27 Nov

Pure malt row sees Diageo frozen out

WHEN Diageo sits down next week with members of the Scotch Whisky Association (SWA) to defend its decision to brand Cardhu as a "pure" rather than "single" malt, it will find itself completely isolated.

The Scotsman has learned that the executive of the SWA has told Diageo that it feels the only solution to the present crisis is for the world’s biggest drinks company to withdraw its controversial Cardhu Pure Malt product.

The Scotch whisky industry has been angered by Diageo’s decision to sell the whisky in the same style of bottle and with the name of its Speyside distillery on the label. Distillers claim the decision could damage the industry and confuse drinkers into thinking Cardhu was still a single malt, rather than a blend.

In a memo, seen by The Scotsman, the executive of the SWA says that "the use on a whisky not wholly produced in the Cardhu Distillery is illegal" and that "the only wholly satisfactory solution is withdrawal of the Cardhu Pure Malt product".

The revelation is a hammer blow to Diageo, which so far has relied on the public impartiality of the SWA to broker a deal with its members over the controversial issue. It is also crucial in light of last week’s proclamation by senior executives of the industry that the SWA had a "significant role to play" in the resolution of the issue.

Rival distillers argue it has been long-standing practice in the industry for distillery names to be used as brand names only for single malts.

A pure malt threatens to confuse customers and undermine the "authenticity and integrity" of the premium single malt category, on which many smaller distillers depend.

In its response, Diageo has suggested the move is designed to "grow and expand" the Scotch whisky industry.

But after a meeting behind closed doors at the Glasgow offices of Morrison Bowmore last week, senior executives from all the major distillers wrote to Diageo’s chief executive, Paul Walsh, asking him to withdraw the product while discussions are ongoing and re-issue it in different packaging. They stressed these conditions were not negotiable.

The memo also reveals that the SWA believe Spanish consumers could be deceived into thinking that the product is in fact a single malt whisky.

It reads: "The get-up of Cardhu Pure Malt in its present form is virtually identical to that of Cardhu Single Malt, which means consumers are unlikely to notice there has been any change in the product."

In a further blow to Diageo, a leading industry analyst told The Scotsman that he had changed his mind on the issue and thought Diageo had weakened the whole malt category.

The analyst, who asked not to be identified, said: "When the situation happened, Diageo had two options - they could either do what they have done or have said, ‘We do have a bit of scarcity, there is a demand so we will continue to put the price up’.

"The fear is if (a pure malt) is introduced by one company, everyone else will follow suit. A good example of this would be Glenmorangie, who pioneered the wood finish malt that has now been successfully copied by everyone. I do believe Diageo’s move has weakened the whole malt category."

Reacting to the leak, Jonathan Driver, Diageo’s global malt whisky director, said: "We have worked with the SWA to address concerns as expressed in the letter. We are meeting next week to put new proposals, which have never been seen before, on the table to address these issues. Next week is a very important week."

Last night a spokesman for the SWA said: "We are working to find a solution within the membership and will be reporting to the council in December."

Article Courtesy of The Scotsman