Allied Domecq PLC History

Company Perspectives:

Providing outstanding customer service lies at the heart of all Allied Domecq and to ensure that its formidable range of spirit and retail brands meet all customer and consumer demands, the company has developed an extensive network of either wholly owned, joint venture, third party operations and franchised outlets around the world. Stretching from Canada to Australia, be it a Baskin-Robbins factory in Moscow or a distillery producing Sauza tequila in Mexico, the focus on delivering top quality consumer brands and excellence in service is paramount.

Company History:

Allied Domecq PLC is the second largest distiller of wine and spirits in the world, second only to industry leader Diageo. In addition to its major international beverage brands, the company also has holdings in the food and retailing sector. Allied Domecq's Wine & Spirits division generates approximately 60 percent of the company's annual revenue, while its Retailing division is responsible for the other 40 percent or so. The company's brand name spirits include Beefeater, Ballantine's, Courvoisier, Kahlua, and Sauza. It also owns retail operations such as the Baskin-Robbins ice cream chain, Dunkin Donuts, Togo's Eatery franchises, and numerous pubs in the United Kingdom such as Big Steak Pub with Wacky Warehouse, Mr. Q's, and Firkin. In total, Allied Domecq operates over 14,000 such locations in over 60 countries throughout the world.

The Early Years

The beginnings of Allied Domecq PLC can be traced to 1961, when three UK-based brewing companies merged to form a larger company, which was named Allied Breweries. Prior to the merger, the three companies--Ind Coope, Tetley Walker, and Ansells--had operated independently for years, each gradually becoming a major presence in the brewing and pub-operating business throughout the years. In 1968, Allied Breweries merged once again, this time with Showerings, Vine Products and Whiteways, which owned Harveys of Bristol.

A decade later, the still-growing company acquired J Lyons, a company whose holdings included the United States-based Baskin-Robbins ice cream chain. Three years later, in 1981, the company name was changed to reflect this addition, and Allied Breweries became Allied-Lyons plc.

After its name change, Allied-Lyons set about restructuring its business operations and holdings. The company was separated into three main divisions, each with its main focus in a different area. The name Allied Breweries re-emerged as one of the new divisions, which was responsible for the brewing and pub-operating portion of the company's business. Additionally, Allied Vintners was formed as the company's new wine and spirits division, with two of its main brand name products being Teacher's and Harveys. The third division was J Lyons, which was responsible for the company's retail operations--such as the Baskin-Robbins chain.

Mid-80s through Mid-1990s: Growth through Acquisition

In 1987, a year after it completed its corporate restructuring, Allied-Lyons scored big with the acquisition of the Canadian-based company Hiram Walker-Gooderham & Worts Ltd. The purchase gave Allied-Lyons control of Hiram Walker's well-known brand name product lines, such as Ballantine's, Canadian Club, Courvoisier, and Kahlua. Although Hiram Walker's overall operations were merged into those of Allied-Lyons, the newly acquired brand names remained unchanged.

Two years later, Allied-Lyons made another major purchase, adding the Whitbread spirits division to its Allied Vintners holdings. The Whitbread acquisition brought the brand names Beefeater, Long John, and Laphroaig to the Allied-Lyons family. Also in 1989, Allied-Lyons completed the purchase of the Dunkin Donuts store chain, and added the entity to its J Lyons retail operations division.

As the company entered the 1990s, the string of successful acquisitions continued, and the company's expansion plans were furthered. By 1993, Allied-Lyons had also inked a brewing joint venture deal with Carlsberg A/S, naming the venture Carlsberg-Tetley.

The year 1994 brought with it an extremely notable development in Allied-Lyons' history, as the company purchased Pedro Domecq--the top marketer of spirits in Spain and Mexico. The addition of Pedro Domecq gave Allied-Lyons control of some very well known brand name spirits, and greatly bolstered its portfolio. Most notably, Pedro Domecq brought with it two of the world's top three brandies--Presidente and Don Pedro&mdash well as the two leading Spanish brandies--Fundador and Centenario. Also acquired with the purchase were Sauza--the number two brand of tequila in the world--and La Ina, a well-known brand of sherry. As a result of the Pedro Domecq acquisition, in September 1994 Allied-Lyons once again changed its name--this time to Allied Domecq PLC--and began publicly trading its stocks under that name.

The Mid-1990s: Another Reorganization

After Allied-Lyons' transition into Allied Domecq, the company decided to focus solely on its spirits, wine, and retailing operations. The food manufacturing holdings were divested in 1994 and 1995, except for the company's 50 percent interest in Panrico, a Spanish bakery business. The remaining holdings were separated into two divisions: Allied Domecq Spirits & Wine, and Allied Domecq Retailing.

The company's pub-operating business was reorganized in 1995 as well, into two United Kingdom-based operations: Allied Domecq Leisure and Allied Domecq Inns. These two new divisions replaced the four regional pub companies that had been in action--Tetley, Ansells, Ind Coope, and Taylor Walker. Allied Domecq Inns became the umbrella under which approximately 1,470 pub locations continued to operate. Another aspect of the realignment of this area of the company was the creation of Allied Domecq Restaurants and Bars, an arm that was formed to manage the locations where food sales were prominent. Allied Domecq Restaurants and Bars was composed of over 560 pubs, including all Big Steak Pubs.

Allied Domecq also sold off its tea and coffee interests in 1996, including Tetley Tea and Lyons Irish Tea. Tetley was sold to Karand Limited and the Lyons tea business was transferred to Unilever, Ireland. Also divested was Allied Domecq's 50 percent interest in the Carlsberg-Tetley joint venture.

In 1997, Allied Domecq added yet another food-related retail operation to its portfolio when it purchased the Togo's Eatery chain. Togo's was a deli-style sandwich shop. Soon after the addition, Allied Domecq initiated a new marketing strategy involving Togo's and its Dunkin Donuts and Baskin-Robbins chains. Company officials had noticed that while Dunkin Donuts did the majority of its business in the morning hours, Baskin-Robbins generated most of its own in the evening. Upon bringing Togo's underneath the corporate umbrella--a chain which was busiest during lunchtime--Allied Domecq decided to try saving money on real estate by opening new locations that combined all three chains. In addition to offsetting real estate costs, the co-branding concept also made it possible for Allied Domecq to introduce its lesser-known brands into an area where one of its better-known chains was already dominant.

The End of the Century and Beyond

By mid-1998, Allied Domecq was continuing to build its Spirits & Wine division, and had worked out a deal with a subsidiary of industry giant Diageo PLC. The subsidiary in question was the well-known Guinness Ireland Group Limited, from whom Allied Domecq purchased a 49.6 percent minority stake in Guinness's Irish drinks company Cantrell & Cochrane Group Limited.

The Spirits & Wine division also spent time restructuring its spirits business in the United States, so as to cut costs and make its operations more efficient. The sales, marketing, and administrative operations of Hiram Walker and Allied Domecq's import arm (Domecq Importers) were combined, with Allied Domecq Spirits, USA being the result.

The Spirits & Wine operation also revamped its marketing strategies, and began attempting to target younger customers than it had been in the recent past. It was noted that consumption of spirits in the United States, for example&mdash opposed to that of beer or wine--had decreased throughout the 1980s and 1990s, especially in the young adult demographic. Allied Domecq made an effort to win back this consumer group by offering interesting and often exotic drink options, while also reeducating its customers about its products and their merits.

Meanwhile, Allied Domecq's retailing division was being bolstered by the merger of its United Kingdom off-license interests--Victoria Wine and Thresher--with those of Whitbread PLC. After the deal was closed both Allied Domecq and Whitbread owned 50 percent each of the new entity, named First Quench Retailing.

As the end of the twentieth century approached, Allied Domecq continued reevaluating and streamlining its operations in an attempt to earn a solid return on its shareholders' equity. The company made history in early January 1999, when it completed the first major business transaction ever to use the new European currency, the euro. The transaction occurred when Allied Domecq reviewed its Cantrell & Cochrane Group (C&C) operation and determined that ownership of C&C did not fit Allied Domecq's long-term strategies.

In June 1999, Allied Domecq began the process of selling its over 3,500 United Kingdom-based pubs to Whitbread. The move was made in order to enable Allied Domecq to focus more intently on its core businesses in the Wine & Spirits and Retailing divisions. Soon thereafter, rumors began to circulate that Pernod Ricard was planning on initiating a bid to take over Allied Domecq's Wine & Spirits division, although the company's officials refused to confirm the rumor.

By late 1999, Allied Domecq was generating solid sales figures and was ranked second worldwide in its industry. It was producing either the number one or two-ranked product in seven different international spirits and wine categories. Its annual income was experiencing a growth spurt, to the point that the company attracted the attention of U.S. investment guru Warren Buffett, who had a reputation of selecting undervalued companies' stocks that had potential to deliver huge returns in the future. With Buffett and others seemingly hooked, Allied Domecq's future success rested on its ability to ensure that its operations continued to be efficient and well managed.

Principal Divisions: Allied Domecq Spirits & Wine; Allied Domecq Retailing; Allied Domecq Spirits, USA; Allied Domecq Retailing, USA; Allied Domecq Leisure; Allied Domecq Inns; Allied Domecq Restaurants and Bars.

Further Reading:

• Beck, Ernest, "Allied Domecq Reaches Accord to Sell Pubs Unit to Whitbread for $3.84 Billion," Wall Street Journal, May 26, 1999.
• Boyd, Terry, "Franchising Facts," Business First--Louisville, December 21, 1998.
• "Business: The Company File--Buffett Takes a Sip of Allied Domecq," BBC News, May 18, 1999.
• Goodway, Nick, "Talk Grows of Deal Between Spirits Firm Allied Domecq and Pernod Ricard," Evening Standard, June 1, 1999.
• Marquand, Barbara, "Co-Branding Brings Cafes to Banks, Pizza to Kmart," Sacramento Business Journal, December 18, 1998.
• O'Brien, George, "This Franchisee is Making Serious Dough," Business West, January 1999.
• Sinton, Peter, "Double Dipping: Family Sells then Buys Back Gelato Business," San Francisco Chronicle, March 3, 1999.
• Sledge, Ann, "Beverage Marketers Capitalize on Changing Tastes," Fairfield County Business Journal, April 5, 1999.

Source: International Directory of Company Histories, Vol. 29. St. James Press, 1999.

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