Chivas Brothers cut whisky production as Diageo dumps 700 in Kilmarnock

This is a tale of two big – the biggest, but very different – Scotch whisky producers.

One, Diageo, owns 40% of Scotch whisky production and, with its CEO, Paul Walsh chairing the organisation, is virtually synonymous with the Scotch Whisky Association.

The other, Chivas Brothers, owned by Pernod Ricard, the second biggest Scotch whisky production owner, at 20%.

Diageo, in the interests of making even more money for its shareholders, has walked away from Kilmarnock, leaving 700 out of work – 700 homes in a single modest town left without an income in a major recession and with the raised bills of winter coming in.

This move has nothing to do with the recession. Diageo have just announced a £2 billion+ pre-tax profit for the last year. This is simply about increasing profit margins in a mind set where living people, loyal long-time workers, are no more than numbers on a swollen balance sheet.

And the brutish Diageo boasts ‘corporate citizenship’ — who do they think they’re fooling?

Chivas Brothers, on the other hand, are facing tough market conditions with reduced growth expectations in the short term. In the first 6 months of this year Chivas has seen a 4% drop in sales of Ballantine’s and a 5% drop in sales of Chivas Regal – both year-on-year comparisons.

The company’s response has been a measured one. It wants to avoid the damage done in the 1990s where production was sharply cut back when the Asian financial crisis occurred.

Today Chivas has cut production at some unnamed distilleries from a 7 to 5 day week operation, saying at the same time that it is confident that the market will recover and that it sees longer term growth in demand for Scotch whisky.

Chivas is, however, keeping open the previously mothballed distilleries of Braeval and Allt-A-Bhainne, which were reopened during the past few years. It is also planning to double output at Glenlivet, whose sales, year-on-year, were up 5% for the first 6 months of 2009.

These actions look more like those of a socially responsible company. The wage packets of workers at the distilleries affected will be thinner but they still have jobs and they still have a future.

Compare that with the fate of Kilmarnock and the actions of Diageo?

In the antediluvian habit of cheap political points scoring, the  Scottish Government has come under fire for failing in its efforts to save the Diageo jobs at Kilmarnock. First Minister Alex Salmond has said, rightly, that it is the duty of a Government to try.

Diageo has made it clear that, in essence, what was missing from the deal that might have encouraged them to agree a new approach – which would still have seen 500 jobs go – was that the Government wasn’t prepared to pay them to act responsibly.

If the Scottish Government had done this – paid to protect the already bloated profits of a private company that boasts corporate citizenship while leaving an entire town devastated, there would have been anothter outcry – and we would have been in the van of such a protest.

Why not take the phoenix route and fund a small independent malt whisky distillery and bottling plant start-up – Kilmarnock Stramash? The Johnnie Walkout would give it a great PR platform.