of unquestioned experience: after 13 years at the helm of Diageo, he is one of the longest-serving chief executives among Britain’s biggest companies.

Since he became chief executive, annual results to last June show Diageo’s operating profit rising by 59.5%, and the value of the company (market capitalisation) more than doubling.

Today Diageo is valued at almost £50bn, making it Britain’s ninth biggest company. Significantly, even during the recession, Walsh increased both profitability and the dividend every year. The company also has a rock-solid balance sheet.

Nevertheless, Walsh doesn’t like speaking about his “achievements” – he prefers to talk of “changes over which he has presided”.

And such changes leave an impressive legacy.

As he admitted, “We have created with Diageo a British company that is global and a champion. And the great news is that there is more to do. It’s an exciting market and Ivan will continue to move it to higher levels.”

For the full interview – conducted by Ron Emler before Walsh’s retirement was announced – see the May issue of the drinks business, or click here.