Diageo has an enviable reputation for building global brands. To what extent have the downturn and shifts in official attitudes to alcohol consumption dented the company's growth?
The recession and changes to the regulatory framework are the biggest challenges for us. Of these two, it's the regulatory framework that we know will become increasingly important. Our industry is fairly resilient, but the recession has changed our assessment of the most important risks and made us review our strategy. It has slowed our growth, of course, but this sector hasn't been affected dramatically. Having said that, it has made us focus far more on cash and working capital, and on ensuring that the necessary organisational restructuring didn't increase our risk exposure or compromise compliance and corporate governance. We had to assure ourselves that the overhead cost base was appropriate, although our main focus has still been on growing market share and winning approval from customers.
The US and Europe have been particularly strapped for cash. Is this why you're attempting the biggest multinational buy-out to date in China?
We need to ensure that we're well placed to build on our strengths when the recovery happens. This is why it's so important to focus on emerging markets such as the Bric nations (Brazil, Russia, India and China) and Africa. Part of this involves the bid to increase our stake in Shui Jing Fang, a premium Chinese white spirit. We'll continue to invest in our European and North American businesses, but significant opportunities lie in developing and emerging markets.
Isn't this a headache for risk analysis?
We're highly conscious of the risks of trading in such regions, so we invest disproportionate amounts, compared with the sales we generate there, in putting exemplary control and compliance frameworks in place. We need to work to the same standards wherever we do business and we do this by having a clear code of conduct and policies.
We train our staff to understand Diageo's core values and then follow this up with audits to ensure that it's having the right effect. We have to be clear about our values to new recruits right from the start and reinforce them by rewarding people who adhere to them and showing the consequences if they don't. It's the only way to achieve the conditions under which you can deliver to international standards globally and rely on people to use their own judgment.
Your policy is to build up your premium...