using website header

Connected: Display Connected: Media Landscape Connected: Regional Connected: AV Consumer Surveys Connected: Direct LinkedIn LinkedIn logo icon Twitter Twitter logo icon Youtube Youtube logo icon Flickr Flickr logo icon Instagram Instagram logo icon Mail Mail icon Down arrow
Dominic Mills 

Diageo and the power of marketing

Diageo and the power of marketing

Diageo's ambition to control 6% market share is reliant on marketing. Dominic Mills tells why it's extremely plausible, which is good news for media and creative.

It’s not every day that a global brand owner announces that it plans to increase its market share by 50% over the next decade, yet Diageo’s announcement last week of its ambition didn’t really generate the headlines you might have expected. 

After all, this is no mean target.

You might expect it of a newly arrived DTC or disruptor targeting a fast-growing market, but not of a global entity operating in mature markets and categories. And certainly not from a company with some brands that go back well over 200 years. Could you imagine Unilever, P&G, Coke or Nestle saying the same? They’d be laughed out of court. 

Which was pretty much how I felt once, when someone from Coke told me one of their strategies was to increase “share of throat” — not a thing you would ever say lightly — part of which involved persuading people to drink the stuff first thing in the morning. I don’t think that idea stood the test of reality. 

But while Diageo is already a major player in the key spirits categories, its current market share is just 4% by value. So going to 6% might not sound like a massive stretch, but to put it in crude terms on current sales volumes that means going from just under £13bn for the year ending June 2021 to around £19bn, and more if the overall market grows.

That is a lot more ‘alcohol drinking opportunities’ involving a lot more people, everywhere, drinking more stuff or, like I sometimes do, discovering a crusted and dusty bottle of Bailey’s at the back of the cupboard. 

Well, you think, they could do it if they acquired a load more brands, including new categories, if they cut prices, or if there was a major shift in alcohol culture. 

But that, judging by the way it laid out its ambitions last week to investors is not totally the Diageo way.  No sir. 

The challenge of meeting that goal, it seems, it’s going to be down mostly to marketing and e-commerce (two sides of the same coin, I’d say). Here, the company seems supremely confident. 

Just going by recent performance, it is justified. It achieved organic sales growth of 16% last year (20.2% in the US) and, with investment in marketing up 23%, is clearly spending ahead of immediate returns. Better still, it held or gained market share in more than 80% of its markets. 

Part of its confidence stems from — and here, you wonder how widely imitated it is, and if not, why not — its Catalyst marketing effectiveness unit.

What’s more, it’s not afraid to shout about it, picking up no less than seven IPA Effectiveness Awards in 2020 (the most recent set).

I saw a Catalyst presentation a couple of years ago about Diageo’s effectiveness culture and was blown away. Catalyst, Diageo says, has driven over £400m incremental gross profit since 2017. 

If you want to get a sense of the rigour with which Diageo approaches marketing, it’s worth taking a look at this presentation to investors by chief marketing officer, Cristina Diezhandino, which you can read here or watch on YouTube.

What shines through is not just the focus on consumer understanding and brand — as opposed to price or performance — marketing, but also an obsession with, and respect for, creativity.  

It’s not many CMOs who would offer up a hostage to fortune, as Diezhandino did, by saying: “Given the fact that we can now prove our investment is working in certain ways, we can now go to our chief financial officer and say we can actually afford to invest and show the return. The degree of confidence we have in our investments is unprecedented.”

You can bet a lot of Diezhandino’s peers would kill to be able to say that. 

You get the sense too that Diageo treats its agency partners with respect. Not for it, the chopping and changing of rosters like other multinationals, or indeed a pandemic-induced review to cut costs.

A search for ‘Diageo creative agency review’ throws up negligible results, while its most recent media review kicked off in 2019 and completed in January 2020. That did see Dentsu lose its hold on the business, but only after a relationship spanning many years. 

I hope roster agencies cracked open the drinks cabinet on last week’s news. They will want to hang on for the ride. More spend, more creative opportunity is coming their way. And those that aren’t should fight like cats and dogs to get a foothold.

From what one start-up founder told me a couple of years ago, Diageo is always on the look out for new agencies to inject some fresh thinking or competition. 

A caveat, however. Diageo shares initially rose 3% on the presentation. But not for long. As of 22 November, less than a week later, they were about 1% below the original starting point.

That initial excitement may have turned to scepticism. But what do those pesky City investors know.  

Leave a comment

Thank you for your comment - a copy has now been sent to the Mediatel Newsline team who will review it shortly. Please note that the editor may edit your comment before publication.