Diageo ‘realigns’ marketing team as it focuses on driving efficiency of marketing spend

Diageo will ensure “discipline” and “productivity” are key when allocating marketing spend as it looks to drive long-term growth after a “challenging year”.

The drinks maker, which owns brands including Guinness, Johnnie Walker and Baileys, saw volume sales decline 3.5% in the year ended 30 June. Reported net sales for the year were $20.3bn (£15.76bn), down 1.4%. The business was particularly challenged in its Latin America and Caribbean segment, where volume sales were down 21% year on year.

Speaking to investors today (30 July), CEO Debra Crew partly attributed the financial performance to a “cautious consumer” following a period of high inflation and tough comparators from the pandemic era when spirits saw strong growth.

Diageo CFO: Growth requires ‘sustained’ marketing investment over several years

Crew stated Diageo is a business being run “for the long term” and that despite these challenges it is confident it has the brands, organisation and people to succeed.

It is taking actions to ensure that, when the consumer environment does improve, the company can return to growth, she said. For example, the business is evolving its approach to insights, rolling out a Consumer Choice Framework, designed to deepen understanding within the business of occasions and motivations.

“We are realigning our marketing organisation into agile brand communities to quickly action against these insights to drive quality growth,” Crew said.

Diageo is also looking to step up the efficiency of its marketing spend, as well as aligning it to consumer insights. The company will “maximise consumer-facing” advertising and promotional spend, while “driving accelerated productivity and allocating resources with discipline”.

Marketing spend ‘flat’

Diageo has already been able to make “productivity” decisions on its marketing spend, something which it says enabled it to invest behind “key growth opportunities” and hold advertising and promotional spend “flat”, despite a drop in sales

In the year ended 30 June 2024, Diageo spent $3.69bn (£2.87bn) versus $3.66bn (£2.85bn) in the year prior. While the drinks giant has not cut marketing budget as such, this marks a change compared to previous financial years, where it had upgraded marketing spend significantly. For example, last year, it upped marketing spend by 6% compared to the year before.  In 2022, marketing spending was increased by 24.7%.

Diageo has upped marketing spend by almost £1bn since 2017

However, these investments were made at a time when Diageo’s net sales were also growing strongly. In 2023, sales grew by 6.5%, while in 2022, they increased by 21.4%.

The drinks firm’s levels of marketing investment is still significantly above what it was just a few years ago.

The business cut marketing spend in regions where consumer demand was weak, notably Latin America and the Caribbean. In Europe, it increased marketing spend by 4% as consumer demand was more resilient.

In Great Britain specifically, Diageo grew net sales by 5%. Guinness was a key driver of this, in both the on- and off-trade, the company reported.

Guinness’s success in the region was driven by innovation, marketing and “surgical” pricing, it added.

Diageo: We will not pursue ‘short-term’ market share growth at expense of brand equity

Diageo chief financial officer Lavanya Chandrashekar detailed how the brand had “smartly managed” pricing. Price and mix was up 14% for Guinness in Great Britain, but volume sales continued to grow strongly at 18%. This was supported by an increase of marketing investment for the brand by 14% in the country, she said.

Guinness recruited more consumers in the financial year through its approach to marketing, CEO Crew added.

“One significant way we recruited more Guinness consumers in Great Britain was tapping into consumer passion for the brand, inviting them to partner with us to co-create content and shape the brand through our “community-first” marketing model,” she stated.