Southern and Diageo Consolidate in Control States

FILED JUNE 17, 2011

Dear Client:

After conducting an "extensive review process," Diageo has appointed Southern Wine & Spirits its new national broker in control states. Southern will provide "fully dedicated coverage" for Diageo's spirits brands across all 18 Control States and will also represent Diageo's Chateau & Estate Wines portfolio in the five Control States for wine. Diageo said this announcement "comes after an extensive review period initiated by Diageo earlier this year," and also marks the next phase in its new route to market strategy it began in 2000. That includes "recently announced initiatives to enhance distributor relationships in key regions." [Editor's note: remember our coverage of Redburn's note on Diageo's strategic review yesterday? This seems to fit].

The new agreements will go into effect on July 1 or August 1, depending on the state, and will provide for a number of key changes, said the company. That includes (1) enhancements to the teams representing Diageo brands, and (2) increased focus on multicultural and on-premise, which are "two areas that are designated as key priorities for future growth."

Note that Southern already represents Diageo in 11 control states, and as a result of the agreement, Diageo will move from self-representing its brands in Pennsylvania to a brokerage for wine and spirits. The agreements do not include Montgomery County or Worcester County, Maryland, as those counties are covered by Diageo's current Maryland distributor. In addition, the agreements do not include Low Proof spirits in Idaho, Michigan or Ohio, or the Authorized Distributing Agent in Michigan.

Stay tuned for more details....

Until later,

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