Diageo to ramp up media spend to fuel growth

Diageo is to increase the media spend behind brands such as Johnnie Walker and Pimm’s and dial down its below-the-line activity in an attempt to drive marketing efficiencies across all its markets. 

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Diageo will increase its media spend to drive marketing efficiencies across all its markets.

The drinks maker has been piloting the initiative in North America where it claims to have already captured savings in promotional and point-of-sale spend over the last year. The move has funded a boost in media spend for its brands in the region and the company says it will now roll out the approach to all its markets.

Ivan Menezes, who replaced Paul Walsh as chief executive of Diageo earlier this year, says: “To grow at a time of change we need to invest in marketing and in our routes to consumers.

“Having a focus on driving out cost also drives efficiency. For me the biggest benefit of the supply excellence programme is not the £60 million of cost savings it delivers, it is the agility it creates now that the in market teams and the supply function are aligned.”

The strategy will be pushed through Johnnie Walker, Diageo’s biggest brand by sales, with the company looking to drive its more premium variants in Western Europe, Asia and the Americas. Elsewhere, Smirnoff is currently the subject of global review to create a new marketing positioning for the vodka brand.

It is hoped the media drive can open new channels to reach drinkers. Diageo has been working closely with YouTube and Facebook in recent years in effort to broaden the scope of its brands and drive engagement.

Diageo’s shift comes as the drinks maker credits marketing for delivering better than expected growth over the last 12 months. A five per cent year-on-year boost in marketing spend of £1.7bn for the year to 30 June helped lift sales by the same rate to £11.4bn in the period.

The company’s growth was, however, stunted by demand in Western Europe where sales for the year fell four per cent. It said the “strong positions” of top brands J&B, Guinness and Baileys in Western Europe had left them exposed to “market weaknesses” and vowed to reverse the decline through sales activations for its premium brands and upcoming innovations for its Captain Morgan rum brand.

Menezes says Diageo’s global performance has made “a strong business stronger”.

He adds: “The effectiveness of our marketing campaigns remains a competitive advantage for us and this year we have seen these campaigns extend the leadership of our brands in many markets during the year. This has been a key driver of our performance in scotch, our biggest and most profitable category, especially for Johnnie Walker which is now a 20 million case brand.”

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