DIAGEO PLC

A Corporate Profile
By Corporate Watch UK
Completed May 2005

Corporate Crimes

5.1 Non-traditional innovation in

5.1.1. wine and beer

5.1.2. alcopops

5.2 Marketing

5.2.1. Diageo's Code of Marketing

5.2.2. Marketing 'responsible drinking'

5.2.3. Marketing alcopops

5.2.4. Investigations into Diageo's marketing

5.3 Unions and labour - the shift to casualisation

5.3.1.Diageo Europe Forum

5.3.2.Corporate Social Partnerships

5.3.3. Nigeria: casualisation and redundancies

5.4 Relations with suppliers

5.5 Diageo in Africa

5.5.1. Philanthropic projects

5.5.2. Marketing

5.6 Environmental damage

5.7 GM products

5.8 MAI

5.9 Colombia

5.10 Human rights

5.11 Squeezing out small businesses

5.12 The Thalidomide scandal

5.13 The Guinness Affair

5 CORPORATE CRIMES
The ethical status of a giant alcohol corporation is inevitably questionable, simply because of the
dangers of the drug. The World Health Organisation (WHO) states that alcohol causes 3.2% of
deaths worldwide (and is responsible for between 8% and 18% of the disease burden amongst
males in Europe and the Americas) and is estimated to cause 20-30% of oesophogal cancer, liver
cancer, cirrhosis of the liver, homicide, epilepsy, and motor vehicle accidents.1 This makes it the
leading risk factor for disease in low mortality developing countries, and the third highest in the
developed world.2 It costs Europe between 2-5% of GDP,3 and the extensive cost it brings the
NHS has been acknowledged.4 The most important issue raised by the WHO is that, in direct
contradiction to the claims of the industry, the greatest burden on society comes not from isolated
individuals, but from the collective impacts of light to moderate drinkers.5
For an analysis of how Diageo's commitment to solving these problems matches up to its
practices, please see the www.corporatewatch.org/?lid=1708">Influence section of this profile.
This section will look at a number of other areas in which the image established in Diageo's CSR

may not hold out to scrutiny, including its role in the increasing global trend towards the disenfranchisement of the workforce through a steady rate of staff cut-backs and the casualisation of
labour.

5.1. Non-traditional innovations in alcohol production

Recent years have seen changes in the way alcohol is being produced and drunk in Britain and
elsewhere, with Diageo, among other companies, but always at the forefront of changes in the
industry.
5.1.1. Wine and Beer - Structural Changes
The drinks sector is polarised between a small number of huge multinational companies, and
small local producers, particularly for wine and beer. In the case of wine, Diageo and Allied
Domecq in particular have accelerated the big multinationals programme of investment in
vineyards and branded wines, collecting wine brands and in doing so changing the wine industry
from being very fragmented to being highly concentrated.6
www.camra.org.uk/SHWebClass.ASP?WCI=ShowCat&CatID=1">The Campaign For Real Ale
(CAMRA), a British beer consumer group, campaigns in favour of independent breweries not
owned by one of the major multinational brewing companies. Beer is one of the products still
regularly produced at a small local scale,7 and according to CAMRA this is under threat from the
growing role of multinationals (particularly since the Beer Orders of 1989 eroded the brewery-tie
system in which most pubs were owned by brewers) who neglect real ales thereby undermining
the diversity of British beer. CAMRA also say that the major multinationals undermine local
tastes, which it sees as an important part of local communities, as well as the ability of smallscale local producers to function.8 Diageo, as producer of Guinness (whose popularity is at the
expense of other stouts) and premium lagers like Red Stripe, has a significant role to play in this
process.
5.1.3. Alcopops
Diageo has been heavily involved in the manufacture of alcopops, a new innovation in the drinks
industry in the mid-1990s as it responded to changing consumer lifestyles and forms of
entertainment in British society (as elsewhere).9 These forms of drinks have been linked to the
problems associated with binge-drinking, as they are designed to be easy and quick to drink, and,
as will be examined below in the 'marketing' section, they have been linked to under-age
drinking.
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5.2. Marketing

5.2.1. Diageo's Code of Marketing

5.2.2. Marketing of responsible drinking messages

5.2.3 Marketing alcopops

5.2.4 instances of investigation into Diageo's marketing

Diageo invests heavily in marketing, with 1.04 billion spent on marketing of premium drinks
brands in the year ended June 2004.10 In 2001 Diageo became the first company in 50 years to
advertise spirits on American TV, with an advert for Smirnoff Vodka on NBC.11 More
worryingly, despite Diageos policy of responsible marketing,12 there have been claims that its
marketing has been aimed at groups at risk, such as young people.
(For more on marketing, see 'Self-regulation' under the www.corporatewatch.org/?
lid=1708">Influence section of this profile, and the 'Diageo in Africa' section below.)
5.2.1. Diageo's Code of Marketing
Diageo does have a www.diageobrands.com/assets/marketing-code.pdf">Code of Marketing. But
the code, as distinguished from regulations imposed in legislation, presents the need to limit the
scope of advertising in a way which ensures that these limitations will not damage sales. A
central point in this code is that alcohol will not be presented in a manner associating it with
destructive and anti-social forms of behaviour, which Diageo is keen to discourage. Advertising
that associates alcohol with positive, non-bingeing forms of behaviour will, the code states,
benefit British society as well as the company's sales:
We believe that brand advertising that depicts responsible drinking as a relaxed, sociable and
enjoyable part of life, has a role to play in promoting a responsible approach to alcohol
consumption... We will not depict people drinking heavily or very rapidly, or imply that such
behaviour is attractive or appropriate... We will ensure that our marketing communications do
not suggest any associations with violent or with anti-social behaviour.13
The result is a 'responsible' marketing campaign for alcohol which refrains from depicting
irresponsible or unattractive behaviour, encouraging a message which presents drinking as a
desirable activity which can be part of a desirable lifestyle. For example, the code of marketing
practices suggests that 'our brand advertising... frequently depicts responsible drinking as a
relaxed and enjoyable way to socialise with friends.'14 Though presented as a policy of social
responsibility, this can actually be seen more as an effective way of marketing products, and thus
increasing sales. Taken together with campaigns against binge-drinking, this very successfully
plays a dual role of presenting the company as one that disassociates itself from undesirable
behaviour, so can be viewed as 'responsible,' and of selling the product (including, potentially, to
under-age drinkers), as something desirable. Indeed, the issue of presenting alcohol as something
that can increase sexual ability is a slightly more sensitive issue: Alcohol Concern have
suggested that drinks companies are using 'creative advertising' to bypass regulations forbidding
advertising that links alcohol to sexual success.15
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5.2.2. 'Don't be the drunken monkey': Marketing of responsible drinking messages

It isn't just the selling of alcohol over which Diageo formulates marketing: the company, and
SAOs it is involved in, have shared a role with government departments in investing in the
promotion of what they define as responsible drinking.
In May 2004, the Portman group released an advertising campaign entitled 'Don't be the
drunken Monkey,' presenting binge-drinking as undesirable and anti-social.16 The adverts
showed an irresponsible young drinker as a chimpanzee. The idea behind this was to disassociate
the correct use of alcohol from violent and anti-social behaviour, so as to discourage such
behaviour - but this also served to protect the product itself from an association with such
behaviour. The message of the anti-binge drinking campaign portrays a platform that is not
harmful to the company's aim of selling drinks, and is perhaps even beneficial to it. This platform
is that excessive amounts and irresponsible use of alcohol, rather than the substance itself, are
damaging to health and society. This message correlates well with the idea behind Diageo's Code
of Marketing. Alcohol campaigning groups question the role played by industry groups, rather
than disinterested health experts, in putting together this campaign:
It shouldn't be left to drinks manufacturers to decide what messages are conveyed about the
dangers of alcohol, because their priority will always be to sell alcoholic drinks to the public. Lee Lixenburg, Alcohol Concern 17
There was also criticism of this advertising campaign from another perspective: the Captive
Animals Protection Society (CAPS) called for the campaign to be withdrawn on the grounds that
the advert's portrayal of an irresponsible young drinker as a chimpanzee was degrading to
chimpanzees and damaging to their welfare.18
In August 2003, Diageo was criticised by the Australian Drug Foundation and National Council
on Drugs at the launch of a social responsibility marketing campaign for advertising its product
in a campaign to discourage drink-driving. In the words of Paul Dillon of the National Alcohol
and Drug Research Centre Diageo were 'still pumping out the product and still pumping out the
problems.'19
And despite the messages being those chosen by the industry, Diageo still expects government
funding to be available to finance these campaigns. In October 2004 they called on the British
government to fund a campaign against binge drinking, holding a series of meetings with
ministers.20
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5.2.3. Marketing alcopops

Alcopops provide the clearest indication that drinks may be being marketed to young people.
Called FABs (flavoured alcoholic beverages) or RTDs ('ready-to-drinks') by the industry, these
drinks specifically target young and inexperienced drinkers and are prominent amongst underage and young people. Their penetration by age group in Britain across the industry is 42%
amongst 25-34 year-olds, 60% amongst 20-24 year-olds, and 64% amongst 15-19 year-olds.21

They were innovated and rapidly expanded in the mid-1990s, designed not to taste very alcoholic
so as to appeal to those not used to drinking and to those seeking to consume a large amount of
alcohol in a short amount of time. As such they have been linked to binge-drinking.22 The recent
resurgence of spirits is due in part to the interest in cocktails and alcopops, both of which
constitute a youth market for spirits such as vodka. The percentage change of FABs has been a
rise of 51.1% 1999-2003 compared to 35.7% for wine, 13.9% for spirits and 4.8% for beer. The
percentage change in market value of FABs 1999-2003 was 227%.23 Marketing spent on FABS
is extensive, with 32.9 million spent 2002-3. The top brand is Diageos Smirnoff Ice, which
together with Bacardi Breezer constitutes over 50% of the market, and Smirnoff Ice was also the
brand with the highest amount spent on marketing in 2002-3, a sum of 8 million.
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5.2.4. Instances of investigation into Diageo's marketing

In several other instances, Diageo's marketing of products has been criticised or investigated, in
some cases for breaching its own or regulatory codes of marketing practice.
Legal action in the US In 2004 a series of putative class actions were filed against Diageo in US
federal district courts (in Ohio, North Carolina and the district of Columbia), and one in
Colorado state court. These actions filed for recovery of profits made through allegedly
advertising and marketing products to underage drinkers.24 Diageo pledged to defend itself
against these allegations.25
Guinness adverts in the US In March 2004, the Marin Institute in the US claimed that Guinness
adverts for St. Patrick's Day violated Diageo's own Code of Marketing, by depicting St. Patrick's
Day as 'Christmas morning with a keg,' which 'apparently starts with binge drinking in the
morning' and 'unambiguously evokes a child's delight.'26
Cardhu Affair In March 2004 Diageo were forced to withdraw their brand Cardhu pure malt,
which was marketed under the name of the Cardhu distillery despite the fact that it was being
made from a number of distilleries. Traditionalists in the Scotch Whisky Association claimed that
this undermined the top end malt of whiskeys which ought to be single malt, and constituted
false marketing.27
Sports events In 1998 the Amsterdam Group (an SAO in which Diageo plays a leading role)
asked the EC to let it take court action against Frances regulations banning screening of sports
featuring alcohol advertising.28 The World Health Organisation has judged that sporting events
featuring alcohol advertising and sports promotion and sponsorship by alcohol companies are a
major forum in which the alcohol industry are targeting marketing towards young people.29
Causing offence: Taiwan In January 2003, the Taiwanese government voted to criticise Diageo
and considered a ban on its brands, for an advert for Smirnoff disseminated on the London
Underground which they deemed to be offensive to Taiwan. The poster campaign depicted a
Christmas present saying on the label: Warning. This gift will break down on Christmas
morning. Replacement parts available from Taiwan. Allow three hundred and sixty-five days for
delivery.30

Norway In July 2002, Diageos license to sell alcohol in Norway was revoked for six months for
its marketing of an alcopop in breach of Norwegian law. Smirnoff Black Ice was promoted to
trade officials but members of the public entered the event and got hold of free promotion
material, making Diageo in contravention of Norwegian law. Diageo continue to trade its
products in Norway through third parties.31
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5.3 Unions and labour - the shift to casualisationr

5.3.1. Diageo Europe Forum

5.3.2. Corporate Social Partnerships

5.3.3. Casualisation of labour and redundancies in Nigeria

Between 2003 and 2004, Diageo cut nearly 1000 jobs worldwide,32 and between 1998 and 2000
axed the same number of people in the UK alone,33 part of an on-going trend towards
contraction of employment that mirrors the concentration of ownership into the hands of fewer
and fewer companies. It is hardly surprising then that there is considerable pressure on Diageos
relationships with suppliers and workforce, but it is interesting to note how, especially with
regards to relationships with trade unions, the companys strategies seem very much in line with
the way they assume responsibility for alcohol problems. Rather than an outright oppositional
strategy to other interest groups, they seek 'working partnerships', which give the impression that
they are engaged with other interest groups, but can have the effect of reducing the power an
independent negotiating body might have over them. In labour law, just as in health regulation,
we can see Diageo pursuing voluntary codes which seem evasive to more binding legislation. It
is quite telling that a National University of Ireland report refers to the trade union role in
Guinness as constructively managing change34 - the emphasis on communication with unions
masks the extent to which involvement is a substitution for influence.
5.3.1. Diageo Europe Forum (DEF)
One recent innovation has been the new Diageo Europe Forum (DEF) agreement which was
unveiled in 2002. The DEF is an annual meeting involving at least two core senior managers, and
just 35 employees, only some of whom are union representatives, drawn from the whole of
Europe. It is supposed to be a means by which management and staff work in partnership, and
was hailed as innovative because it included an unusually extensive definition of consultation
with employees over the issues that affect their interests. This was called 'extensive' because it
stipulated that this must involve communication before, rather than after, decisions are made,35
but the key point is that there is no obligation on managers to respond to objections. The function
of the DEF is said to be an information and consultation forum, but whatever that may mean, it
is stated not to involve collective bargaining.36

In addition, we must look at what precipitated Diageo towards such an 'extensive' definition of
its worker's rights. Firstly, the forum has to be seen as a response to the1994 European Directive
on European Works Councils (EWCs). This aimed to improve workers rights to information and
consultation, and stipulated that all companies of a certain size must establish EWCs,37 such as
Diageo's annual forum. Under this Directive, companies which had established a voluntary
agreement on the consultation of the workforce before a certain deadline were exempt from
many of its provisions, and because of the time delay in implementation of the Directive, the
agreement can be counted as just such a voluntary code.38
What's more, the agreement over the definition of consultation also came after unions
threatened to take Diageo to the European Court of Justice over the issue. The company had
announced it was planning to cut 300 out of 360 jobs at Dundalk in Ireland, and insisted that
consultation had taken place, because they had mentioned overcapacity at the plant at the DEF
meeting a month before. 39
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5.3.2. Corporate Social Partnerships

Another strategy recently favoured by businesses is the development of corporate social
partnerships with employees. These set up structures between staff and top level management,
which allow for communication and joint problem-solving, and often involve some degree of
employment security. While these do not replace unions, they can in effect means that they are
co-opted, and involvement in decisions replaces independent bargaining power.40 It is telling
that both the UK Department of Trade and Industry (DTI) and the Involvement and Partnership
Association (IPA) refer to these partnerships as a means of increasing competitiveness,41 and
the ability to manage change effectively, change being a sure euphemism for insecurity and
instability.42
The DTI features Diageo Global Supply in Scotland as a shining example in their brochure on
best practice in employee partnerships, though it also states that this partnership was revised after
7 months attempting to negotiate pay in 2000.43 It is also the case that only 55% of the Diageo
work force in Scotland is unionised, and 17% are employed on temporary contracts.44 In July
2004, when Diageo announced it was cutting 60 jobs in Glasgow and Edinburgh, a spokesperson
for the company said that they hadnt consulted over the move because they operated in a nonunionised environment.45
United Distillers, now owned by Diageo, provides a prime example of how these partnerships
can serve corporate rather than employee interests. After considerable job losses had already
taken place, the unions (GMB, AEEU, TGWU and MSF) signed up in 1994 to a 'Positive
partnership', a three-year deal which promised no more compulsory redundancies, provided that
staff agreed to retraining and redeployment, and didnt attempt to oppose voluntary
redundancy. The move was rejected in a ballot, but, to quote the IPAs own website, for
'mysterious reasons ... the agreement still went through ...'.46
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5.3.3. Casualisation of labour and redundancies in Nigeria

However partial Diageo's extension of labour rights to European employees, there is no
suggestion that they are to be extended beyond the zone of EU legislation. In 2004 Diageo Africa
was awarded first prize as the 'Employer of the Year', for its 'clearly articulated policies' to
'ensure that employees have a positive experience.'47 This recognition came from Africa
Investor Magazine, the quarterly publication of 'Business for Africa',48 and Diageo's website
described the award as recognition of its 'investment' within the continent,49 rather than its
labour standards. It seems unlikely that unions would be offering the same accolade. Guinness
Nigeria sacked 500 workers in February 2005, and unions claimed that the company's objective
was to replace permanent contracts with casual ones, and claimed that major redundancies in
1992, 1995 and 1997 had all been followed by employment of casual workers with no conditions
of service, and created space for more expatriates in higher level management.50 Guinness had
already been picketed in 2002 as part of the Nigerian Labour Congress (NLC) anti-casualisation
campaign,51 which revealed that a majority of workers in Nigerian industry were employed on a
casual basis,52 and claimed that the biggest companies had the worst labour practices.53
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5.4 Relations with Suppliers

5.4.1.NFU protest

5.4.2. International supply chain labour standards

The phrase eliminate waste occurs twice in three short paragraphs in Diageo Scotlands
Corporate Citizen Report.54 In 2000 they switched to an e-procurement system with the
company www.ariba.com/">Ariba, which among other things allowed them to negotiate in
consortiums.55 E-procurement is said to place suppliers in an increasingly cut-throat
environment, where any possible considerations for quality, labour rights or the environment are
squeezed out in favour of competition based simply upon who can offer the lowest price.56 It
also places another intermediary in the sale process, which puts further costs on the suppliers,
who have to pay a transaction fee for every sale made.57
5.4.1. NFU protest In October 2002 the National Farmers Union of Scotland chose to target
Diageo in a protest against the price paid for malted barley, claiming that the price paid to
farmers accounted for only 7.5p in a bottle of whisky, and that an increase of one penny per
bottle would produce a further 20 per tonne,58 while in 2003 the money farmers were receiving
was still lower than the cost of production.59 Peter Smith of Diageo described himself as
'mystified' by the accusations, while Scotch Whisky Producers Association spokesperson
Campbell Evans protested that the NFU was responding to a 'wider problem within agriculture,'
and protested that the whisky industry could not 'control the weather and world prices;'60 in
other words, while marketing Scotch whisky, the only factor in selecting suppliers could be
cost.

5.4.2. International Supply Chain labour standards Diageo has produced a 'Statement of
Intent' on its ethical standards in international deals with suppliers, which promises to take its
responsibilities 'very seriously',61 but a recent independent report into supply chain labour
standards produced a different picture.62 Although Diageo came out as a leader against other
companies in the beverage industry, this sector had one of the lowest scores overall,63 and a vast
majority of the companies surveyed were found to be inadequate, even though the only data used
was their own publicly-available reported information.64 Although Diageo has a code in place
with regards to labour standards, this was described as weak, not referencing all the core
conventions of the International Labour Organisation (ILO).65 It scored 0 in the 'Management'
and 'Stakeholder Engagement' sections of the survey. In other words, it doesn't privilege ethical
standards at a high enough level of the organisation, or offer training on this issue to buyers and
sellers, and nor does it give unions adequate scope for involvement in decisions over issues such
as working conditions.66 Perhaps more worrying, Diageo's score is very low in the auditing and
reporting section, so that there is no guarantee that the code responds to anything in reality.
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5.5 Diageo in Africa

Diageo enjoys huge economic clout in many areas of Africa. Not only does the continent provide
10% of their annual profit, and an area of 'phenomenal growth',67 but the concentration of
wealth is such that their subsidiaries are frequently among the very top companies listed on local
stock markets. In Kenya for instance, over 50% of the national market is controlled by just five
companies, all of which are owned by multinationals, including Diageo.68 Since national
industries were privatised and opened up to foreign capital, the market in branded alcohol has
been more or less carved up between Guinness, Heineken and South African Breweries. In
Nigeria around three quarters of the regional and state owned breweries foundered in the 1980s,
leaving Guinness, and the Heineken-controlled Nigeria Breweries competing for top position.69
As well as their ability to buy out competition in the form of smaller national companies, this
stranglehold may also in part have been achieved by a marketing strategy which seems to
pervade all areas of public life and to seek to demonise non-branded alcohol as illicit and
dangerous. With such financial power, Diageo seems in a position to exercise huge influence on
public policy, with regards to alcohol, environmental and labour regulation, and more over-riding
economic issues.
In addition to the disproportionate influence Diageo wields by virtue of its sheer size, it has a
more direct impact on public policy. In 2003 it was one of the prime sponsors of, and provided
speakers for a meeting of the Commonwealth Business Council (CBC) in Abuja.70 This forum
was held directly before the meeting of the commonwealth heads of government, and the CBC
made its intentions quite explicit, referring to it as a 'unique opportunity' for delegates to
'network', contribute to policy recommendations, and influence 'the debate on important trade
and investment issues.'71 The agenda of the CBC is equally clear and predictable: it's pre-Abuja
recommendations for instance, called consistently for public services to be 'liberalised' while
'burdensome environmental, health and safety regulations' were to be avoided.72

Diageo was also a member of the Business Contact Group set up to give business input into Tony
Blair's Commission for Africa in 2004-2005. The outcome of the Commission for Africa were
predictable, calling for Africa to embrace liberalisation and for the continent to make itself more
attractive to foreign investment through developing its infrastructure.(See Corporate Watch
report, 'Bringing the G8 Home: Corporate Involvement in and around the G8 in Scotland 2005).
5.5.1. Philanthropic projects
As well as bragging about its business successes, Diageo's literature tends to use Africa as proof
of its philanthropic credentials. Diageo's Corporate Citizen Report 2004 'Focus on Africa' talks
very little about breweries, and a lot about hospitals, literacy programmes, water projects, and of
course HIV.73 It seems almost churlish to be critical of anyone addressing such basic needs, and
yet with a healthy dose of scepticism we see a different picture. For a start, according to an
admittedly very rough estimate, Diageo donates only 0.078% of annual turnover to worthy
causes,74 and for a second, it can seem that the initiatives are chosen to maximise publicity and
minimise investment. In Kenya and Nigeria for instance Diageo subsidiaries provide
scholarships for small numbers of individuals to attend university, especially to study business,
and in South Africa Guinness UDV presents a yearly award to the best literacy centres.75 Such
schemes are an excellent way of increasing the prominence of Diageo's brand, inducing brand
loyalty, and providing future recruits, but sponsorship for individuals doesn't increase the total
number of places available, and pouring more funds on successful institutions doesn't help those
which are under-resourced and struggling. Diageo is often cited as a leading socially responsible
corporate citizen because it provides free drugs to HIV-positive members of staff. However this
seems rather an inadequate counterbalance to the well-documented role alcohol has to play in the
spread of HIV.76 In addition, the epidemic has reached such devastating proportions that is in
business' direct economic interests to address it.77
Far more damningly however, an article in The Guardian in November 2003 suggested that, at
that stage at least, Guinness Nigeria had not actually implemented the drinking water projects
which were boasted of on the website, and by Gabriel Nkanang, then the external relations
manager. The company's water engineers when questioned said that they had not heard of any
boreholes being drilled, and when questioned, Nkanang replied evasively that 7 of the 10
projects were in fact 'at the planning stage'. Similarly, 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.78 It is interesting that nearly two yeas later the webbased project description for the Water of Life programme in Nigeria doesn't seem to have been
updated, the wording is exactly as it was when Rory Carrol quoted it, referring to the project as
having been 'launched', and talking of how Guinness 'will' work with local organisations.79
Searching the local press on the internet has revealed a number of contradictory stories as to the
locations of future boreholes, but nothing to suggest that any had been completed since the one
in Benin, which had already been operating by 2003.80 While there is no evidence that Diageo
does not intend to ever put its promises into practices, such delay seems rather contradictory to
the 'integrity' which the company lays claim to.81
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5.5.2 Marketing
The marketing of alcohol is of course the familiar area in which Diageo poses as the solution to a
problem of which it is such an obvious part. There is nothing unique to Africa about Diageo's
paternalism here: as in the UK, they have been training bartenders in 'responsible serving',
publicly sponsoring campaigns against drink driving, and supporting 'programmes to educate
consumers'.82 What is extraordinary however is the 'creativeness' with which the company has
sought new territory for advertising. In part this is about targeted sponsorship. Guinness Nigeria
backs events aimed at the young and wealthy, such as beauty contests on university campuses,
essay writing competitions for schools, and radio shows devoted to questions and answers on
particular brands. This reaches its climax in the superhero Michael Power, whose image has
spilled over from billboards to mini adventure series on radio and television, which do not need
to market products as such, but simply focuses on his personal qualities of strength, virility and
moral responsibility.83 The 2003 film 'Critical Assignment' was celebrated in reviews as 'Africa's
very own James Bond'84 and a testimony to the 'maturity of African films'85, but it is in fact
tantamount to a feature long advert for Guinness, produced by the company and starring Power
as its hero.
The competition which Diageo is fighting against is often not rival corporations: a majority of
alcohol consumed comes from the so-called 'illicit' sector. Across Africa, beer is traditionally
brewed from millet, maize or cassava as a small scale commercial enterprise, often by women.
The company's agenda comes through very clearly from the 2004 Corporate Citizenship Report
for East Africa which has a virulent attack on unbranded alcohol, which, they claim, can pose
severe 'health and social risks.'.86 Interestingly enough, even a report commissioned by ICAP, an
organisation itself sponsored by Diageo, reported that so-called 'illicit' brew is generally safe and
of good quality,87 as well as providing an important boost to the household and local economy.
For further information about Diageo's practices in Africa see the separate 'Environmental
damage' and 'Unions and labour' sections.
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5.6 Environmental damage

In 2004, Diageo missed its targets for reduction of energy use, greenhouse gas emissions, and
liquid effluent. It set 2007 targets for energy use at the same level as the missed 2004 target ,and
set a more conservative target for 2007 than the missed 2004 target for greenhouse gas
emissions. Diageo achieved its 2004 targets for water used and solid waste landfilled, though
these still constituted an increase both in total supply and in relative level (refer to Diageo's
Corporate Citizenship Report for details of these figures).88 According to Ethical Consumer
magazine, in 2000 Diageo failed to meet its targets for reduction of raw materials and emissions,
and set conservative targets for the future, which it succeeded in meeting most likely due to
output reduction, with emissions relative to output making little progress.89
Why water?

It is interesting that water is Diageo's prime chosen area for charity given that, yet again, the
company is a far bigger part of the problem than it is of the solution: breweries are frequently
listed among the worst pollutants and biggest consumers of water, especially in Africa. Until new
treatment plants were installed, Uganda Breweries was taking water from the national supply,
and then discharging effluent and broken glass into Lake Victoria at levels which exceeded the
recommended limits often by ten times or more.90 This is no isolated incident. In 2003 the
executive director of the United Nations Human Settlement programme complained that Kenya
Breweries was consuming nearly 6% of the total water supply for Nairobi City.91 A report into
water pollution in East Africa held Tanzania Breweries, (partly owned by Diageo,) largely
responsible for the fact that the Msimbazi River was so polluted as to be 'practically devoid of
life.'92 The irony is complete when we learn that in Malaysia, Diageo have been sponsoring
educational handbooks on integrated river mouth management,93 a gesture which, interestingly
enough, came after the company had been fined for discharging effluent into inland water in the
area.94
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5.7 Genetically Modified products

The chocolate in Haagendazs Ice Cream (Haagendazs UK is one of Diageos subsidiaries)

contains GM soya lecithin; in addition, some varieties contain corn syrup which may contain
GM.95 In 1999 Diageo was one of a number of companies targeted in a shareholder anti-GM
campaign.96

5.8 MAI - Promoting Unjust Trade Rules

In 1998 Diageo was involved in the negotiation of the Multilateral Agreement on Investment
(MAI). The MAI was an agreement multi-national companies tried to get passed through the
Organisation for Economic Co-operation and Development. The agreement was defeated by a
world-wide coalition of groups opposed to the serious social and environmental consequences it
was expected to have. It would have increased investment rights and the opening up of free trade
in an unprecedented manner, resulting in a real transfer of power to unaccountable private
corporations.97

5.9 Colombia

On 8 November 2004 Diageo together with Pernod Ricard were forced to defend themselves
against a suit made by the Columbian government that the companies had bypassed the heavilytaxed official state alcohol distribution networks, instead importing alcohol through drug
traffickers, and companies laundering drug money and supporting terrorist groups. According to
the allegations, Diageo and the other companies had competed illegally with government-owned

businesses and received bribes from companies dealing with laundered funds. Diageo determined
to defend itself vigorously against these allegations.98
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5.10 Human rights

As Diageo has operations in 180 countries, it has difficulty in putting its commitment to
condemning human rights violations into practice, as many of these countries are ones in which
serious human rights abuses take place. In 1999 Amnesty International pointed out that Diageo
had operations, and investments into establishing markets, in countries with oppressive regimes
including Tanzania, Turkey, Russia, the Philippines, Mexico, Indonesia, Colombia, and Nigeria
(the world's 3rd market for Guinness).99 In 2003 the IBLF drew attention to this, suggesting that
the discrepancy between the company's policy on human rights and its operations in these
countries might damage the company's reputation. To guard against this, Diageo drew up a
policy on human rights in collaboration with Amnesty International. Geoffrey Bush, director of
corporate citizenship, suggested that there was little Diageo could do about human rights abuses
in countries it operates in, beyond assisting the local economy: 'from our point of view the best
thing we can do is build a brewery.'100

5.11 Squeezing out small businesses

In 2002, Diageo sponsored a bill in the California Assembly which would have had the effect of
limiting imports of wine to a small monopoly of registered companies. This provoked a major
campaign and the bill was finally blocked, but according to Michael Opdahl, managing partner
of Joshua Tree Imports in Pasadena, it represented 'perhaps the greatest threat' smaller importers
had ever faced, and could have been the end for local business.101

5.12 The Thalidomide Scandal and its aftermath

Thalidomide was a drug produced in 1954, and prescribed to pregnant women for morning
sickness in the late 1950s. It was found to produce severe deformities in babies including internal
deformities and missing limbs. Distillers, which was bought by Guinness in 1985, was the
company which manufactured and marketed the drug in 1958. In 1973 Distillers failed to accept
liability when offering compensation to victims of thalidomide, and the original settlement made
by Distillers is described by the group Thalidomide UK as 'the lowest medical claim ever
awarded in the UK.'102 in 2000 this group called for a boycott of all brands owned by Diageo
with the aim of obtaining full compensation for the surviving 456 British victims of the drug,
who saw the no-blame compensation fund of 1973 as inadequate. In June 2000 Diageo extended
the company's payments to the Thalidomide Trust.103

5.13 The Guinness Affair

In 1990 the Guinness Four were convicted of trying to manipulate the price of shares in
Guinness, by artificially organising widespread buying of shares to boost the share price in order
to succeed in its takeover bid of Distillers in 1986. This was judged illegal by the DTI in their
investigation of December 1986. Ernest Saunders, former Guinness Chief Executive, was
imprisoned for 5 years, which was halved on appeal, for false accounting, conspiracy and theft.
Also imprisoned were trader Anthony Parnes and businessman Gerald Ronson, and consultant
Jack Lyons was fined.104 In 1991 Saunders was released from his term on the grounds that he
was suffering from Alzheimers disease, though he subsequently recovered from his symptoms
(Alzheimers is incurable).105
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55 Ariba puts Diageos supply chain online

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