Drinks giant Diageo is gathering past and present insight from its markets around the world to understand how best to tackle the challenge of inflation across Europe.
Inflation is a growing concern for businesses as inflation hit its highest rate in 29 years this week, with the Office for National Statistics (ONS) reporting price inflation of 6.2% in February and worse yet to come. Brands are now faced with the challenge of navigating rising costs while consumers have less spare cash to spend.
While in the UK and Europe this kind of inflation has not occurred in recent times, there are parts of the world where it has been an ongoing reality for many years, Diageo CMO Cristina Diezhandino said today (24 March) at the Festival of Marketing: Transform.
As a global company, Diageo can therefore extract learnings from the things that worked for its brands during high levels of inflation in regions like Latin America, and apply them to the current situation in Europe.
“One possibility in our hands is to really go back and see what happened,” she said. “How did we do it when this happened in that part of the world?”
Diezhandino acknowledged that rising costs is a key issue for marketers at the moment, and inevitably, these rising costs will have to be reflected in the prices passed onto the consumer.
Consumers are more likely to accept these price increases from premium brands because these are viewed as “special” or “treats” already, she said.
Diageo has been on an ongoing mission to invest further in its premium portfolio. In 2015 the company purchased luxury tequila brand Don Julio while selling off its wine brands for $552m (£411m), later acquiring Casamigos in 2017.
How do we make our presence in ecommerce as experiential and powerful as it is in any other channel?
Cristina Diezhandino, Diageo
Diezhandino also emphasised the importance of the relationship between brand and consumer. If rising costs result in price increases for consumers, the ability to lean on that relationship will be extremely important, she said.
“The brand strength or equity that says consumers feel this brand is worth paying more for is going to serve you really well,” she added.
In its own portfolio, Diageo has brands that have existed for hundreds of years, such as Guinness (established in 1759) and Johnnie Walkers (established in 1820). Diezhandino noted that often consumers have a long-lasting “phenomenal connection” with these brands.
Data can be a key tool in enhancing these relationships, she said. Diageo utilises tools like econometrics and predictive analysis to try to understand more precisely where it should direct its investment.
Selling an experience
For Diageo, its strong consumer relationships will be key to withstanding the challenges that inflation brings, Diezhandino said, noting that these relationships are directly tied to the consumer’s experience of its brands.
That includes their experience in ecommerce channels, an area in which Diageo has been expanding. While ecommerce has traditionally been a small channel for premium spirits, it accelerated during the pandemic out of necessity, she explained.
As pandemic restrictions ease, ecommerce continues to be an important channel for the business. Diageo has a significant presence across third-party ecommerce channels, as the largest seller of spirits on Amazon in Europe, a leading supplier to Uber-owned drinks delivery platform Drizly in the US, and the company behind 26% of whisky sales on Chinese platform T-Mall.
“The question for me…is how do we make our presence in ecommerce as experiential and powerful as it is in any other channel?” Diezhandino said.
She pointed to a recent partnership between the company’s gin brand Tanqueray and Netflix period drama show Bridgerton. The partnership sees the brand release cocktail recipes designed to be served in teacups, as well as limited edition themed cocktail kits.
These kinds of campaigns are designed to “speak to an occasion” Diezhandino said, adding that Diageo’s goal is prioritise the consumer’s experience even when the purchase is done online.