Diageo slows new product launch rate as it reaches ‘peak innovation’

Diageo is slowing the pace of innovation as it looks to foster current products and ensure that launches make a bigger impact.

Speaking today (2 July)  at an innovation event hosted by the company, Michael Ward, Diageo’s global head of innovation, said: “We are actually doing less innovation now than three or four years ago and that is quite simply because of the strength of our ideas in our pipeline. [They] are delivering most of what [we want] and that allows us to be more choiceful.”

While new product launches may have slowed, Diageo is ramping up marketing spend to ensure it makes the most of innovations it already has in the market. Scaling spend while slowing launches is part of a three-pronged consumer-centric strategy that aims to hone innovation around “recruit, re-recruit and disruption”.

Recruit is at the centre of Diageo’s innovation plans, with more than half of its new products focused on attracting new consumers – a “major shift” from a couple of years ago.

Ward explained: “There is no point having a recruit project that is only bringing in a few new consumers, we need to be doing things on a scale that really matters.”

He adds: “By having recruit at the heart of our pipeline – that is products that are coming out -we are operating at an ambition towards scale. What that means is when we are doing big recruit launches, you have fewer of them but you want to have a bigger difference.”

The second area of re-recruiting aims to engage existing drinkers to ensure loyalty. Its purpose is to create excitement around existing brand fans, for example with new products like Baileys Strawberry and Cream. The limited edition drink is available in the UK and Europe to coincide with the summer and offer the opportunity for Bailey’s drinkers to enjoy the brand on more occasions.

The last branch of the strategy is disruption, which aims to focus on longer-term trends. Ward explained: “[It’s about] being more experimental – test, learn and iterate – as we’re looking at the longer term opportunities that are not necessarily going to help us next quarter, or next year.”

He adds: “One of things we are trying to do with disruption is plant a lot more acorns that we think can become oaks but doing it in a much more thoughtful, patient way.”

This “ying and yang“ of disruption and recruitment has created a dual mandate for Diageo’s innovation team, which Ward argued means its new product pipeline is “stronger now that it has ever been”.

Despite this, he admitted that the drinks giant is at “peak innovation” and is choosing to focus on products that can have a sizeable impact, rather than smaller trends.

Ward said: “When we think about a recruit-driven pipeline, it is very advertising and promotion (A&P) intensive so we need to be very thoughtful about how much A&P we are putting into the business and future business and balancing that.”

He is clear that while innovation is solving issues that “great marketing and commercial executions cannot”, marketing needs to be the heart of all innovation.

He concluded: “We are kindred spirits with marketing as all of that needs to fit together in a deeply integrated way.”