DIAGEO

green labels

Diageo is responsible for a world-leading package of over 200 premium brands of drinks. Alongside managing the steady growth of this portfolio, Diageo is pushing forward with sustainable packaging options and a broad ESG programme. Report by Phil Nicholls.

The Diageo Sustainable Solutions programme asked innovators for ideas to achieve sustainable growth. Launched in 2020, the programme has launched three different rounds of creative challenges.

Of particular note, the second round focused upon sustainable packaging technologies. The process began in November 2021 and has now reached the pilot stage. Ideas under consideration include the use of sustainable containers, increased refilling or returning of bottles and updated packaging for shipping.

Diageo was formed in 1997 as a merger between Grand Metropolitan and Guinness. However, the brands within the Diageo portfolio stretch back a lot longer, with some reaching down into the 17th Century.

At the turn of the millennium, Diageo consolidated its assets with a focus on premium drinks. As the company progressed through the new century, it steadily expanded its range of brands with additions such as Captain Morgan, United Spirits Limited and Chase Distillery. In 2022, Diageo moved its global headquarters to Great Marlborough Street in London, within the heart of Soho.

Diageo currently has over 200 brands within the premium drinks sector, with sales in more than 180 countries. The company operates 132 production sites and employs around 28,000 people globally. 2022 brought a 21% growth in new sales to £15.4 billion, delivering an operating profit of £4.4 billion.

DIAGEO I PROFILE

“Diageo has, again, delivered strong performance, despite the challenges that all consumer goods categories have faced this year,” said Chairman Javier Ferrán in a statement summarising the company’s 2022 annual report. “We continue to invest for the future to sustain the momentum in our brands and deliver a positive impact on society.”

Premium brands

The extensive Diageo portfolio features two of the top four international spirits brands by retail sales value: Johnnie Walker and Smirnoff. The Johnnie Walker range of blended Scotch Whisky has pushed boundaries for 200 years. Available varieties include Black Label, Red Label and Gold Label. Diageo’s most popular blend is the Johnnie Walker Blue Label, hand-selected from rare Scotch Whiskies with a remarkable depth of flavour. Only one in 10,000 casks makes the cut.

Smirnoff holds the position of the world's number one vodka. Established in 1864, Smirnoff is created through a unique process involving three distillations and ten separate stages of filtration. The brand is also offered in flavours such as Raspberry Crush or Mango & Passionfruit Twist, plus a range of seltzers and ready-to-drink cocktails.

The extensive Diageo portfolio also holds iconic brands such as Guinness, the world-leading stout, established in 1759. This classic black beer continues to innovate with the launch of the alcohol-free Guinness 0.0% and Guinness Cold Brew Coffee Beer. Another iconic line is Baileys, the world’s first cream liqueur created in

1974 and now a much-loved spirit across 160 countries.

Other highlights of Diageo’s package of 200 premium drinks include Tanqueray, the world's number one premium gin, Captain Morgan, a spirit made with the finest Caribbean rums, and Gordon’s, the world’s number one international gin.

Solving packaging

As part of Diageo’s drive to ‘deliver a positive impact on society’, the company is running the Sustainable Solutions programme. The Cohort 2 challenges from Diageo focused on the development of sustainable packaging technology for its extensive portfolio of drinks. The pilot stage of this challenge draws together an exciting selection of schemes.

One such project addresses the challenge of glass bottles, which are energy intensive to manufacture, move and recycle. To solve this problem, Diageo is exploring the use of renewable content alternatives and the possibility of innovative metal container formats. The goal is to find a low-carbon solution with minimal associated waste.

DIAGEO I PROFILE

A second strand of Cohort 2 investigates a circular business model for reuse and refill archetypes, with an emphasis on consumer-focused sales. This concept requires both containers adapted to a number of reuse/refill cycles, plus an innovative scheme to engage customers and ensure their participation.

Additional challenges being addressed in Cohort 2 concern the implementation of decoration techniques on glass bottles which do not hinder the sustainability credentials of the glass. Diageo is also exploring solutions to optimise glass bottles and other container formats with the associated packaging for shipping. The standard 6- and 12-pack formats were

Diageo’s pioneering grain-to-glass Sustainability Targets for 2030 compel the company to:

• Become sustainable by design

• Preserve water for life

• Accelerate to a low carbon world

designed for bulk palletised loads, but alternate packaging options could reduce waste.

Sustainable partnership

Further evidence of Diageo’s commitment to sustainable business was the recent announcement of a hydrogen-powered furnace together with Encirc to change the face of the UK glass manufacturing industry. This partnership aims to create the world’s first net zero glass bottles at scale by 2030. Encirc will build a new furnace at its Elton plant, Cheshire, that will use an energy mix of green electricity and low carbon hydrogen. It is expected that carbon capture technology will deal with the remaining emissions by 2030.

“We are really excited to be a part of this world leading announcement,” said Ewan Andrew, President, Global Supply & Procurement and Chief Sustainability Officer at Diageo. “This forms part of our commitment to halve our Scope 3 carbon emissions by 2030. We look forward to a world where people can enjoy their favourite drinks from zero carbon glass bottles.”

The use of the zero-carbon furnace will contribute towards Diageo’s commitments in its ESG action plan ‘Society 2030: Spirit

of Progress’ to reduce emissions across its supply chain by 2030. Under this 10-year ESG action plan, Diageo is working towards creating a more inclusive and sustainable world.

The multi-strand ESG plan includes projects to promote a positive drinking culture and champion inclusion and diversity at every level of the business. Society 2030 also features Diageo’s pioneering grain-to-glass sustainability work with three major goals.

Alongside these assorted enviromental projects, growth continues. At the start of 2023, Diageo reached an agreement to acquire Don Papa Rum, a super-premium, dark rum from the Philippines. The initial consideration was €260 million, with a second possible con sideration of up to €177.5 million through to 2028 subject to performance, reflecting Don Papa Rum’s current growth potential.

Diageo remains committed to its position as a global leader in the premium drinks sector, leadership in terms of both portfolio size and driving the sustainable agenda within the industry.

“Our people are engaged and proud of Diageo,” concluded Mr Ferrán in the company’s 2022 annual report. “We continue to invest for the future to sustain the momentum in our brands and deliver a positive impact on society. We have consistently shown resilience in the face of volatility in recent years and proven our ability to emerge stronger in these circumstances.”