Walsh, Paul S. 1955–

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Paul S. Walsh
1955–

Chief executive officer, Diageo

Nationality: British.

Born: May 15, 1955, in United Kingdom.

Education: Manchester Polytechnic University.

Family: Married (wife's name unknown); children: one.

Career: Grand Metropolitan, 1982–1986, financial planning and accounts manager for Watney, Mann and Truman Brewers; 1986, finance director; 1987–1988, CFO of Inter-Continental Hotels; 1989–1992, CFO of food division; 1992–2000, CEO of Pillsbury; Diageo, 2000–2001, CEO of Guinness UDV and COO; 2001–, CEO.

Address: Diageo, 8 Henrietta Place, W1M 9AG, London, United Kingdom; http://www.diageo.com.

■ Paul Walsh made an immediate impact when he took over the direction of the food-and-drinks firm Diageo in 2000. By selling off the company's food concerns and concentrating on the marketing and innovation of its core premium drinks brands he refocused and reenergized the company. Walsh took successful ideas from other markets, such as the soft-drink industry, and combined them with an aggressive and innovative sales and promotion campaign. A merger with Seagram's made Diageo the world's largest spirits marketer.

EARLY CAREER

The young Paul Walsh wanted to become a fighter pilot—a dream inspired by a mathematics teacher who had served with the British Royal Air Force in World War II—but poor eyesight kept him out of the cockpit. Instead Walsh turned to business management and after studying accounting at Manchester Polytechnic found employment with the food-and-drinks firm Grand Metropolitan (GrandMet). Walsh first joined GrandMet as a financial planning and accounts manager for the company's Watney, Mann and Truman Brewers division in 1982. He quickly climbed GrandMet's corporate ladder, becoming a finance director in 1986, then chief financial officer for Inter-Continental Hotels in 1987 and for the food division in 1989. In 1992 Walsh was appointed chief executive officer of Pillsbury, which was then owned by GrandMet, a position he kept until 2000. In 1995 he was made a member of GrandMet's board.

DIAGEO IS BORN

In 1997 Grand Metropolitan merged with Guinness UDV, the brewing company most famous for its dark stout beer. The combined company was dubbed Diageo, a name that merged the Latin for "day"—dia —with the Greek for "earth"—geo. At the time of the merger GrandMet owned Burger King Corporation, Pillsbury Company, and a range of drinks brands, including Baileys and Smirnoff. Walsh was immediately made a member of the board of Diageo and in 2000 became its chief operating officer. That same year he became chief executive officer of Guinness UDV.

WALSH REFOCUSES DIAGEO

While shareholders were supportive of the 1997 merger, by 1999 doubts had surfaced over the logic of Diageo owning both a U.S. food group and a U.S. fast-service restaurant. Walsh opted to redefine his company by shedding its food holdings and focusing solely on premium drinks. As he told NYSE Magazine, "Strategically, you never want to be in the middle. You either want to be full-scale or you want to be niche. If you look at our positions in food, we were in the middle of the pack" (August 3, 2003). Pillsbury was sold off to General Mills in October 2001 for $10.5 billion, and the company's Burger King holdings were sold to a private consortium in December 2002 for $1.5 billion.

Diageo next purchased in conjunction with Pernod Ricard the Seagram's spirits-and-wine business from Vivendi Universal in December 2001. This added the brands of Captain Morgan rum and Crown Royal whiskey to Diageo's line of liquors. The purchase would not prove to be the start of an acquisitions spree; Walsh considered the addition of Seagram's to be organic growth and noted that very few other noteworthy brands were available.

Naming their overall plan the Next Generation Growth (NGG) strategy, Walsh and his fellow executives devised an ambitious strategy to modify the relationship between supplier and distributor by training 2,500 dedicated salespeople. The new sales force's role was to target specific bars and restaurants using analyses of regional and ethnic preferences. A new emphasis was also given to on-premise promotions, such as Jose Cuervo or Smirnoff nights featuring unique drinks tailored to the locations. The plan rationalized Diageo's wholesale operation, which had been fragmented and had often left distributors of Diageo products also handling the brands of major competitors. For U.S. operations a single distributor was established in each state. Diageo also introduced a uniform way of measuring returns gained from marketing investments; Walsh saw the approach as providing increased efficiency and a new ability to respond to consumer needs.

In 2001 Diageo was operating in over 180 markets; thus such sweeping changes proved complex and involved many employees and clients. The changes were modeled after those used by the successful soft-drink and beer companies Coca-Cola and Anheuser-Busch, producer of Budweiser beers. The tactics had proven successful in those markets but had never been tried in the premium alcoholic beverage market.

With such moves in place Walsh was able to concentrate on innovative marketing and brand extension for Diageo's eight highest-priority products: Smirnoff premium vodka, Johnnie Walker scotch, Guinness stout, Baileys liqueur, J&B scotch, Captain Morgan rum, Jose Cuervo tequila, and Tanqueray gin. With many of these brands positioned as longstanding market leaders, the challenge for Diageo was to maintain those positions while finding new directions for growth. Walsh was forthright about his goals, describing his growth strategy as "audacious" (NYSE Magazine, August 3, 2003). His long-term aim was to convert adults everywhere into people he referred to as "adorers" of the brands: customers who willingly chose—and even sought out—Diageo products over the competition. Walsh helped introduce the "Diageo way of brand building," which ignored existing categories and instead looked at the product range from a consumer point of view, taking into consideration the feelings, desires, and social interactions of the target market.

Beyond its top eight global brands Diageo sought to promote another 30 local-priority brands that had dominance in one or two markets but were not well known around the world. Diageo also had 450 additional smaller brands that accounted for 30 percent of the company's sales but would be difficult to promote outside of their respective regional marketplaces. Walsh and his team decided that while those brands were important, the investments that would be needed to expand sales would not be worth the expected returns.

Industry analysts widely considered Walsh's moves to be successful, putting the fizz back in the world's largest alcohol business during a flat market and thus pleasing investors. The refocusing produced immediate financial returns; sales of Diageo's premium brands rose by 23 percent in the latter half of 2002.

RESEARCH AND RESPONSIBILITY

While promotion of existing products and brands was essential, at the same time Diageo was extensively committed to research and development, spending $46 million in that department over the fiscal year ending June 30, 2002. For Walsh the introduction of the ready-to-drink beverage Smirnoff Ice was the most successful example of Diageo's commitment to innovation. Brewed like beer but tasting like lemonade, packaged in a single-serving bottle, and promoted with clever advertising, Smirnoff Ice proved itself to be a popular alternative to beer—or "malternative" as such products were known in the industry—breaking into a market previously thought to be impenetrable. Smirmoff Ice quickly became a billion-dollar brand. Another successful innovation was the introduction of Diageo drinks packaged in plastic containers, allowing them to be served in glass-free environments such as sports stadiums. Such renovations of the core Diageo brands help to keep the product image fresh and vibrant. Not all of Diageo's projects met with such success, however; their ready-to-drink Captain Morgan Gold beverage did not meet customer expectations.

Walsh and Diageo were careful to promote responsible drinking and took their policy of devotion to the community seriously. They adopted stringent global standards for advertising campaigns—such as only using mediums in which more than 70 percent of viewers could be expected to surpass the legal drinking age and never using actors aged under 25 in promotions—that were more strict than most of the requirements of the markets in which they operated. Walsh noted in NYSE Magazine, "We're in this for the long term and therefore want a nice steady market in which our products can be responsibly enjoyed" (August 3, 2003).

Both GrandMet and Guinness had long histories of altruism, and Walsh ensured that Diageo continued those trends; the company was regularly one of the United Kingdom's top corporate donors. The Diageo Foundation was set up to contribute 1 percent of the company's worldwide profits to charity and social-investment programs. In 2001 the company began sponsoring the Prince of Wales' International Business Leaders Forum Award for International Corporate Citizenship, which aimed to recognize companies showing responsible business practices and having positive impacts on wider society. Walsh even set up an internal Diageo committee on corporate citizen-ship that focused on alcohol education, the environment, and community work. Diageo signed on to the United Nations' Global Compact, a set of human-rights standards that held multinational companies responsible for securing and promoting human rights wherever they operated.

MANAGEMENT STYLE

Walsh, an admirer of the motivational skills of the wartime leader Winston Churchill, was called in the Financial Times "an excellent hands-on chief executive, a very good team player and team leader" (October 21, 2000). A practical manager, not a "blue-sky" thinker, Walsh cultivated an open, honest, and very human style that was evident in his approach to the Seagram's merger, when Diageo brought over two thousand of that company's employees into their own workforce of 25,000. Walsh's openness and ability to communicate with workers at all levels in his organization helped keep the merger smooth and prevented conflicts from arising between the two groups of employees.

Although unable to chase his childhood dream of piloting fighter planes, Walsh's career necessitated his spending many hours in the air; he once estimated that his Diageo job took him from the United Kingdom to North America an average of once a month. Walsh was able to sleep with little effort on such journeys, thereby avoiding the curse of many other trans-Atlantic executives: jet lag. While Walsh was a driven, successful business executive who was often away on business trips, he was also a committed family man who endeavored to maintain a healthy balance in his life. In his days at Pillsbury he once delayed the closing of a business deal so that he could keep a promise to his son and go on a fishing trip.

Walsh, who admitted enjoying the occasional Johnnie Walker Black with soda or a pint of Guinness, was also a director of the Scotch Whisky Association, a nonexecutive director for General Mills, Federal Express Corporation, and Centrica, and governor of the Henley Management Centre.

See also entry on Diageo plc in International Directory of Company Histories.