Diageo Mulls Sale Of Parts Of Its Wine Cellar

The FTSE-100 producer of Guinness and Smirnoff is considering the sale of parts of its wines division amid growing investor disquiet about the company's performance.

Sky News has learnt that Diageo is examining plans to offload some of its wine brands, which include Blossom Hill and Sterling Vineyards, following approaches from a number of unidentified third parties.

The company also owns Justerini & Brooks, the wine merchant which has held a royal warrant since 1760.

The deliberations about a sale come amid growing City pressure on Diageo and its chief executive, Ivan Menezes, who was forced to announce an unexpected fall in third-quarter sales last month.

Its wine brands account for only 4% of Diageo's group sales, and have for some time been regarded as a non-core business within the £46bn company.

It is unclear whether any sale could include the agreements that Diageo has with LVMH, the luxury goods group, to distribute champagne brands Dom Perignon and Moët & Chandon.

A disposal of large parts of the business would unwind a chunk of the deal struck by Mr Menezes' predecessor, Paul Walsh, in 2000 when Diageo bought parts of Seagram in a £5.5bn joint bid with France's Pernod Ricard.

Mr Walsh is now the preferred candidate to become the next president of the CBI, the employers' group, although an announcement about his selection has been deferred after he signed a letter backing Conservative economic policies.

In a statement issued to Sky News, a Diageo spokeswoman said:

"Diageo has a great wine business with great brands that are growing.

"We are sure there are many people who would love to own our wine business and we have received expressions of interest over the years.

"As you would expect we have a duty to consider any such interest carefully."

People close to the company cautioned that Diageo's board had not made a formal decision to sell its wines business, and that any transaction remained some way off.

"They are assessing interest from parties who have made approaches for parts of the wine business, but If it doesn't fit financial and other criteria, they will not feel compelled to sell," said one source.

Diageo has been going through a turbulent period, with sales in emerging markets such as Venezuela and China experiencing sharp slowdowns, and an intensifying row about the stewardship of its majority-owned Indian operations.

Mr Menezes said of the recent sales figures, which were partly the result of adverse currency movements:

"Our performance in the quarter reflects continued tough conditions in the emerging markets and subdued consumer demand in some developed markets. However it also reflects the actions we have taken to ensure we are building a stronger business.

"We will continue to strengthen Diageo. We are investing in our brands, enhancing our route to consumer, introducing great innovations...winning in reserve and focusing on cost and cash. We can realise Diageo's full potential and deliver our performance ambition."

The company's brand portfolio also includes Captain Morgan rum, Johnnie Walker whisky and Baileys.

In addition to its wine division, Diageo is pursuing a sale of Gleneagles, the hotel and golf course which staged last year's Ryder Cup.