Drinks giant Diageo has offered to sell its malt whisky distillery at Fettercairn in Aberdeenshire and a grain operation at Invergordon to appease competition concerns.
A distillery on Jura is also up for sale as the group attempts to quell fears that a recent acquisition will mean higher prices.
Diageo – whose whisky brands include global market leader Johnnie Walker, Bell’s, Buchanan’s and J&B – bought a controlling stake in India’s United Spirits, which owned Whyte and Mackay (W&M), for £1.3billion earlier this year.
Yesterday, Diageo said it was prepared to sell W&M’s Invergordon, Jura and Fettercairn distilleries and all of its central operations. But the Dalmore and Tamnavulin distilleries, which supply United Spirits and primary international markets, would be retained.
Diageo also said it would help the Office of Fair Trading (OFT) with an “evaluation” of the deal with United Spirits, and a further announcement would be made in due course.
In July, the OFT said it was looking into the acquisition of the United Spirits’ stake and considering whether it reduced competition in the UK spirit market.
An update from the anti-competition authority yesterday said retailers had expressed concerns about possible price rises for bottled, blended whisky sold in the UK as a result of the deal. It added: “The OFT’s investigation found that there is substantial competition in the retail sector between Bell’s whisky, a Diageo label, and Whyte and Mackay’s own-label and branded blended whisky.
“After analysing evidence including data on consumer switching between brands, economic modelling and internal documents, the OFT found the merger may lead to a substantial lessening of competition in the supply of blended whisky to retailers.”
The OFT said it had also considered whether other whisky-makers were capable of competing with Diageo’s enlarged business, and found that they did not have and could not quickly reach sufficient capacity to offset the likely loss of competition.
OFT chief economist Chris Walters added: “These companies are two of the leading suppliers of blended bottled whisky in the UK, especially to supermarkets and other large retailers.
“Our investigation considered a wide range of evidence and we concluded that the likely loss of competition could give rise to higher prices for retailers, and ultimately consumers.
“We are now considering Diageo’s offer to sell the bulk of the Whyte and Mackay business, with the exception of two malt distilleries, to address our concerns.”