Diageo credits marketing for delivering GB’s return to growth

Diageo credited the “exceptional” campaigns for Guinness and Captain Morgan for helping return sales across Great Britain to growth for the first time in several quarters as its efforts to drive marketing efficiencies across Western Europe started to take effect.

Guinness-Product-2014_460
Guinness saw volume and value share grow in GB.

The drinks maker posted a 1 per cent increase in sales in the six months to 31 December in Great Britain despite reducing marketing spend across the region to focus on strategic brands.

The performance was buoyed by Guinness gaining volume and value share in the period, although Diageo says its overall performance remained flat in a declining beer market. Captain Morgan “performed well” according to the business, off the back of its “Live like the Captain” campaign.

It also hailed increased marketing investment for Bailey’s and Johnnie Walker over the festive season for contributing to its growth.

A 2 per cent sales drop for Smirnoff dented Diageo’s total revenue but the company says there are signs of “improved momentum” for the brand. It is banking on the recently launched Smirnoff Apple Bite and Smirnoff Gold products to drive demand as well as the arrival of a revamped global marketing strategy penned for later this year

Western Europe revenue was up 1 per cent year-on-year in the three months to December with the group claiming its switch in focus from small-scale promotional-based activities to scalable activations saved it money across the region. North American sales rocketed 4.6 per cent over the same period.

Ivan Menezes, chief executive of Diageo, says: “While our marketing reinvestment levels are broadly flat, Western Europe is now applying the learning from North America to drive further efficiency in marketing spend and increasing the amount we spend on media.

“We continued to invest in the business increasing marketing spend ahead of net sales growth and keeping our strong focus on innovation and route to consumer improvements.”

The results will give Diageo confidence for the rest of 2014 after its half-year sales fell short of analysts’ expectations. Slowdowns in key markets such as Asia and Nigeria meant global sales rose only 1.8 per cent in the period.

To accelerate growth, Diageo announced plans to cut costs by £200m annually over the next three years. The measures were first hinted last November when Menezes outlined six drivers of expansion to extend the reach of its brands.

He adds: “This clarity of focus at a market level enables me to take the changes I have already made to the operating model to the next level. Over the next two months we will set out detailed plans to simplify our processes and de-layer our organisation. This will create a more agile, accountable and effective organisation to deliver our performance ambition.

Diageo were unable  to provide further detail on how the changes would affect its marketing structure and activty by the time this article was published.

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