Grand Met and Guiness in Merger

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The boards of Grand Metropolitan and Guinness agreed to a proposed merger that would create the world's leading spirits and wines marketer. The merger took the marketing departments of the two companies' spirits divisions by surprise, and nobody would speculate on whether ad agency relationships will be reviewed.

The new London-based company, called GMG Brands, will include four divisions: United Distillers & Vintners (the two groups' combined spirits and wines business); Pillsbury Co. (foods); Burger King Corp. (restaurants); and Guinness Brewing Worldwide (beer).

GMG would have had a pre-tax operating profit of $3.5 billion on combined sales of about $21 billion for 1996. Its combined spirits and wines group would have accounted for 59% of profit, with food and brewing accounting for the rest.

In the U.S., Grand Met was the 13th-largest national advertiser based on 1995 spending (including unmeasured media) of $950 million, a total likely to have hit $1.31 billion last year. Estimated combined U.S. spending for Guinness brands last year is about $60 million.

GrandMet's International Distillers & Vintners and Guinness' United Distillers each own nine of the world's top-selling spirits brands. Allied Domecq is a distant second.

Guinness uses two main agencies globally: Ogilvy & Mather Worldwide for Guinness beer and Leo Burnett Co. for UD's spirit brands. Its portfolio includes Johnnie Walker, Bell's and Dewar's Scotch whiskies, and Gordon's and Tanqueray gins. Carat handles a significant amount of media buying for UD brands around the world. Although Guinness stout is the brewer's key beer brand, over a third of brewing sales are accounted for by Spain's Cruzcampo brands, Harp lager, Smithwick's ale and Kaliber alcohol-free lager.

London-based network Lowe Howard-Spink is one of IDV's main agencies. Smirnoff vodka is handled globally by Lowe Howard-Spink, which also handles the Baileys and Sheridans liqueurs and the rum drink Malibu internationally. Other key IDV brands include J&B whisky and Gilbey's gin.

Copyright May 1997, Crain Communications Inc.

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