Diageo halts ‘ineffective’ ad spend due to coronavirus
The drinks giant is reallocating resources across the group “as part of mitigation measures” as the on-trade is hit by lockdowns.
Diageo is halting all current advertising and promotional spend that “will not be effective” in the current coronavirus crisis.
The drinks giant is reallocating resources across the group “as part of mitigation measures” as the company sees detrimental effects due to on-trade closures across the world.
It added that it would be deferring discretionary capital expenditure projects, while providing “an appropriate level of support to our key suppliers and customers” to ensure its strongly positioned for a recovery when consumer demand returns.
A spokesperson for the company tells Marketing Week: “While everyone navigates the unprecedented challenges caused by the Covid-19 pandemic, we do not think it is appropriate to proceed with some of the marketing we had planned. Our primary focus remains the welfare of our employees, their families and our communities and we will continue to provide as much support as possible.”
Diageo did not expand on what teams would be affected by the changes or what spend precisely was being cut.
Despite a rise in drinking at home, drinks company are being hit by the closure of pubs and bars.
In Europe, the on-trade accounts for approximately 50% of Diageo’s European net sales, although the size of the channel varies significantly between individual countries. It is also unclear if the pick up in the off-trade will be sustained.
Despite this, Diageo says that given the pandemic’s global and uncertain nature, it is “not in the position” to accurately assess the impact on its future financial performance yet.
Diageo CEO Ivan Menezes says: “I am confident in Diageo’s long-term strategy and our ability to move quickly in this difficult environment. We will continue to execute with discipline and invest prudently to ensure we are strongly positioned for a recovery in consumer demand. I am proud of the resilience and commitment of our people as they work hard to support our partners, customers and communities.”
The most profitable part of the spirits business was always duty free. Travellers having a propensity to spend their money on the premium brands such as Smirnoff, Gordons, Bombay, Tanqueray, Jamesons, Jack Daniels, Remy Martin etc (what a great business!).
With airports closed, cruise ships tied up and ferries confined to freight, this business will now be non-existent. The good news is that consumer inventories will need to be refilled once the lockdown ends.