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Following a "global review," Diageo today announced it is making changes to its organizational structure to reduce business costs that will result in 150 employees in North America losing their jobs. The changes are effective in mid-April.
In a statement, Diageo said it will further integrate its beer and wine organizations, Diageo-Guinness USA (DGUSA) and Diageo Chateau & Estate Wines (DC&E) into a "total beverage alcohol approach" to cut costs.
Ray Chadwick, President of Diageo Chateau & Estate Wines will be leaving Diageo but will remain a non-executive board member and beginning in June, is to become the chairman of Wine Institute.
Diageo said it would soon announce "next steps" for Jim Young, President of Diageo-Guinness USA.
Sandra LeDrew will run the sales operation of DC&E as President, DC&E Sales; while Pete Carr will run the sales operation of DGUSA as President, DGUSA Sales. They will both report directly to Larry Schwartz, President, Diageo USA and will join the Diageo North America executive team.
"We are centralizing finance, supply, marketing and other functions within the business," Zsoka McDonald, a spokeswoman for the company said.
McDonald said the cuts represent four percent of Diageo's 3,700-person North American work force.
When interim results were disclosed in mid-February, Paul Walsh announced the organizational review. Diageo will be looking the rest of its business and is expected to make similar announcements in other parts of the world. Wash previously announced that the company was looking to take £100 million of costs out of the business globally.
"We expect conditions to get tougher and are preparing for the long term," McDonald said. "We have to improve organizational effectiveness and reduce costs. We had some difficult decisions to make about our people."
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As anyone who has bought a $50 bottle of Shiraz at Costco or a $200 wine refrigerator at Target can attest, wine has gone mainstream.
For Wine Enthusiast Cos., a niche brand that rates wines, sells wine accessories and publishes an eponymous magazine, that is both an opportunity and a challenge.
Having more people interested in the kind of products you sell is generally a good thing. But with wine generating interest among more consumers, more companies are going after the market as well, including giant retailers like Costco Wholesale Corp. and Target Corp. And they are selling things that were once the purview of specialists like Wine Enthusiast, such as climate-controlled wine cabinetry and hundred-dollar corkscrews.
"When we were niche-y, we had the market to ourselves," says Adam Strum, Wine Enthusiast's chairman and co-founder.
Wine Enthusiast Cos. Adam Strum, Wine Enthusiast's chairman and co-founder; and a box of the company's red-wine glasses being sold at retailers.
No more. The Mount Kisco, N.Y., company is embarking on a campaign to establish Wine Enthusiast as the go-to company for all wine drinkers -- the brand of authority for wine accessories and information for nonexpert wine drinkers as well as connoisseurs. Wine Enthusiast-branded wine glasses and wine refrigerators are available in retailers like Bed Bath & Beyond Inc. and Macy's Inc. And, the company's longtime mascot, Lord Winston, has lost his aristocratic title along with some of his finery: He's just Winston now, and he no longer sports an ascot.
"In order for us to grow as a business," Mr. Strum says, "we needed to address different pocketbooks: the affluent, a working clientele, middle class and the wine wannabes. We had to come up with price points for all of them." Wine Enthusiast posted $100 million in revenue in 2007, the vast majority from wholesale and retail sales of wine-related products.
Moving into the mainstream market can help a niche player boost its name recognition and sales. And offering a wide array of products at different price points is especially important during this uncertain economy. Wine Enthusiast, for instance, wants to make sure that if consumers stop reaching into their wallets for $1,000 wine cellars, they can find a less-expensive model at a store where they shop regularly. Still, a company must be careful not to dilute its original message -- and the authority it brings.
"There's a danger in being a jack of all trades but a master of none," says Gregg Lipman, managing partner at New York branding and design company CBX, which worked with Wine Enthusiast on its strategy shift.
Wine consumption in the U.S. has risen every year for the past 15 years, according to John Gillespie, a partner at Wine Colleagues LLC, a wine-business consultancy in St. Helena, Calif. Demand is strong from both older, affluent consumers and 20-somethings who are embracing the beverage, attending tastings and frequenting wine bars.
To tap that growth, Wine Enthusiast launched wine-tasting events back in 2001. Recent gatherings have drawn as many as 2,000 people, many of them novice wine drinkers. But only a few wine-tasting attendees knew about the magazine. And only some magazine readers knew about the company's wine glasses and wine cellars, which until recently were mainly found through the company's catalog and Web site and select independent shops.
The Situation: Niche player Wine Enthusiast is responding to the growing market for wine and accessories by repositioning itself as the authority for all consumers.
The Changes: Glasses, refrigerators and other accessories in an array of prices are being sold in major retailers. And the firm's logo has been redesigned to be less highbrow.
Pros and Cons: Selling lower-priced items at mass retailers can help lure consumers who are cutting back on big spending. But firms must be careful not to dilute their original message and the authority it brings.
So Mr. Strum decided it was time to reposition the brand to reach out to that expanding wine-drinking populace. To start, company executives sat down in focus groups, and Wine Enthusiast's marketing team listened as people talked about their emotional connections to wine: how the drink reminded them of dinner at grandma's house or a summer vacation in Italy. They picked up that consumers don't want to be told they have to drink a certain wine with a certain food. Rather, they like getting guidance on how they can pick a wine themselves.
Those insights played a big role as Wine Enthusiast launched new products through new retail partners, says Francis Juliano, the company's chief marketing and information officer.
Over the past couple of years, the company has begun working with bigger retailers, rather than just selling its products through independent wine shops. At Target, for instance, customers can find a set of two stemless wine glasses, designed for the casual drinker, for $20. For Halloween, the glasses are etched with spiderwebs; there are hearts for Valentine's Day. Macy's stocks break-resistant stemmed glasses, four for $50, designed to appeal to a more upmarket clientele that might serve wine at dinner parties.
To set themselves apart from the scores of other wine-glass manufacturers, the company explains on every box what types of wine should be served from that particular glass shape, and why. The boxes also list helpful hints, including that wine should be stored at around 55 degrees.
"We have an authoritative voice," says Mr. Juliano. "We make sure those messages are clear on the boxes."
More technical products, like double-walled glasses designed to maintain wine's temperature, are sold only through Wine Enthusiast's catalog and Web site. The company also talked to high-end retailer Neiman Marcus about carrying Wine Enthusiast's priciest line -- which sports bigger bowls and can run as high as $100 apiece -- but determined that consumers who want those kinds of products are more likely to look at wine-focused specialty shops.
Wine Enthusiast Cos. Winston, the new version of Wine Enthusiast's mascot, above; Lord Winston, the old version, below.
These days, about 25% of Wine Enthusiast's product sales come from its retail partners, up from less than 10% a few years ago.
Part of the brand's overhaul also involved rethinking its longtime mascot, Lord Winston.
When the company started out in 1979, Lord Winston was given his aristocratic title, dressed in an ascot and posed sniffing his wine glass. That wouldn't do any longer, the company's executives decided. The image of wine sniffing is a little haughty, they thought.
Wine drinkers are getting younger -- the millennial generation has been key to the company's growth. So executives and their branding consultants flirted with the idea of a trendy Winston, attired for a Las Vegas nightclub. But that look might alienate some other potential customers, they thought.
So they dropped the Lord title. And the ascot came off. Today, Winston hoists his wine glass in the air, in a toast.
"They took him from the stereotype of a stuffy sommelier and loosened him up and made him an adviser and a friend," says CBX's Mr. Lipman. "He's redesigned to be more approachable."
Write to Simona Covel at simona.covel@wsj.com
Copyright 2008 Dow Jones & Company, Inc. All Rights Reserved
Peter Haywood is celebrating the return of his wine label to his ownership after a 15-year oddyssey through the international wine business. Robbi Penoell
I've missed the Haywood label! Didn't really understand what happened, but this little piece put my mind at ease. Hope you can rest easy now, too![]()
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