Diageo insider to replace Walsh as chief executive

Guinness owner Diageo reshuffled its management yesterday, with a company insider becoming the boss of the world’s biggest spirits firm, suggesting there will be no major change in strategy.

Chief operating officer Ivan Menezes will replace Paul Walsh, who is stepping down after 13 years, the maker of Bushmills whiskey and Tanqueray gin said.

The value of Diageo has tripled under Mr Walsh but the firm has struggled recently in some of its attempts to make acquisitions in emerging markets. Diageo was formed in 1997 by a merger of Grand Metropolitan and Guinness.

Menezes has a background in India and the US, and this may help to underline the global credentials of the London-listed firm.

Analysts had been expecting the move after Menezes, formerly the head of Diageo North America, was made chief operating officer last year.

“We would not expect any significant change to strategy and see this as the natural ‘next step’ in Diageo leadership,” said Jefferies analyst Dirk Van Vlaanderen. “Ivan is a known quantity and has done a good job managing Diageo’s largest and most profitable business segment.”

Faced with sluggish demand in recession-hit European economies, Diageo has been snapping up brands in emerging markets, where it aims to make around half of its turnover by 2015.

However, the going has not always been smooth. It agreed in November to buy a controlling 53.4% stake of India’s biggest liquor maker United Spirits under a two- stage process. The completion of the acquisition is yet to happen, slowed by regulatory approvals, while the second-stage open offer is unlikely to succeed and Diageo is expected to end up with around 30% of the firm.

In December, long-running talks to buy a stake in tequila brand Jose Cuervo collapsed.

But emerging markets are seen as key for the firm, which houses brands such as J&B whisky that dates from the eighteenth century.

In its latest trading update last month, it reported sales growth of 5% for the nine months to the end of March, with a 4% decline in Western Europe dragging on growth elsewhere.

Diageo’s shares have nearly tripled under Mr Walsh’s reign, and have risen around 30% over the last year alone. They trade at 17.5 times expected earnings, equal to Pernod Ricard, the world’s number two spirits group.

“The handover is being made at a time when the business is strong and Ivan takes on the role of CEO at an exciting stage of the company’s global development,” said Diageo chairman Franz Humer.

Mr Walsh had not yet decided what his next move would be, a Diageo spokeswoman said.

Mr Walsh has a number of corporate non-executive positions, as well as roles in the British government’s departments of business and energy. He will remain with the company over the next year to focus on moving “critical partner relationships”, Diageo said.

— Reuters