OF all the gin joints, in all the towns, in all the world, I have to walk into
Paul Walsh’s. He’s having his photo taken. As the joint in question is the
glitzy cocktail bar which Diageo, the world’s biggest drinks company, keeps
on the ground floor of its London headquarters, he’s pretty much in charge.
And you can tell. Tall, paunchy, balding and thickset, Walsh looks like Tony
Soprano in spectacles, readjusting his suit as he finishes up and heads for
the lift. He gives a tight smile of greeting, but makes little small talk.
If there were just a couple of pole dancers, we really could be in the Bada
Bing.
Up in his fourth-floor office, jacket off, sprawled in an armchair, Walsh then
goes from cold to warm quickly. Seven years at the top of Diageo – which
makes Johnnie Walker, Gordon’s, Smirnoff, Captain Morgan, Guinness and more
– has given him a burly confidence that exudes from every pore.
Diageo, formed from the merger of Grand Metropolitan and Guinness a decade
ago, is now a global leviathan with interests in just about every spirit and
beer sector. And Walsh, 52, is the man who created it.
This week his company will announce sales figures close to £10 billion. For
Walsh, a bluff Mancunian whose blokeish humour masks a fiercely competitive
nature, it will be another milestone. He obsesses about market share. Diageo
is huge in Europe and America, and growing fast in emerging markets, but not
fast enough for him.
“We’re No 1 in Brazil, No 1 in Russia, No 1 in India, not No 1 in China,” he
pauses to pour more coffee. “It pains me to say we are No 2.”
He gives a mock-wince and sips from his cup. Walsh came up on the finance side
at Lord Sheppard’s GrandMet, then became “Americanised” running its
Pillsbury subsidiary for a decade. He doesn’t like coming second.
Those who have worked with him say he has an uncomplicated, can-do style, and
a street-smart love of numbers. He’s also not shy of making the big jump.
He reshaped GrandMet and Guinness by selling the group’s food interests and
focusing on premium spirits, snatching many of Seagram’s brands in a complex
acquisition in his second year in charge. Earlier this year there was more
speculation that he was planning another swoop to break up Scottish &
Newcas-tle, the brewer.
Any truth? He grins. “I can’t say yes or no. What I would say is that if you
look at the profile of that company, and look at our aspirations around
globality and growth – I think most would acknowledge that the two aren’t
compatible.”
Yet press reports suggest he discussed a joint bid with the brewer SAB Miller,
the clandestine negotiations coded Project Spice and names changed to
protect their identities: SAB was Sage, Diageo was Dill . . .
Walsh laughs, then gives a bit away. “None of our document-ation said that.
But come on, do we look at competitors? Absolutely. Do we think ‘if only we
could get a bit of that business’? Absolutely. But I think sometimes others
do the same and we get attached to it without our involvement.”
Others suggest that if Walsh learnt one thing from his mentor Sheppard, it was
“strategic curiosity” – always look at all possibilities. He’s more
forthcoming about Absolut vodka. Its parent company, owned by the Swedish
government, is up for sale this autumn and Diageo will be bidding. About £3
billion?
Walsh’s beady eyes narrow above his monogrammed shirt. “I’m not going to tell
you how much we’ll bid. The reality is, no-one’s seen the company’s numbers
yet.”
How badly does he want it? “It’s nice to have but we don’t have to have it.
It’s a bit different from Seagram – we had to have that. It moved us a
quantum leap away from the rest of the pack, particularly in America.”
And is he selling? Three years ago, he said he might sell Guinness, if the
right offer came in. Now, with sales growth flagging in Ireland and proving
hard work elsewhere, you would think it must be back on the agenda. He says,
firmly, no.
“For any brand, you never say never – but I would be personally disappointed
if we had to sell it, because it is a great brand and truly global and fits
our portfolio.”
But some are still unconvinced by Diageo’s strategy for beer, which provides
20% of its net sales. It has Guinness, Red Stripe, Tusker, Harp and others,
but is small-fry in beer compared with giants such as Inbev and SAB Miller.
Diageo also missed a trick with cider, one of the surprise successes of the
past two summers in Britain. Walsh annoyed rivals recently by dismissing
cider’s prospects as “not a long-term trend”.
Sour grapes? “No, I just don’t believe it will grow ad infinitum to take share
from beer.”
But Diageo didn’t spot it coming and doesn’t have a big cider brand.
“Correct,” he says, suddenly terse.
At times like this, you wonder if the team that missed that one has been taken
into the car park and dealt with.
Then he lightens up. “Look at this,” he says, pointing to the rain outside his
window. “I’d guess current cider figures are pretty miserable now.”
He prefers to focus on emerging markets and the profits coming from premium
spirits sales. The recent reduction of tariffs on Scotch imports into India
has Walsh almost smacking his lips in anticipation.
“The punitive duty rates haven’t allowed people in India access to the real
stuff. They’ve been buying fakes. When those barriers come down, imagine
what’s going to happen . . .”
He looks excited. That upbeat
drive has characterised his rise through business. An only child, Walsh wanted
to be an RAF pilot but failed a medical on colour blindness. Instead he
trained in accountancy at Manchester Poly, got a job in the Coop and used
that to jump into GrandMet, with a determination fuelled by thwarted
ambition.
He says he gets his work ethic from his engineer father, his love of
organising from his mum, and confidence from both. They taught him “the
world is your oyster, go and explore it”.
He did. Key moves were his decision to work in America for GrandMet, then to
take on Pillsbury. Sheppard remembers Walsh being sent to Texas to sell a
hotel for GrandMet. He returned, saying he hadn’t got the right amount for
the business, but had made up the difference by selling its chandeliers
separately. That, says Sheppard, is when they knew Walsh was top management
material.
Pillsbury was tougher, a bastion of American business never headed by a Brit.
Yet Walsh ran it for a decade, winning his American team round, later
offloading the company to General Mills, which shares the same Minneapolis
base. Good for the business and good for the people, he later said.
For Walsh sees himself as a people-centric boss. Diageo’s London headquarters
is nattily done up like a top ad agency, the bar emphasises its marketing
roots. And he’s proud of the growing multi-ethnicity of its global
workforce. Other bosses say it’s hard not to be won over by Walsh’s total
enthusiasm for business in all forms.
“Paul is direct, nononsense and pragmatic,” says Roger Carr, chairman of
Centrica, where Walsh sits as a nonexecutive director. “but he’s also very
savvy. Business just brings him to life.”
You can see that in Walsh’s robust defence of the drinks sector’s attempts to
stop alcohol abuse – Diageo will spend £2m this year on television
advertisements plugging responsible drinking. It has been leaning on the
retail trade, too. He says we will soon see less of the “buy one, get one
free” promotions in bars.
As for recent suggestions about raising the age limit for buying alcohol, he
says we should not invent new laws, just enforce the ones we’ve got.
“If an individual is found causing nuisance on the street, there should be
consequences.”
That Lancashire bluntness buoys up the troops, although campaigners still feel
that drinks firms could do more. It doesn’t impress the City, either, which
worries that Diageo’s growth may soon falter. More than 40% of Diageo’s
shares are now held in America – more than here. So much for the group
being a British champion.
“There’s no question that America prefers our prospects to the UK,” says
Walsh. Why? He shrugs. “They see the brands, and the discount we trade at
versus the other leading US consumer-product companies, and investors here
don’t.”
It may also be about speed. Walsh acknowledges that “reshaping” the company as
Diageo took longer than it should have. Perhaps British investors lost
patience.
So how long will he stick around to tell doubters that they’re wrong? As long
as it takes, he says. He has a new chairman to bed in next year, when Lord
Blyth is replaced by Roche boss Franz Humer. Walsh will stay as chief
executive, results willing, for at least another three years.
Which could make him one of the longest-serving FTSE 100 bosses around. He
nods and smiles slyly. “That’s the objective.” Really? He just laughs, like
it’s the beginning of a beautiful friendship.
PAUL WALSH’S WORKING DAY
THE Diageo chief executive wakes at 5.30am at his flat near Chelsea Bridge.
Paul Walsh has coffee and is driven to Diageo’s London head office by
7.30am.
“I do newspapers, e-mails, then one-on-one calls with my team. I have nine
executives reporting directly to me.” Later he may lunch contacts at
Mirabelle in Mayfair. He works until after 7pm. Half the year he is abroad.
“I enjoy the travelling, seeing markets like China and Brazil and I get
energy from our teams.”
DOWNTIME
PAUL WALSH relaxes by fishing and riding near his country house in West
Sussex. “I’m really boring, I have discovered flyfishing. I also go hacking
on my horse, Sebastian. He’s 17.1 hands high.” Walsh also has an old E-type
Jaguar that he drives at weekends.
Does he have to drink a lot as boss of Diageo? “No, some days I don’t even
have a drink.” He recently divorced after many years of marriage. Does he
have a girlfriend? “I’m not telling you,” he laughs.
VITAL STATISTICS
Born:May 1, 1955
Marital status: divorced, one son
School:Royton and Crompton, Oldham
University:Manchester Polytechnic
First job:trainee accountant, Coop
Pay package:£2.4m
Homes:Petworth and Chelsea
Car:grey Range Rover
Music:Pink Floyd
Book:Birdsong, by Sebastian Faulks
