Andy Fennell, chief marketing officer at Diageo, is a man with a great burden of responsibility. The largest drinks company in the world relies on its marketers to lead the £12.3bn business both from within and externally in search of share.
So to ensure a healthy future, Fennell says he is always hunting for the next brilliant marketer to add to his global team of 950. “Our philosophy is that success is about great and inspired people,” he says. “Our fortunes rest on being able to find the right people.”
But actually being the next great marketer at Diageo sounds like a pretty tough task. Fennell says he would rather his marketers and agencies failed by aiming too high rather than creating safe campaigns. He argues: “Risk a three out of ten in pursuit of a ten out of ten. Half measures won’t sell Diageo’s premium brands.
“If you say sorry quickly for the three, your customers move on. But there is disproportionate economic benefit to achieving a ten. The solid sixes and sevens out of ten are not going to make Diageo the company that we can be and that I think we are.”
Fennell accepts that such swashbuckling bravado cannot be taken lightly. He says that when you work for a company where marketing is held responsible for growth, wielding a global marketing budget of almost £2bn, you are required to have a strong sense of what is going to work.
“I accept that in order for us to be pioneering, it means saying yes to a few things that aren’t proven,” says Fennell. “But with that must come accountability; you are expected to drive business growth and provide leadership.”
Business leadership is something that Fennell also demands from the rest of his team and he feels strongly that this is something missing from the marketing profession as a whole. Many of his team have risen through the ranks to senior positions and Fennell takes a sideswipe at brands that don’t expect so much from their marketers.
“I think that when marketing positions itself as merely the creative services provider, it loses its right to have commentary on total business issues,” he says. “When marketing directors think of themselves as the producer of advertising, digital or the new pack, they relegate themselves to being a service provider of marketing stuff. That’s not how it is here.”
Fennell says that working with the finance department is part of the effective marketing process. In order to change the perception that marketing is a cost rather than an investment, he works closely with Diageo financial director Nick Rose on his strategy.
The relationship with Rose is of “critical importance” to the successful running of the company, says Fennell. “Nick sees marketing spend as an investment. If I can’t make it to a meeting, Nick sits in those meetings trying to figure out how he can release more investment behind the growth drivers that work for our brands.” Both report to CEO Paul Walsh, who Fennell describes as “a brand builder by instinct and nature”.
By developing this mutual respect between finance and marketing, Fennell believes this sets up his team to offer the company something far more valuable than simply creative minds. He says: “The finance team must have deep respect for the analytical prowess of the marketing team, and the marketing team have to know how to count.
“I want marketers full of flair, who use their instincts and their hearts to make decisions – but they’ve got to know how to count. You can’t be a business leader unless you sound like a business person.”
Fennell is keen to emphasise that this way of behaving is not merely his own influence but has been part of the company “since the days of Arthur Guinness and John Walker”. The two men whose businesses now make up a significant part of Diageo – Guinness founder Arthur Guinness and John Walker, the Kilmarnock grocer who founded Johnnie Walker – are still held up as examples of taking world-class talent and developing it in the right way.
Fennell says that even the basics of marketing still hold true from times of old. Really good marketing requires flair, agility, consumer insight and excellent execution. “The fundamentals of brilliant marketing have not, will not and do not change. They’ve been the same since Arthur Guinness was running the brewery.”
He continues: “What changes is the context you’re in. When Guinness launched into draught format with new nitrogenation technology just after the Second World War, the context was very different than it is today. The essentials, though, of understanding your consumer and executing with speed, agility, panache and flair were the same.”
Fennell’s historical allusions stand out from the rest of his conversation because otherwise his discussions and ideas appear ensconced firmly in the present, focused on all the challenges that he faces as a global business figure in 2010.
With his budget nearing £2bn globally and needing to be spread across more than 200 markets, Fennell had tough decisions to make during the recession. Though he has famously described the drinks sector as “recession resistant”, the reality proved rather different. Diageo reduced its marketing spend from 15% of its total revenue to 14%.
This year, Fennell claims the aggregate spend will return to the 15% level, but deployed in a different way. The company already spends heavily in developing markets, where it believes it will find the majority of growth. This year will see the same pattern with the aggregate spend disproportionately high in developing countries.
This shift to spending and marketing in markets outside the US and Western Europe is set to continue throughout the next couple of years. Two-thirds of Diageo’s business is currently in the US and Europe, and a third is in developing markets. That balance is likely to tip even further towards emerging nations in future.
Double-digit growth is already “a requirement” in the developing world, reports Fennell. “We’ll continue to spend £400m per year on marketing in Europe because we need to but you’re not going to get double-digit growth out of that area.”
Fennell’s team of marketers have vast international experience between them. Apart from the fact that each member of his marketing team has lived somewhere else other than where they were born, the company is able to translate experience around the world through shifting around its marketers.
Fennell offers the example of James Thompson, currently marketing and innovation director for the Asia Pacific region. Thompson left the UK business in 1996 for Canada, then went to the US and is now in Singapore.
“That is now part of James’s strength,” says Fennell. “He sees the world through a broader perspective. If you go to a modern bar in Shanghai, it will feel different to a bar in midtown Manhattan or a place in Soho or Leeds here in the UK. The way people interact and the way business gets done is different. There is also something about placing yourself outside your comfort zone that helps you grow.”
This focus on international markets doesn’t mean the company is planning to ignore its traditional developed markets such as the UK. Fennell admits: “Diageo is going to get more growth out of Africa, Latin America and Asia than out of Europe. This is why we will put disproportionate resources there – but there has to be balance.”
Whatever the level of investment, we have to remain sharp in all markets.
He says that there will still be pressure on Diageo marketers in the UK to strive for domestic growth. “That’s why we need superb people in markets like the UK, which accounts for 9% of our global business. Whatever the level of investment, we have to remain sharp in all markets.”
“If you put all your resources in China and India and forget Western Europe, you’ll lose your current scale. Your competitors will say ‘Bye bye, enjoy the east’ and pick up your lunch where you left it.”
This type of statement might make Fennell sound like he is all-consumed by his employer, but those who have worked with him say that while he is “driven and passionate”, he is far more than a corporate suit. These sources say that he is “accessible, affable and down-to-earth”. They also claim that under the professional exterior, the man can be the life and soul of the party. “He can hit the high notes in Madonna’s Like A Virgin with freaky and repeated accuracy,” claims one former colleague.
Fennell’s thoughts are not on Eighties pop today, however. He is still thinking about finding the marketers of the future. There is no shortage of young marketing graduates hoping for the chance of a career at the world’s largest drinks company. Diageo even has people based in universities to spot the great talent in their second year, before they consider applying for work placements.
But once the enthusiastic new blood has been found, there is work to do to mould the recruit in the right way. Those interested in a career as a Diageo marketer should know that a marketing background might not necessarily give them an advantage.
“What they study is not important to us,” says Fennell. “In fact, if they studied marketing at university, the first thing we have to do is retrain them. Anyone who comes here, either as a graduate trainee or as marketing director, is trained within the first six months by those that already live by the Diageo way of brand building.
I want marketers full of flair, who use their instincts and their hearts to make decisions – but they’ve got to know how to count. You can’t be a business leader unless you sound like a business person.
“The Diageo way,” he says, “is a necessary suite of skills and expertise regarding everything from understanding consumers and their relationship with a brand, through to the most effective way of investing marketing spend to drive growth.”
Fennell wants to pass on a little of this knowledge and experience to youngsters through his participation in The Marketing Academy, a new independent scheme that aims to ensure sound business leadership skills among younger generations through getting marketers like Fennell to mentor people at the start of their career.
“I’m very hopeful for the Academy. Success in business is all about people, so when they called and asked for my help it was very easy to say yes. If we can surface talent that we might not have found, then that’s brilliant,” he says.
This isn’t his only commitment to the next generation of marketers. Fennell is making sure he plays the same role in his own company. He himself passes on the Diageo way by teaching on internally run courses for the firm’s new recruits. “It’s so rewarding because you get smart people asking brilliant questions. It’s written by us, for us and taught by us and it really is special. For me, it’s the most fun two weeks of the year.”
MW: We’ve recently seen Coca-Cola and other multinationals scrap the UK marketing director role. Are local marketing director roles in jeopardy as brands seek to restructure?
The Diageo UK marketing director role is absolutely not in peril. We want both the benefit of global scale and local consumer insight – that’s quite complex and it is our job to make it simple and effective.
I need a strong UK marketing director. I have just appointed Philip Gladman to start in the role this month. Philip comes to the UK from his role as global brand director of Smirnoff.
Every one of my most senior marketers has had both international and domestic jobs with Diageo. I’ve been the UK marketing director, I’ve been global brand head of vodka and rum and I’ve been the European marketing director. It’s important to get this breadth of experience if you’re going to be successful in an international brand building organisation.
MW: How did the recession affect Diageo’s programme of new product development?
Innovation is critical. During the recession, we launched The John Walker, which costs $3,000 a bottle and we can’t make enough of it. It is the most expensive member of the Johnnie Walker family. The bottle is baccarat crystal. It’s the rarest blended malt whisky that you can get your hands on. In fact, most of the whisky in there is from distilleries that are no longer open.
Now, we’re not selling bottles of $3,000 malt whisky in Western Europe, but you go to Abu Dhabi, Singapore, Hong Kong, Shanghai, Dubai and we’re out of stock.
We were also responsible for seven of the top ten innovations in the US drinks sector, according to IRI [global research] figures. I know that not everything we do is a ten out of ten but our ambition always is.
MW: Choosing the right metrics to measure the success of online campaigns is a tough call. How do you measure Diageo’s digital marketing success?
In order to drive business growth, we need to deploy our funds in the best way possible. It was easy back in the time when you could just measure coverage, frequency and discount off the rate card, but there are now tools that allow us to understand the effectiveness of our content in the digital space. We measure clickthroughs as well as dwell time. We also measure the online conversations that mention our brands.
At Diageo, we are establishing a suite of online metrics, but the golden rules that used to exist are no longer there.
MW: Does the lack of one single metric of online success make it difficult for Diageo’s marketers to convince you and themselves that they are on the right track?
I expect my marketers to exercise judgement over what they are seeing – you don’t get a free pass on judging whether it is effective or not because it is hard to measure.
You have to ask: “What data have I got?” In some countries, data is really hard to get. In Nigeria, it isn’t that easy, but that doesn’t give the Nigeria marketing director a free pass on marketing effectiveness.
Hard numbers have to be part of the conversation – sales, share and equity. We expect every brand manager and marketing director to write a narrative for every brand plan explaining why it will work in their market. We ask them how it is going to achieve growth, how it will beat the competition and how it will excite customers. The more data they include of various types, the more convincing the plan will be.
MW: Which global trends should marketers take heed of?
It’s a smaller world now. The influence on culture, such as music, fashion, film and food and drink, is accelerating, in particular from Asia.
So the context has shifted from 20 years ago when Americanisation was everything in terms of how we felt as punters. It affected our buying choices, whether we were buying jeans, music or paying to see a film.
People in Western Europe are now very interested in Indian, Chinese and Brazilian cultures. If our job as marketers is to ask what is going on around us, well, that’s our context.
MW: Is the battle to convince companies that marketing is fundamental to business being won?
I can only speak in a really informed way about Diageo. You have just described how it is here. There is an expectation placed on the marketing function to source, find and lead the business in its search for growth, not just be the provider of creative services.
That’s not about being superior to other functions; it’s about stepping forward and understanding that someone needs to lead in that search. We do it because we can. It is an expectation here.
I’m not naive enough to think that every company is the same. For a business like ours where all the value of the enterprise is in the emotional relationship between the consumer and the brands, there is no choice but to be marketing-led.
But lots of successful companies are not marketing-led. If you’re a technology company where all of the value of the enterprise comes from you designing the next technology, or a mineral mining company, where the value comes from finding the next big seam of minerals, I understand that those are not going to be led by marketing.
But if you’re a company where it’s all about the relationship between you and the customer, you’ve got to be led by marketing. It might not be called marketing. Another organisation might call it general management, but that doesn’t actually matter.
I have a holistic view of the definition of marketing. I’m not “turf-ist” about this thing called brand building or marketing. I want the general managers, the sales guys, the HR department and the finance people to feel a sense of ownership of our brand building agenda. I expect the marketing director to lead that conversation.
MW: How does the marketing structure beneath you work?
We’ve got about 950 consumer marketers and innovators within Diageo. Their bosses sit on my leadership team. Half of the leadership team is global and “hardline” report to me. The other half of the leadership team reports to the president of their region.
It’s really important that they report locally because they are expected to be the business leader of that region. The only way they can do that is to be the “wing man” of the president in that region. I don’t behave any differently towards the guys in the regions than the guys on the global team. My job is to lead that leadership team.
Marketer 2 marketer
David Thomas, marketing director, Virgin Holidays: Given the drinks industry’s reliance on blockbuster TV and high-profile outdoor campaigns in the past, how is this changing with the onslaught of digital and social media communications?
AF: Under the old model of engagement, there was 40 years of data on how to do it. This meant that there were golden rules, which, if you applied you’d be alright. You knew ITV would deliver a certain viewership, while Channel 4 was a big call – that was the way it was when I was a brand manager. You could just blast it out.
When I was a marketing manager for Carling Black Label, you would ensure you had an ad campaign with lots of male insights, dramatise it with humour, get your big ratings, do a bit of footie sponsorship and you were done. Now there aren’t those golden rules that have built up over the years because the nature of consumer engagement is evolving really quickly.
Cathryn Sleight, marketing director, Coca-Cola GB: Has the way Diageo embraced digital marketing altered the internal business viewof what a marketer needs to be able to do?
AF: The skill-set of a marketer needs to shift from the analytical predominance to one that is more instinctive and more flair-oriented. You can’t just analyse what you did last year because things are shifting too quickly, so I need people with a pioneering spirit – people who are entrepreneurial, who will try something different and back their own judgement. Those people can take new lessons on board and learn within a quarter rather than over a five-year period. We need people who are strong with the fundamentals, but not those that rely on five years’ of data before deciding what to do next. If you’re relying on what happened five years ago, you’re way off pace.
My last 24 hours
I spent time yesterday with our global travel team for airports and duty free. They put some good ideas on the table. They realised that our core brands are potentially more likely to be chosen as a thoughtful gift than other products such as perfumes.
This concept is based on the idea that if you buy booze as a gift for somebody, you have the knowledge that they might open the bottle during your visit and share some of it with you. That might affect your choice of drink as you will buy something you think the recipient might like but that you know you love. There are all sorts of marketing and package design ideas we can play around with if that is true.