Why Diageo Is Quitting DISCUS

In recent years, DISCUS has developed several programs – the DISCUS Academy and a sustainability program, in particular – that are aimed at helping craft brewers become more efficient.  And it has partnered with the American Craft Spirits Association on several initiatives.

Having seen what happened in the beer industry – craft brewers have captured 13.1% of the beer market by volume and 8% by dollar sales – Diageo may have decided that DISCUS is providing aid and comfort to its enemy, the craft distiller.  And so Monday, Diageo announced it was ending its membership in DISCUS on Dec. 31.  The decision was first reported by Politico Influence.

That's not the explanation Diageo is giving – a Diageo spokesman insisted "this decision is a Diageo North America decision and really about being laser-focused on the commitments we’ve made" --  and DISCUS officials aren't suggesting that either.  

But it the only reasonable one in our mind.  After all, the decision comes after DISCUS has racked up a series of impressive legislative and regulatory successes that benefitted all players, including:

• passage of the historic Craft Beverage Modernization & Tax Reform Act,
• lifting of tariffs on American Whiskey,
• passage of important state market access initiatives – 18 states now have permanent cocktails-to-go laws and 14 others have temporary measures  
• as well as expanded access and reduced taxes on spirits-based ready-to-drink products in many states.  

Diageo spokesman Lorenzo Lopez told us late last night that Diageo looks forward to working with DISCUS and its member companies of issues of mutual interest.   But, he said in a statement, "we have chosen to focus our resources on key strategic priorities which we would like to pursue."  

These three key priorities are (1) educating consumers about responsible consumption through Responsibility.org, (2) facilitating access by all to the spirits industry for greater diversity, equity and inclusion, and (3) helping ensure business and the industry are environmentally sustainable by design.

Those priorities seem to be much of what DISCUS is working on

Diageo said it will continue to participate in DISCUS' work with Pronghorn, which seeks to increase representation for the Black community in the U.S. spirits industry. The DISCUS-Pronghorn partnership, announced May 22, seeks to gain commitments from suppliers, distributors and retailers to fill 1,800 positions over the next 10 years, identifying candidates to fill positions from internships to the executive level.

In announcing the Pronghorn partnership, DISCUS cited Pronghorn research that while Black Americans represent 12% of alcohol consumers across categories, they make up just 7.8% of the sector’s labor force and 2% of executives in the industry.

What Diageo hasn't said it will be doing is working with DISCUS on the DISCUS Academy, which provides education and training for industry member, the principal beneficiaries being smaller distillers.  Nor is it working with DISCUS on the Craft Distiller Sustainability Taskforce which seeks to help craft distillers "collaborate and share effective strategies for maximizing resource utilization and eliminating waste at every step of the production process."

One observer noted that Responsibility.org and the Pronghorn partnership are both public-facing.  But some of the other recent DISCUS initiatives, especially the DISCUS Academy could be viewed as more inward facing – and helping Diageo's smaller competitors.  

For its part, DISCUS President/CEO Chris Swonger said the organization remains "steadfast in our ambition to continue to drive historic growth for all three tiers of our industry and continue our proven track record of collaboration and alignment. We are firmly focused on the future and will continue to promote consumer convenience, support our effective three-tier system, and seek to eliminate unfair tax discrimination.

“Over the past three years, DISCUS has significantly expanded its membership, and we have created a new partner program to extend our advocacy efforts.  Broadening our organization has enabled our advocacy successes and made DISCUS stronger," Swonger said, adding:

“We acknowledge Diageo’s decision and express thanks and appreciation for their significant contributions over the years, working alongside DISCUS and their peers to help modernize the marketplace for the distilled spirits industry.”

If Diageo's decision to leave DISCUS is really a protest against it helping craft distillers, the question is, is it a wise move?  The beer industry's history may provide some insight on that.  

The Beer Institute, which represents large brewers, makes no effort to provide educational or technical support to craft brewers.   Lacking help from Big Beer, craft brewers created the Brewers Association.  The result:  the number of operating craft breweries has climbed to 9,118 and craft beer represents 13.1% of the beer market by volume and 8% by dollar sales.

To be sure, there may be other explanations for Diageo's decision to leave DISCUS.  Maybe Chris Swonger and Debra Crew, who is moving from the top Diageo exec in the Americas to the No. 2 position for Diageo worldwide had a falling out.  Maybe the decline in the value of the British Pound played a role.

A Diageo spokesman told us late Monday night the decision was "strictly a "Diageo North America decision and really about being laser-focused on the commitments we’ve made."  And helping craft distillers succeed through the DISCUS Academy and the Craft Distiller Sustainability Council may not be among the highest priorities for Diageo North America.