Diageo manages a broad range of brands across several categories. It manages eight of the world’s top twenty premium spirits brands, including Smirnoff, the number one brand by volume and Johnnie Walker, the number one brand by value. In beer, Diageo owns the only global stout brand, Guinness, and a range of lager brands sold primarily in Africa. Diageo’s wine brands are sold predominantly in North America and Great Britain across a full range of price points.
Diageo is a global company with its products sold in more than 180 markets around the world. In the developed markets of North America and Europe, Diageo has built scale and strong routes to market. Diageo is also the number one international spirits company in the emerging markets of Africa, Latin America and Asia. These rapid growth markets now comprise approximately one third of Diageo’s net sales, up from 22% in 2005. Through continued organic growth driven by infrastructure investments and targeted acquisitions, these markets are expected to contribute 50% of Diageo’s net sales by 2015.
In the majority of markets, Diageo’s brands reach customers and consumers through local teams with strong local expertise and networks. In countries where Diageo has not established its own subsidiary, it looks to expand organically through business partners and third party distributors. Diageo is also committed to explore opportunities to expand geographically through acquisitions, within its financial criteria. The acquisition of companies with strong local routes to market and brands that appeal to the growing number of middle class consumers are particularly appealing. The acquisition of Mey İçki in Turkey and the investment in ShuiJingFang in China are two examples of this strategy in action.
Diageo combines the benefits of global scale with local insights into consumer trends and behaviours to deliver world class marketing campaigns. For example, the Keep Walking campaign on Johnnie Walker has been running globally for over 10 years, based on the universal appeal of personal progress. The marketing campaign is true to this insight although the local creative executions look different around the world. Likewise, consumer insights inform Diageo’s innovation launches and pipeline. The premiumisation of scotch to appeal to consumers of luxury brands and the development of ready to serve cocktails as at-home consumption increases have been particularly successful.
Diageo is also focused on driving category growth with its customers through shopper insights. The sales ambition is to win at the point of purchase. The ‘Diageo Way of Selling’ programme equips four thousand salesmen with best practice tools and processes. It builds capabilities in sales execution, customer service and the efficient use of trade investment so that Diageo becomes an indispensable business partner to its customers.
Diageo is committed to building a sustainable business across its value chain through its Sustainability & Responsibility’ strategy. The way in which Diageo promotes a positive role for alcohol in society; respects the natural resources, communities and people it relies on; and champions a culture of good governance and ethics are all important drivers of growth. The company and its employees are proud of the responsible manner in which its brands are marketed and the positive role that moderate consumption of its brands plays in the lives of many people. Diageo seeks to be at the forefront of industry efforts to promote responsible drinking and works with other stakeholders to combat alcohol misuse.
Diageo recognises that it operates in a world where many of the natural resources that the business relies on, such as fossil fuels and water, are limited. In 2007 Diageo set highly challenging environmental targets covering water efficiency, the reduction of carbon dioxide, polluting power of water and waste-to-landfill, and in 2009 Diageo expanded these to include the sustainability of its packaging. Measuring and managing its environmental impact is not only important for the planet, it is essential for the financial sustainability of Diageo’s supply chain and its business.
Diageo is also proud of the positive impact it has on the communities in which it operates. For example, from its start in 2007, the ‘Water of Life’ programme has brought clean and safe drinking water to millions of people in Africa. In Latin America, the Learning for Life programme provides vocational training and has directly transformed the lives of tens of thousands of young adults. Diageo also recognises that the way in which it conducts its business, treats its people and works with local stakeholders can have an impact on community development.
Diageo believes that industry leading performance will be delivered through great leadership. The Diageo Leadership Performance Programme builds leadership capabilities and creates the conditions for all employees to grow and perform at their best.
Market participation
Since 2005 up to the year ended 30 June 2011 Diageo managed its business through four regions: North America, Europe, International, and Asia Pacific. The North American region, comprising the United States and Canada, accounts for the largest proportion of Diageo’s net sales and operating profit. Europe is comprised of Great Britain, Ireland, Iberia, Northern Europe, Southern Europe, and Russia and Eastern Europe. The International region is made up of three business units: Latin America and the Caribbean (including Mexico), Africa and Global Travel and Middle East (GTME). The Asia Pacific region comprises South Korea, Japan, the People’s Republic of China, India and other Asian markets, Australia and New Zealand.
In the past financial year roughly two-thirds of net sales were derived from developed markets (mainly North America and Western Europe) and one-third from emerging markets (mainly Latin America and the Caribbean, Africa and Asia Pacific). In 2005 approximately four-fifths of net sales arose in emerging markets and one-fifth in emerging markets.
During the year ended 30 June 2011 the group reviewed its operating model across its businesses and commenced a restructuring programme that is expected to be fully implemented by 30 June 2013. The main objective of the programme is to improve the effectiveness and productivity of the group’s operations and to deploy resources closer to the market and in those geographical regions where the potential for growth is greatest. This review will result in changes to the group’s regional structure and the way it organises its central functions. The principal countries impacted are the United Kingdom, Ireland and the United States.
On 25 May 2011 Diageo announced that the International region from 1 July 2011 will have two autonomous regions: Diageo Latin America and Diageo Africa. The Global Travel business will be divided and each specific duty free operation will be allocated to the market of the geographic region where it is located. The Middle East business will become part of Asia Pacific.
Product offering
Diageo classifies 14 brands as global strategic brands: Johnnie Walker, Smirnoff, Baileys, Crown Royal, Captain Morgan, Jose Cuervo, J&B, Buchanan’s, Windsor, Ketel One vodka, Cîroc, Tanqueray, Bushmills and Guinness. These brands are the main focus for the business and 78% of the group’s marketing spend supports these brands. In aggregate, for the year ended 30 June 2011, they comprised 66% of Diageo’s net sales.
Brand performance for the year ended 30 June 2011 is now reported for the 14 strategic brands above which replaces the brand performance reporting of eight global priority brands disclosed in prior years and reflects the way the brands are managed.
Business effectiveness
Over the long term, Diageo’s strategy continues to focus on driving growth and increasing shareholder value.
