Diageo says marketing effectiveness boosted by £72m efficiency drive

Diageo says it shaved £72m from its marketing budget by consolidating media buying and switching money to more efficient channels as it the company stepped up efforts to improve profitability.

Smirnoff owner Diageo says it saved £72m last year from more efficient use of marketing channels.

The Smirnoff and Guinness owner says its actual marketing outlay in the 12 months to 30 June was £1.6bn but procurement savings of £32m, £15m and £25m on media, point of sale and other marketing initiatives respectively meant its investment was effectively boosted to £1.69bn.

In a presentation given to investors, Diageo trumpets consolidation of media buying and consolidation of point of sale into global catalogues “to standardise items and consolidate suppliers” for the savings. It has also cut back on point of sale posters in favour of more effective “behind the bar materials” such as glasses, it says.

It also cut regional marketing teams from some markets and scrapped its marketing innovation unit, moving responsibility for marketing innovation to the brand teams, in the period.

The net result of the efficiency drive is reinvestment in innovation such as the launch of Baileys Chocolat Luxe in Europe, and better performing media – “a virtuous circle”, the company adds.

Diageo set out its plan to move marketing spend away from point of sale and promotional activity and increase investment in media, particularly digital channels, it has identified as more efficient in January with the aim of driving margin improvements.

Operating margin increased 0.8 per cent in the period, slightly ahead of the 0.4 per cent increase in net sales.

Sales were subdued by worse than expected returns from emerging markets.

In a statement announcing the full-year results, chief executive Ivan Menezes says despite the “macroeconomic and market specific challenges” that impacted performance it will continue to invest in brands.

He adds: “We have made progress in accelerating the performance of our premium core brands but these brands have been under pressure given the environment this year, although we have delivered share gains in a number of markets.”

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