Page last updated at 10:25 GMT, Thursday, 27 August 2009 11:25 UK

Protests 'could hit Diageo sales'

Diageo distillery, Port Dundas, Glasgow
Diageo announced plans to cut about 900 Scottish jobs in July

"Short-sighted" protests over planned job cuts by drinks giant Diageo could affect future sales, its boss has said.

Paul Walsh's comments came as the firm announced pre-tax profits of £2.01bn, a fall of 3.7% on the previous year.

Mr Walsh said he feared those campaigning to save 900 jobs at two plants producing Johnnie Walker whisky were trying to dent the brand's image.

The Unite union claimed the multi-billion pound profits showed the firm's plans to shed jobs were unnecessary.

Mr Walsh described the figures, which cover the year until June, as "robust" in a challenging market.

The company announced in July that it planned to close its Johnnie Walker bottling plant in Kilmarnock in 2011, resulting in the loss of 700 jobs.

It also intends to close its distillery in Port Dundas in Glasgow, which would mean 200 people losing their jobs.

Diageo looking forward to growth

The firm said the cuts would be off-set by the creation of up to 400 new posts at a packaging plant in Fife.

However, it has faced a vociferous campaign against the closure plans.

Diageo said the latest figures showed whisky sales were down by 3%, with Johnnie Walker the worst affected, seeing an 11% fall.

The results related to the period before the cuts were announced, but Mr Walsh said he feared the protests could affect future sales.

He told BBC Scotland: "I'm aware of the jobs campaign and I am concerned that people are almost trying to dent the image of the brand, which will not be good for the remaining employees, so I think it's very short-sighted.

"However, overall, I believe the brand equity that we have around the world will prevail.

"As tragic as it is for the employees in Kilmarnock who will lose their jobs, I have to look out for the well-being of the other 4,000 employees in Scotland and make sure that we have a viable business going forward."

Bottle of Johnnie Walker whisky
Johnnie Walker whisky has been bottled in Kilmarnock since 1820

Two staff representatives from Kilmarnock - where Johnnie Walker has been bottled since 1820 - were joining politicians in a visit to Diageo's headquarters in London, the House of Commons and 10 Downing Street to voice opposition to the plans.

Mr Walsh said he was "very comfortable" with the cost-cutting measures, which he claimed would save the company £120m next year and allow greater spending on marketing its brands.

The Scottish Government has agreed a letter laying out an alternative business plan to save the Kilmarnock plant and continue production in Port Dundas, which it will present to the firm.

Mr Walsh said he had not yet seen the letter.

"I will be very open-minded when I look at the content but I hope the content is specific and provides options that still maintain our business objectives, ie being cost-competitive," he said.

"And if there is a gap I hope the letter is very clear on how the public purse is going to fund that gap."

'Short-term greed'

When asked if a government subsidy would prompt a rethink, he said: "As long as our shareholders are neutral in this proposal I will be very open-minded."

But unions have criticised the firm following the annual results.

Len McCluskey, assistant general secretary of Unite, said: "Even in a global recession, Diageo can pull in billions of pounds in pure profit.

"Surely now Diageo's claims that it must cut Scottish jobs to reduce costs can be seen once and for all for what they are - about short-term greed, not long-term need."

Harry Donaldson, Scottish regional secretary of the GMB union, called for the bosses to take a pay cut as a gesture of good faith.

"I think some restraint by senior executives in tough times may well be an approach that would be welcomed by people who may well be affected by these proposals," he said.

"It would be an indicator to the people who are potentially going to be affected by these proposals that it was not just the workers at the coal face that were effectively taking cuts, but that restraint was being shown across the piece."

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