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Introduction
Paul Walsh talks about the strengths of a great mix
Transcript
F09 was an extremely challenging year, and what emerged was a complicated picture the world over. In such circumstances it's important in business to have a wide range of brands and markets which you can flex dependent upon the market conditions you face in a particular place or moment in time.
At Diageo we're fortunate to have built a great mix of strengths and resources which we can count on to help us grow our business whatever the economic circumstances. Since Diageo was created we've endeavoured to understand what our consumers want and to respond quickly to changing trends. We've developed methodologies to give us the insights we need, and these have never been more important than in the past year, where agility has been key in a world which changed month by month.
In recent years we've also researched shopper behaviours in store, getting under the skin of what drives decisions at the moment of purchase. We use that data to work with our customers to grow sales – a win/win for both parties.
We have a great supply organisation within Diageo, and they drive our effective and efficient routes to market. Their work is critical to our success for two big reasons. The first is that we're able to get our products to where we need them to be, quickly and in a way which minimises cost and supports our customers. The second is that it underpins our agility as a business, our capacity to be able to change tack quickly and meet a consumer need wherever it may be in the world. The work they've done with Scotch whisky is a prime example of where we've made this particular issue work for us.
The continuing development of a world–class marketing capability is critical to our success. We're fortunate to be the stewards of some of the globe's most iconic brands, and we put a lot of focus on continuing to build consumer appeal for those brands. As well as growing global brands, our marketers are also adept at driving local priority brands. We flex to the market need.
We strive to develop our marketing capability with creativity and flair, exploring new ways to make a consumer connection. And our work in the digital arena over the past few years has been exciting and externally recognised as being so.
Our collection of brands is truly outstanding, and we have world leaders across virtually all categories of beverage alcohol, of which we are rightly proud. The great strength of Diageo, however, is the depth and diversity of our range within categories – across price points and brand position.
Within vodka, for example, Smirnoff, Ketel One and Ciroc cover all the bases when it comes to what the consumer wants. We have the range to capture the consumer wherever he or she goes.
We all have seen great strategic thought come to nothing because of poor execution. In Diageo we attach as much importance to driving excellence in tactical planning and delivery as we do to thinking and strategising. Striving for brilliant execution in everything we do means we become more efficient year on year, deliver against our goals, and it makes us better partners to our customers and suppliers – and that's a prize worth having.
The quality of leadership is a defining competitive differentiator for companies in the 21st century. We have invested considerably in the development of our leadership population, and we are seeing the benefits of that in terms of business performance. We want every leader in our business to inspire his or her people, and this has never been more important than in these challenging times.
Diageo in 2009
Nick Rose, chief financial officer
Transcript
Well, 2009 was a challenging year as a result of the economic environment. We saw changing consumer patterns through the period and a significant amount of destocking within the wholesaler and retailer channels.
Saying that, our position as the leading full–line beverage alcohol company gives us the brand and category range to respond to changes in consumer and customer demand. Therefore even in the tough environment we've been resilient. We held net sales constant in organic terms, and we delivered 4 percent organic operating profit growth.
At a reported level both net sales and operating profit benefited from foreign exchange tailwinds, particularly the strength of the US dollar and from our brand additions.
In line with our expectations, we achieved 10 percent growth in reported EPS, even after taking the £170 million charge for restructuring. Cash flow remains strong at £1.2 billion, from which we were able to distribute dividends and buy back some shares in the first half. And overall we returned £1.2 billion to shareholders in 2009.
Diageo entered the economic downturn in a strong financial position. We've managed our balance sheet with discipline to maintain its strength through this tough period. That said, we were quick to act in order to preserve the operating margins in the business. In February we announced our intention to restructure. We completed the actions necessary by the end of April and drove £120 million of savings by June – a benefit in this current fiscal year.
As you would expect, we will continue to assess the cost structure and seek efficiencies throughout the business to maintain margin performance. We believe an A credit rating is appropriate and continue to target strong cash flow generation. Not only does this enable us to weather any economic turbulence but it would allow us to move quickly should any opportunities arise to enhance our business.
As we enter this year we continue to see it as a challenging environment. The first half is likely to see reverberations of the economic downturn on consumer demand. This will be exacerbated by the fact that performance will be lapping some strong first–half numbers from the previous year.
The underlying consumer desire for premium brands remains a constant, but of course it is impacted by the current economic downturn in the short term. However, the long–term trend for consumers to aspire to branded consumer goods remains valid in mature and emerging markets.
We'll continue to leverage the core strengths of our business, the range of our brands, our global reach and our ability to respond to consumer trends, to manage risks and access opportunities in our markets.
The confidence in the strength of our business is reflected in the 5% increase in dividend that we're recommending.
Indepth consumer and customer understanding
New engagements with consumers
While Diageo enjoys a collection of outstanding brands that generates loyalty among its consumers, we always aim to attract new interest in our brands and keep them relevant and exciting to existing consumers. Consumer needs are constantly changing, and the insights and knowledge, which we have spent time collecting and understanding, mean that we are agile and effective in responding to those changes.
As an example of this, we have developed a programme with Jose Cuervo Tradicional that uses the Mexican national soccer team to reinforce our messages around social responsibility in the United States, while also broadening the brand’s visibility to the key Mexican American market.
The slogan "A Mexico lo llevas puesto siempre" translated "In Mexico you always have it on" imprinted on the shirts of the players, communicates key messages around responsible drinking, but also advocates to Mexican Americans to live responsibly within their respective communities.
Using effective media outreach in markets where games were actually being played and in key metropolitan centers where we held private viewing parties in the on–premise, some tremendous results were achieved during the year.
As we approach the FIFA World Cup Finals in South Africa in June 2010, we anticipate this sponsorship platform will deliver even more.
Being at the forefront of new media marketing
Diageo is spending more in the media channels that are becoming more relevant for today's consumers. Digital media, in particular, is becoming a more efficient and effective way to interact with our consumers.
In 2008, Smirnoff.mobi brought a feature rich mobile phone site, to consumers on the move, In 2009, Smirnoff launched 'BE THERE', its new global movement – a shift in behaviour and a new way of marketing for Smirnoff, with a bigger emphasis on digital than ever before. 'BE THERE' is a rallying cry from Smirnoff calling on others to create, seek out and participate in more extraordinary one–of–a–kind experiences.
'BE THERE' is strongly content driven – without input from Smirnoff and consumers alike, the idea cannot thrive in the digital space and continue to ignite consumers' imaginations. Through content and collaboration, the Smirnoff brand creates a two–way conversation with consumers so they can socialise.
Harnessing digital technology such as Twitter and Facebook fosters this new reciprocal communication, as consumers can "follow" Smirnoff and its celebrity associates, and post t heir own ideas. In addition, consumers can visit the brand's hub, Smirnoff.com, where they can find merchandise, download exclusive audio and editorial content and, of course, post their own content – all in the name of creating 'THERE'.
As an integrated digital strategy that goes beyond linear ad campaigns consumers are encouraged to 'live' the idea, to define 'BE THERE' with Smirnoff and become part of the movement.
Transcript
Smirnoff has taken advertising into the digital age with the launch of Smirnoff Mobi, a feature–rich mobile phone site.
Consumers can watch the latest Smirnoff advertising,or learn how to make their favourite drinks at home with the pocket bartender.
The nightlife guide provides bar and club recommendations complete with maps so that consumers can find their way.
With tons of other useful features, Smirnoff Mobi really is at the forefront when it comes to the next generation of digital marketing.
Agile in response to changing consumer dynamics
We have stepped up our innovation efforts to capture the at–home occasion as increasing numbers of our consumers forgo bars and restaurants to entertain in their homes. In the first half of the fiscal year we started a test of "Simply Cocktails" in North America – a retail initiative which uses shopper insights to develop a comprehensive merchandising solution that organises cocktail ingredients as a complete range, spanning from the ready–to–serve to the sophisticated ingredients and spirits that are needed to make a great cocktail.
The pilot has been extremely successful, contributing to good sprits growth and gaining strong consumer acceptance with 80% agreeing that the initiative enables 'ease of shop' and 'ease of making cocktails'. As a result, we plan to roll the programme out across a further 34 states and 1,800+ stores in Q1 of F10.
Building category participation
Traditionally the marketing of spirits products has focused on differentiation within a category, achieved through innovative packaging and sophisticated advertising. As consumers have been shifting their spending patterns with a skew to the off–trade, Diageo recognised that there was an opportunity to work closer with customers to educate consumers about categories, and help them to make informed choices across categories.
An example of the success of this is at Moët Hennessy Diageo, our venture in France, where the company has been awarded the 'Mètre d'Or 2008' regarded as the ultimate recognition for the best merchandising strategy and implementation in France. The marketing and sales teams promoted 'Terroirs d'Ecosse' across the supermarket channel, aimed at helping French consumers understand the multi–faceted nature of Scotch whisky. Nielsen research shows a +10% value increase overall for the malt category and an increase of 20% for Diageo Single Malts.
This has also led to a better working relationship with French retailing giant Groupe Carrefour. Diageo has been chosen to work with Carrefour on its 'Business Development Programme' in its principal European markets. The programme aims to improve business results through deeper collaboration with key suppliers.
'This initiative is bold, innovative and has achieved outstanding results.' François Perodeau, President Institut Français du Merchandising.
Elsewhere, one of Diageo's greatest successes has been the introduction of the Malt Whisky Flavour Map – a method of dissecting Scotland's prominent malt whiskies – both Diageo and competitor spirits – into easily identifiable taste profiles. This, together with food suggestions, an overview of the distilling process, and some history of the industry, helps Diageo and the customer to target shoppers better.
Highly effective routes to market
Intouch – driving brilliant sales execution
The Diageo Way of Selling is our global sales transformation programme to increase sales productivity, put measures in place to manage sales better and build amazing relationships with our commercial partners. The team is equipping our sales people with what we think are the right tools to win in the current environment, and to be more effective in every sales call.
For example, through our Intouch project, we're rolling out handheld tools in select markets so our sales force has all the information they could possibly need at outlet, while building capability in our proven Diageo eight step sales call. The initiative will allow us to gather fast and reliable information, simplifying and improving our ability to make commercial decisions. We believe Intouch will be key to future growth at Diageo, allowing our sales force to spend more time with customers, out–execute the competition, and remain agile enough to stay ahead of our competitors.
Intouch was piloted in our Taiwan market with proven results, providing us with a better understanding of our customers, and helping capture and analyse customer information and increase sales profits. So far Intouch has reduced time spent on administration tasks by more than half for the sales representatives, and the Diageo Way of Selling team is confident this will reduce even further as all new Intouch processes are embedded.
Once deployed across multiple markets Intouch will make a significant contribution to Diageo and result in a win–win situation in the years to come for Diageo and our customers. This is just one of the Diageo Way of Selling projects that makes us confident we can be as famous for our customer focus as we are for our brands.
South Africa – a bespoke approach to total beverage alcohol
Our approach to new and exciting markets is not always by establishing a Diageo business in country. We always look at the best platform from which to build our brands and reach new consumers, and quite often that means we take a different approach to each opportunity.
South Africa represents a good growth opportunity for total beverage alcohol. It is ranked the 15th biggest TBA market in the world by volume and is predicted to grow in value by 7% CAGR to 2015. It is known for being a 'beer market' but is also the 5th largest Scotch market by value and one of the biggest ready to drink markets.
In 2003 we teamed up with Heineken and Namibian Breweries to create brandhouse – a cost–sharing sales, marketing and distribution initiative – to target the emerging powerful middle class consumer group and to tap into the growing demand for premium brands. This provides a powerful vehicle to offer customers the best of all three companies in terms of service, experience and, importantly, a range of over 40 spirits, beer and cider offerings including some of the world's most iconic brands.
The results have been impressive. Since inception, brandhouse has driven strong performance, delivering volume growth of +12% (CAGR), net sales growth of +25% (CAGR), and gaining 12.6 percentage points of share in the premium beer segment in the 12 months ending May 2009 (according to Nielsen). Brandhouse share of premium beer is 54.6% in the last 6 months. Brandhouse also continues to attract the best talent, winning the prestigious 2008 Deloitte Best Company To Work For Award.
During 2009, Diageo, along with Heineken, announced the building of a new greenfield brewery and bottling facility in Gauteng province which will supply the majority of the beer, RTD and cider products along with NBL's Windhoek beer and Diageo's RTD facilities. With construction well under way, first production is expected to reach market later in calendar 2009.
Transcript
Okay, guys, welcome to the J&B Jet Lounge! As you can see, it’s an absolutely upmarket place. It’s absolutely one of the examples that we are proud of as brand house here in South Africa. Don’t only have J&B Jets – we have Bushmills, got Ciroc, and I’ve got Tanqueray here, Tanqueray 10, Johnnie Walker here.
As you can see, the bar is pretty much in keeping with what the brand stands for – the whole kind of scheme black and red. We’re very proud to say that the guys have tripled their sales of J&B Jet since opening this lounge here. That’s really a fantastic return on this investment.
Outer Limits is more of a cocktail lounge–type vibe. Putting an investment into cocktails helps us be the brand that’s poured, that’s the main ingredient in the cocktail. When a person walks through the door, the first thing that they must see is our brands. We educate our barmen so when people ask questions about Smirnoff, they’re able to give them sound advice, all the critical information about the brand, what the brand stands for. And when they ask for it, it’s absolutely critical that it gets presented in exactly the right way.
What’s exciting about this is we’re really leading the way in terms of the whole cocktail revolution that’s going to happen in this country. And basically watch South Africa – see what’s going to happen!
This is the Johnnie Walker Bottle Keep program. Basically what it does is it allows customers an opportunity to buy bottle sales in an outlet. You know, they don’t have to finish the bottle; they get their own lot of keys and their own space in the cabinet, and they keep their bottle there. It’s kind of really a nice and special touch. It really makes the customers feel special, which is in keeping with what Johnnie Walker stands for as a brand.
As you can see, it’s a pretty upmarket top outlet. It really could be in downtown Johannesburg, but it’s right in the middle of a township. I think what it does is it typifies this whole shift that’s happening in South Africa: you’re finding more premium outlets opening in the townships. And people really aspire to come to places like this.
We show the guys, you know, how to serve our brands. We give them the support tools that are going to help them serve our brands correctly and make their outlets look nice and decent.
In the end, if you invest in mutually beneficial relationships, you are going to win.
Delivering quality brand experiences
Sometimes it is simple actions that can have a real impact on routes to market and, ultimately, on consumers' experiences of our brands. Africa's climate and infrastructures mean getting cold beer and RTDs to the end consumer is often more difficult than in other markets. The availability of cold products is a key growth driver across Africa, but often customers cannot afford the necessary equipment to keep their products cool.
Throughout the year Diageo has invested in branded refrigerators to support customers who are often unable to afford the capital outlay. As a result of this strategy we expect double–digit volume uplift in an outlet where our products are served at the perfect temperature. Investing in branded equipment also delivers great in–outlet visibility. Already, in the last financial year we placed in excess of 15,000 chillers across Africa and our plan is to accelerate this programme going forward.
Global scale provides opportunities
Diageo's breadth and depth of brand range, along with its insight into consumer behaviours, often enable us to build upon strong brand positions in markets through innovation, opening up new segments to consumers.
Smirnoff is the leading premium vodka in Brazil, and a clear opportunity emerged to build on that position in developing a ready–to–serve caipiroska – a cocktail that has become popular in Brazil. In an easily accessible format, consumers know they are getting a quality product through the Smirnoff brand.
Transcript
Alvaro Garcia Junior: Caipirinha is the national drink in Brazil, and when it’s made of vodka it’s called Caipiroska. But not everybody really knows how to prepare it.
Smirnoff is the leading vodka, so the idea was kind of obvious, you know: why not create a ready–to–serve Caipiroska, you know, and facilitate consumers’ lives.
Bruno Scaranello: People like to drink it when they don’t want to lose time. When you are preparing a handmade Caipiroska, you lose a lot of time preparing and cutting the fruit.
Caipiroska Lemon was launched first here in São Paulo, and then we launched the two other flavours, Passion Fruit and Red Fruit. After this we did a rollout to the north–east region, which had never seen Caipiroska ever. We have carnival, we have several beaches, so they have lots of barbecues. The product fits very well. 44 percent of our consumers elected barbecue as the ideal occasion to drink our product.
Luciane Zanella: We started investing on massive distribution, and then samplings and cross–merchandising where the occasion for consumption, which is barbecue.
Bruno Scaranello: The website is the centre of everything, and we have more than half a million users. The real insight and the breakthrough thinking behind our website is that we’re providing services that are relevant to our consumers. We have a barbecue calculator where you put the amount of people that are going to your barbecue, what kinds of meat you want to serve, what kinds of drink.
Alvaro Garcia Junior: We believe that Smirnoff Caipiroska will have the same success that we have with Smirnoff Ice today. And in the future, we believe that some occasions like barbecues, events or warm–ups will definitely be associated to Smirnoff Caipiroska more than to beer.
Selective strategic acquisitions
While cash management and financial discipline remains key at Diageo, opportunities to enhance the business inorganically will be sought where it makes strategic sense and adds value to our business. Over the past year, we have met a number of our strategic objectives by taking a creative approach to identifying and integrating brands into our business. These brand additions – Ketel One vodka, Zacapa rum and Rosenblum Cellars wine – serve a variety of strategic functions; they have taken us into new markets and segments, they have augmented our current brand range, and we have structured them in a way that maximises value quickly.
In 2007, Diageo made a minority investment in Stirrings, a premium cocktail range which gave us access to this exciting space quickly in the United States. The success of the venture led us in June to take 100% ownership.
We have also invested in the profitable Chinese white spirits markets in Asia Pacific through our venture with ShuiJingFang. We anticipate expanding distribution into selected markets in North America and Europe in fiscal 2010. In addition its strong brand heritage gives us another platform for innovation. Importantly though, this investment will create value beyond distribution and sales by opening procurement and production opportunities in this important emerging market.
World class marketing capability
Introduction – Andy Fennell, chief marketing officer
Transcript
It’s been a year of great change for consumers in the way that they spend. We’ve had to be quick to identify these shifting consumer patterns, as they vary by channel and market, investing appropriately.
But above all, executing with the standards and quality we’ve become known for. We’ve had to become more agile, thinking wider, thinking faster, and also thinking smarter. Some of the great execution in the year has clearly demonstrated this, such as celebrating Guinness’ 250th anniversary and the success of Captain Morgan in the US and Europe.
It’s my profound belief that winners in this economic cycle, like any other, will be the brands that get the fundamentals of marketing right – the fundamentals of executing against genuine consumer insights with flair and agility, and to the highest standards in every market every time.
At Diageo we work with brands that have global resonance and great heritage. Those brands and businesses that get it right can weather challenging economic cycles and emerge stronger.
At Diageo we truly understand our consumers and convert these insights into commercial advantage. A great example is the accelerating trend of home consumption. Consumers might be staying at home more often, but they still want to enjoy the experience of a great drink, like that mixed by their favourite bartender! We’re focused on helping them to do that – so in–store initiatives like mix–it stands that put all of the right cocktail ingredients in one spot for the shopper, through to pre–mixed versions of a favourite spirit in new formats, like cans.
And when they do decide to go to a bar, we’ve worked hard to effectively position our brands to deliver the premium experience our consumers associate with them. And we know that consumers make careful choices about their spending in tougher economic times.
At Diageo we’ve been concentrating on a philosophy of spending smarter. More now than ever, consumers want to spend their hard–earned money on quality brands that they know and trust – brands like Smirnoff, Captain Morgan and Johnnie Walker. We’ve therefore prioritised our marketing investment behind our core premium brands.
The same is true of innovation. Consumers still want to try new things, but from the brands they already trust. Our innovation strategy has focused on bringing consumers new experiences through our premium brands, such as Smirnoff Flavours and Captain Morgan 100.
And we’re applying this approach everywhere around the world as we benefit both from Diageo’s global scale and proximity to local consumers and customers. We’ve spent time in creating a system to share best practice around the globe.
Smart Brand enables brand teams from all markets to create and apply common activities, reducing duplication and executing better.
We’re investing more in digital marketing, seeking new and exciting opportunities to engage with our consumers. A great example of this is our new global campaign for Smirnoff: Be There! We’ve implemented a 360–degree campaign – from outdoor advertising, to mobile phones, to social media sites. This project is at the forefront of brand communications, enabling us to connect with our consumers in new and exciting ways.
Of course, we’re also focused on extracting efficiencies where we can – such as maximising the benefit of media–rate deflation, making sure every investment counts, while continuing to safeguard the equity of our great brands.
But above all, our team are fantastic people and managing for the future, building our great brands through applying the fundamentals and a determination to win.
Innovating around core premium brands
We know that when times are tough, consumers are more careful about how they spend their hard–earnt money.
But that doesn't mean they don't want to enjoy great brands, to treat themselves with a really rewarding experience, and try new things.
It's a great privilege that consumers continue to genuinely trust our brands – they know that if they order a Smirnoff or a Johnnie Walker they are going to enjoy a quality experience, every time.
We've concentrated our innovation efforts in delivering new experiences through the brands that our consumers trust. These are our priority premium brands like Captain Morgan, Smirnoff and Baileys.
In Bristol in Great Britain we tested two new Smirnoff Flavours – green apple and lime – and focused on showing consumers how to mix these drinks for the best taste experience. The two flavours alone beat the competition, driving double–digit growth in the vodka category in the region. We are currently rolling the flavours out in all GB off–trade.
Consumers in the US savour the opportunity to enjoy a stronger taste experience. The introduction of Captain Morgan 100, which offers a deeper taste profile, particularly when mixed with cola, met that need.
Pre–mixed cans of favourite spirits and mixers have delivered the perfect serve in a convenient format for consumption at home – a trend which has accelerated in recent times. This new format is currently one of the fastest growing in GB at +13% and is worth £20 million in retail sales.
Executing in retail in partnership with customers
As consumers choose to spend more time socialising at home with friends and family, we recognised the need to make spirits a more accessible choice for at–home drinking, alongside beer and wine.
The first step is at point of purchase. We have worked with retailers across grocery and convenience channels to ensure that the shopper experience is geared towards making that choice simpler.
We're doing this differently in each channel and store, but solutions such as our Mix It! initiative have driven sales for Diageo, as well as our customers.
This solution gathers everything a consumer needs to make great drinks at home, from the spirit and mixer through to the ice and garnish, is in one place in store. Recipes and advice are also available.
There's more work to do, but Mix It! is a great step toward delivering higher share of voice for spirits in the off–trade.
Transcript
Diageo is working closely with retailers to optimize space in the supermarket. For example, low–level shelving allows shoppers to see the whole of the beers, wines and spirits section at a glance.
Spirits should be clearly divided into blocks, making identification far easier for the shopper.
Using written signposts, as well as images of the most iconic brand in each block also makes finding the product that the shopper wants much simpler.
Shoppers are motivated into buying total drinks experiences through stands that have all the ingredients needed, including mixers, fruit and ice.
The shopper is given further information on creating drinks at home by means of a touch–screen.
Finally, special Malt Whisky stands help the shopper choose what to purchase by giving taste information on the various brands, such as the level of smokiness, richness and so on.
All these introductions are designed to give a more informed choice to shoppers, so that they may enjoy an easier and more pleasurable shopping experience.
High quality brand experiences
Consumer's expectations of Diageo's premium brands are high. Diageo executes its marketing against genuine consumer insights with flair and agility, and to the highest possible standard to generate meaningful brand experiences.
The bar is one of the greatest theatres in the world and our commitment to developing, educating and inspiring bartending talent through World Class – our global bartender competition – is a true celebration and appreciation of great spirit brands and their heritage. Dubbed the 'Liquid Oscars', the year long global competition saw 6000 bartenders from 24 countries shake, stir and pour their way through national heats, with just 18 competing in a three day final in London in July. The winner from Greece claimed the overall title after showcasing his skills using the premium liquids of the Reserve Brands portfolio in six World Class Challenges, from Classic Cocktails and Canapé Pairing to Theatre and Cocktail Mastery.
Transcript
Ladies and gentlemen, please come and join us with our World Class bartenders!
Spike Marchant : World Class started with 6,000 bartenders in 24 countries, narrowed down to 18 contestants, who all came to London.
Marco Pierre White: What does make a great barman? In my opinion, it’s an individual who’s spent many years learning his craft. He has a great palate. He has a great technique. He understands balance of flavours. He works efficiently. And also he has a great personality.
Bartender #1: Keeping us on our toes is what we do as our job, so I think it’s a very realistic way of testing us.
Bartender #2: Six competitions, six teams on three days – never seen before.
Bartender #3: It really is world–class, yeah. I mean, things I’ve seen here I’ve never seen before in my life, I know.
Bartender #4: I think I’ve learned more in four days than I did in four years working at the bars.
Marco Pierre White: The World Class Bartender of 2009 winner is: Aristoteles.
Aristoteles: I can’t describe it. I’m very happy!
Salvatore Calabrese: The fact that they’re all looking after each other, they all talk with each other, they’re all proud. So that it was not just about a winner – it was about the whole event.
Spike Marchant: On this kind of level and this scale is a global recognition, an inspiration for bartenders. There’s nothing that’s come anywhere close to World Class.
Aristoteles: Yiamas!
Spending smarter
We're focused on making our marketing spend more efficient and effective, and we're doing this primarily in three ways.
In many markets and channels round the world we're experiencing media rate deflation. This presents an opportunity to increase our brands' share of voice, positioning them for growth as we move into the next phase of this economic cycle.
Our objective with all our marketing efforts is to ensure that our brands are relevant to our consumers. This means being present in the channels where our consumers spend their time, and engaging them with compelling content. With significantly increased broadband penetration we have been able to increase our global spend in digital channels, which has the added benefit of being cost effective.
As a result, our marketing campaigns are reaching our consumers in effective new ways, and in important markets such as the US we have increased our share of voice, while maintaining our leadership in share of voice across Latin America.
Finally, we're using Diageo's bespoke collaborative tools and fantastic marketing assets to make our work go further – by creating materials that work on a multi–market basis, or simply making sure our teams around the world have access to existing materials and can therefore implement with speed and agility in their own market.
Outstanding collection of brands
Guinness 250
In 2009, Diageo celebrates 250 years of Guinness. To mark this special anniversary – 250 years since the signing of the 9,000 year lease on St James's Gate in Dublin – a year long programme of celebrations is planned. Throughout the year Diageo will be giving consumers the chance to enjoy remarkable events and experiences. Continuing the brand's philanthropic tradition, Diageo is launching a new Arthur Guinness Fund, which will focus on supporting social entrepreneurialism. The centrepiece of the programme is a unique series of music events taking place on Arthur's Day (24th September), featuring some of the world's biggest artists and acts with celebrations taking place simultaneously in the on–trade in four cities around the world; Dublin, Lagos, Kuala Lumpur and Yaoundé.
Ketel One vodka
In June this year, Diageo and the Nolet family celebrated the first anniversary of their 50/50 company to sell, promote and distribute Ketel One super–premium vodka around the world. Combining generations of spirits distilling expertise from within the Nolet family with Diageo's marketing and distribution network, our first year has been one of integration and expansion – extending the global equity from a predominantly US brand to one available around the globe. We have worked hard in educating our sales forces and customers about the unique qualities and characteristics of this distinguished brand.
In May, we launched the first ever broadcast and online advertising campaign for Ketel One in the United States – 'Gentlemen, this is Vodka' – aimed at enticing the 'modern gentleman' to discover Ketel One.
The future is looking positive for Ketel One as we continue to build on fantastic US performance and look to take the brand out to the key growth markets in Europe, Middle East and Africa, Latin America, Caribbean and Asia Pacific.
Click here to see the Nolet family and Diageo North America President Ivan Menezes talk about the brand, an exciting first year working together and visions for the future, together with glimpses of the new campaign from the US.
Transcript
Bob Nolet: This is the first time we are on TV. The years before we only were in print, so a big step to go into TV – next step for the brand, we feel.
Gentlemen, this is vodka!
Ivan Menezes: There’s a tremendous fit between the values of the Nolet family and what they represent and the values at Diageo. And so it’s been a partnership that I can’t feel more proud about.
Carolus Nolet Sr.: There are many vodkas in the world, and they are all quality products, but I wanted one that was a kind of `Wow, this is something special!’ And that is exactly what it is.
Bob Nolet: In five years’ time I hope to travel somewhere, go into a bar and ask for, `What’s your best vodka?’ and they will say, `Ketel One is the one.’
Ivan Menezes: The real opportunity for the Nolets and us is to make Ketel One a truly global brand. Our teams are looking at putting significant focus behind this brand in twenty new markets. So Fiscal 10, I think, will be a terrific year for Ketel One.
Carolus Nolet Sr.: I’m really looking forward to the second year and the third year, because I’m sure we are going to be one of the best super–premium vodkas owned by a partnership of Diageo and the Nolet family. And this is going to be the super–premium brand worldwide, I’m sure.
Investment behind Captain Morgan growth
Captain Morgan had a strong year in 2009. The brand delivered 3% volume growth and 7% net sales growth, primarily as a result of investment behind proven growth drivers, expansion in new markets and focused innovation, built upon the strong equity of the brand.
In the United States, which constitutes the majority of the brand's net sales, Captain Morgan launched Captain Morgan 100 – an innovation designed to meet the changing tastes of rum consumers in the United States. Captain Morgan 100 was the largest spirit innovation launch in the US last year, according to IRI.
As demand grows for Captain Morgan products, work is underway on the construction of a new rum distillery to be built in St. Croix in the U.S. Virgin Islands (USVI). Production at the 20 million proof gallon capacity distillery will begin in 2011, and beginning in 2012, the distillery will supply all rum used to make Captain Morgan branded products for the United States.
The USVI programme is part of Diageo's continued investment in the rum category – an exciting prospect as we move forward. Captain Morgan confirmed its place as the number 2 rum in the world, and is complemented by our other brands in the category from Latin America – Pampero, Cacique and Zacapa, as well as Bundaberg Rum in Australia.
Bushmills celebrates a royal 400th anniversary
During the financial year Bushmills Irish Whiskey celebrated a significant date in the heritage of the brand – the 400th anniversary of the license to distill, granted to the Bushmills area. The celebrations commenced with the launch of a new special edition, Bushmills 1608. This award winning, limited edition whiskey is made via a groundbreaking process of distillation using crystal malt to deliver an exceptionally smooth taste. The anniversary programme also included the brand's first ever global advertising campaign, 'Welcome', featuring employees from the Old Bushmills Distillery, bringing to life the people, the place, and the craft of the distillers. In a fitting tribute to Bushmills and its legacy, the Old Bushmills Distillery also featured on new look £5, £10 and £20 notes – the first time in 18 years that the Bank of Ireland has re–designed its local notes.
Transcript
In 2008 Diageo celebrated the 400th Anniversary of Bushmills’ license to distil.
To mark the occasion, we launched the 1608 limited edition blend, we invited the media to join us on the Bushmills trail, and Irish Rugby Legend Keith Wood became the official Bushmills ambassador.
A special 400th Anniversary advertising campaign was launched and the Bank of Ireland showcased the Bushmills distillery on their new £5, £10 and £20 notes.
The BBC highlighted the anniversary by broadcasting live from the distillery and Louisville, Kentucky won the prestige of becoming Bushmills’ twin city.
Some of Bushmills’ biggest customers took the Bushmills trail and the distillery received some royal visitors.
The Bushmills team received the Outstanding Contribution to Tourism Award and the 10th copper still was installed.
All in all, Bushmills’ 400th year has been incredible. Here’s to many many, more.
Bell's Original
Bell's has been the UK's number one blended Scotch whisky for the last 30 years. In September 2008, we launched an updated liquid to replace the existing 8 year–old blend. With loyal followers, this was never going to be an easy undertaking. However Bell's Original was introduced with a recipe echoing one of the original Bell's blends from the 1950s. Created by master blender Jim Beveridge, the liquid has been praised by whisky experts for its quality and flavour. Arthur Bell, the founder, was brought to life as the brand icon for the first time, appearing on the bottle and giving consumers an emotional connection to the personality behind the brand and a historical touch point. The UK launch was also supported by a £4 million investment which included a new television advertising campaign featuring the spirit of Arthur Bell and direct mail–shot to over 250,000 loyal Bell's customers. The results speak for themselves – Bell's Original's net sales were up 12%.
Focused execution
Combining tradition and technology to achieve best results
Construction of the new malt distillery at Roseisle in Speyside, Scotland, saw huge progress throughout the year, with the distillery largely complete in early 2009. The new facility, which is Scotland's first major new distillery for 30 years, is part of a £100 million investment programme Diageo is undertaking in Scotland, and is a fantastic example of where traditional craft meets new age technology.
Built to meet forecasted international demand for scotch whisky, Roseisle will produce around 10 million litres of malt spirit a year. The first mature spirit become available in 2012.
The distillery features cutting edge green technology and the majority of the by–products will be recycled on site. Potential CO2 emissions at the distillery will be reduced by approximately 13,000 tonnes (equivalent to 10,000 family cars) through direct savings on fuel use for steam raising.
The renewable energy will be generated from liquid and solid by–products – a mixture of barley husks, yeast and water – produced during distillation and dust and rootlets from the maltings germination process.
Roseisle Distillery stillhouse features 14 copper stills crafted by Diageo's coppermiths at Abercrombies, Alloa. The design of the new distillery features traditional production methods, including best practice found at Diageo's 27 existing malt distilleries, and innovative new techniques.
Transcript
Roseisle – Scotland's first major new distillery for 30 years
Part of DIAGEO's £100 million investment in Scotch
Featuring cutting edge green technology
Majority of by–products to be recycled on site... to generate renewable energy
CO2 emissions will be reduced by around 13,000 tonnes
Mixing traditional production methods & innovative new techniques
Sustainable development – Water of life
Access to water is essential for sustainable development. It improves health and school attendance and creates economic opportunity, yet an estimated 400 million people in Africa lack this basic amenity. In response to a UN challenge to companies to 'adopt a Millennium Development Goal (MDG)', three years ago our businesses in Africa committed to set aside half of their community investment budget to provide one million people with access to water every year until 2015.
The Diageo 1 Million Challenge will make a significant contribution to MDG 7, which is to halve the proportion of people without sustainable access to safe drinking water by 2015. In Nigeria alone, we completed seven projects during the year to provide water to 450,000 people. Each project amounted to a mini water works comprising a deep borehole, storage tank, treatment plant and distribution network.
This year, our projects provided water for 1.56 million people in Africa, bringing the total number of beneficiaries from the 1 Million Challenge to date to 3.2 million. We plan a full independent study of the social impacts of the programme in the coming months.
Transcript
Nick Blazquez: We've chosen, my team and me, to bring water, improved water, to an extra million people this year that don't have access to water. It's not to benefit our business. We're not going to make money out of it. It's because it's the right thing to do.
Peter Ndegwa: As part of our business we have allocated 1 percent of our profits after tax to social activities, of which 50 percent is to water.
Sustainable development – Learning for Life
We support projects that help unemployed or disadvantaged people start new businesses or prepare for the world of work. Such projects contribute to economic development in the communities from which our employees, consumers and business partners come and so ultimately contribute to the sustainability of our business.
In Latin America we consulted widely before deciding how we could effectively tackle some of the most pressing needs in our communities. Alerted to the high levels of illiteracy and the proportion of school drop–outs in the region, our response was to devise the Learning for Life programme which we launched this year.
Learning for Life is a three–year scheme through which we aim to improve the lives of 50,000 disadvantaged people by providing them with the skills they need to participate and compete in society. The programme has been partly funded by Buchanan's Forever concerts, which this year featured performances by Sir Elton John and James Blunt – an example of cause–related marketing by the popular scotch whisky brand.
Great marketing campaigns
At the centre of our marketing activities for our global brands are great campaigns that reflect the core essences of the brand and have global resonance.
In October 2008, Baileys launched its largest global campaign to date with a year–long intensive awareness drive that was rolled out across all key brand markets worldwide and urged consumers to 'Listen to Your Lips'.
Using advertising shot by internationally renowned photographer, Rankin together with experiential and relationship marketing, digital communications and PR, the campaign aimed to trigger consumers' desire to listen to their lips and enjoy a Baileys moment.
The campaign has been a key growth driver for the brand this year, generating positive momentum particularly in the digital space where consumers engaged with the advertising through You Tube and online forums as well as the Baileys Facebook fan page, which now boasts around 800,000 fans.
Investing in our innovation agenda
Diageo's innovation agenda builds on our core, trusted brands while being alert to and activating against the shorter–term competitive environment. The breadth and depth of our range of brands mean we have solid platforms from which to drive innovation, while insights into shopping trends and changing consumer habits inform product and packaging development.
Transcript
Men and women in white lab coats are not necessarily what you associate with your favourite drink. But that is exactly what you find when you visit the Woodside facility in Hertfordshire. It is one of Diageo’s innovation centres and the secret behind many of the company’s successes.
There is a proud tradition around Woodside in terms of inventing, some of the technologies we take for granted have come from this lineage of innovation that is in Woodside. Think of the widget, think of Baileys, those types of things.
It is very much like being in a chef’s kitchen, working with the product, working with the ingredients, layering the ingredients to try & get a really nice balanced product.
The key focus here for us is much like anywhere in innovation and anywhere within Diageo is almost four pillars – the first one is ensuring to leverage our core premium brands, wherever they are in the world. Secondly, higher focus on at home occasions and the off trade. It is not to say that the on trade is not important, it still is extremely important to us, but we will be focusing more on the at home occasion. And two other things is ensuring that we have a really healthy pipeline and that health of the pipeline means a balance between closing opportunities, but also that we have for the future the longer term opportunities ticking over as well and the last thing is taking advantage of premium gifting and special editions because a they pay back dividends to the brand but also the short term payback to the business in the short term.
The public will expect to see in the next few months, pre–mix which essentially, which are brands mixed with favourite mixes in a very convenient can format. You have Gordon’s and Schweppes tonic, Smirnoff and cranberry juice. Another area we are looking at is cocktails. Cocktails are quite complicated actually for drinking at home because you have to have so many spirits, so many ingredients. So how do we make that easy? We will actually have Smirnoff ready made cocktails that you can serve at home with your friends, to really get something different and elevate the evening.
Promoting responsible drinking – DRINKiQ.com
Views about alcohol vary widely around the world and there is no single universal definition of responsible drinking. However, people generally have a sense of what it means to them, and know that misuse of alcohol can lead to harm. We support programmes that aim to increase awareness of the issues and aspire to change people’s attitudes and behaviour.
Last year we launched the website DRINKiQ.com to contribute to the public debate around responsible drinking and help inform the public. Consisting of a global site and 16 dedicated country sites, DRINKiQ aims to bring together the best programmes – not only our own –for anyone with an interest in promoting responsible drinking and minimising the misuse of alcohol. On the site are experts’ views, facts about alcohol, responsible drinking tips and an outline of Diageo’s approach to this important subject. This year, DRINKiQ.com was awarded ‘best in class’ for corporate community partnership by PR News and was judged the best health and wellness website by the International Academy of Visual Arts.
The DRINKiQ.com website is complemented by a separate programme of interactive awareness–raising sessions with the same name. The programme has now been delivered to more than half of Diageo employees in all parts of the world. As well as keeping them informed for their own benefit, we also want to equip our people with the information and confidence to be effective ambassadors for responsible drinking and for Diageo’s role in tackling misuse.
See for yourself at www.drinkiq.com
Promoting responsible drinking – Anti drink–driving campaigns
Johnnie Walker’s sponsorship of F1 Team Vodafone McLaren Mercedes has continued to provide energetic focus to our efforts to discourage drink–driving around the world. In many markets we have included in our events the opportunity to sign up to a pact never to drink and drive, endorsed by motor–racing celebrities who have served as Diageo responsible drinking champions during the year.
As part of the campaign, Formula 1 World Champion Lewis Hamilton and Johnnie Walker’s Responsible Drinking Ambassador, and twice World Champion Mika Hakkinen visited London on 11th December 2008 to promote the ‘Never Drink and Drive’ message and to encourage people to use public transport or a designated driver as an alternative way of getting home during the busy festive season.
The main theme of the day was the World Champions celebrating the everyday ‘Real Champion Drivers’ that get the general public home safely – by taxi, tube, bus or general designated drivers. In order to do so, Lewis and Mika took to the wheel of two iconic London cabs and drove across Tower Bridge, around the Tower of London, over London Bridge to City Hall to join forces with professional drivers from Transport for London.
The pair also took part in a full day of media interviews and were joined by London Mayor Boris Johnson and Diageo’s European President Andrew Morgan for a press conference. The results were impressive with the coverage and anti–drink drive message viewed by over 8 million people worldwide, resulting in coverage worth well over £2 million in advertising terms.
Transcript
Well he more used to touching speeds of 190 miles an hour, but Lewis Hamilton got nowhere near that today
We're promoting 'Never Drink & Drive' with Johnnie Walker. Choose a designated driver and you can also use public transport – that's why I was driving a taxi.
Formula One world champion Lewis Hamilton got behind the wheel of a black cab
He's trying to raise awareness of the dangers of drink driving over the Christmas period
Formula One world champion Lewis Hamilton has swopped his...
Why he's campaigning against drink driving
Also lending his support to the campaign Mika Hakkinen
We are here to make people aware that we never drink and drive because if you do that you are not in control.
...it's really just trying to get out the good message, positive message to the whole country.
Come on ladies
Lewis Hamilton will swop his Formula One racing car for a black cab today to promote a campaign to stop drink driving.
Speaking in London at the launch in London of a drinking and driving awareness campaign on Thursday...
Welcome back to more F1. World champion Lewis Hamilton has been using his...
Indepth consumer and customer understanding
All roads lead to leadership
“At Diageo we believe that all roads lead to leadership. Our experience shows that great leaders drive Diageo performance, by growing themselves and by creating the conditions for others to grow and perform at their best. Leaders make a difference by inspiring others through authentic, trusting relationships. They consistently deliver great performance today, as well as stand in the future, creating possibilities that actively shape Diageo’s destiny. Their pursuit of higher standards of performance is relentless, hence our continued investment in this area in F09.
“Over the last two years, more than 900 senior leaders in the business continued their journey to Leadership Mastery through active participation on the Diageo Leadership Performance Programme (DLPP). This year–long global programme focuses on creating a step–change in our individual and collective leadership, against the Diageo Leadership Standard, to deliver the sustainable performance necessary to achieve our stretching business goals.
“Leaders grew their leadership through coaching from Line Managers and a global External Coaching Faculty; as well as participating in two learning events over the twelve months. These events were delivered by Diageo’s most senior leaders who participated on the Programme during 2007 and were held in Europe; Asia Pacific; North America and Africa in 2008. Having “leaders as teachers” on the Programme was key to success – with leaders role–modelling engaging and inspirational leadership – and growing their own leadership by teaching others.
“Feedback from participants through Programme evaluation was exceptional. We are seeing the impact of DLPP on business performance, enabling leaders to navigate through change in a way they wouldn’t have previously considered possible and creating the conditions for people to perform at their best. We know that this makes a significant difference to business performance.
“The journey continues, with a strong focus in F10 on embedding leadership through the business, to set us up for greater success in the future.”
Gareth Williams
Human resources director
A simpler more effective organisation
In November 2008 we embarked on an Organisation Effectiveness programme with two core objectives: to reduce our overheads by £100m from the previous fiscal year, and to reduce complexity in the organisation. Both these objectives reflect our ambition and belief that we can emerge stronger from the current economic downturn on the basis of our competitiveness, responsiveness, and our execution ability.
We have successfully delivered against our first objective to reduce overhead costs. This was a particularly testing time for our people, and work continues in some areas of the business.
Our second objective to reduce organisation complexity is a longer–term journey and beyond a response to difficult business conditions. To do this well, the reach of our Organisation Effectiveness programme spans a review of the effectiveness of our culture, processes and ways of working, people and structure. The programme of activity to date has been both global and local in nature.
From a global perspective, there is significant work underway reviewing and improving the large cross–functional processes that execute our strategy. Major functions have reviewed decision rights in their end–to–end organisations to eliminate duplication and speed up issue resolution and decision–making. Another example of activity is the overhaul of the organisation’s global intranet and information sharing sites to improve information flow and data sharing.
At a local level, business areas have identified where complexity is creating performance barriers and addressing by applying local tools and solutions.
As a global organisation we have set ourselves specific targets to maintain a focus in this area and to measure the impact of our work. These measures range from specific elements of our employee Values Survey through to qualitative measures pertaining to our responsiveness to change and our execution agility and ability.
Great places to work
What makes Diageo a great place to work?
It's about our people being highly engaged, truly owning Diageo’s success and putting their maximum energy into delivering great results. It’s also about Diageo being a place where they can realise their potential and achieve their personal goals. It’s about Diageo being a special place to work.
This is good for our people and is good for the business. People who believe that they have a great place to work will typically deliver superior levels of performance. It also allows us to retain our great people and attract the best people into the business.
It’s also about our reputation. We have a declared goal of being amongst the most admired companies in our key geographies and being publicly acknowledged as an employer of choice is an important element of that.
Competing against the best companies around the world in a variety of independent Best Company surveys, we achieved “Top 10” places in no less than ten markets, our best set of results since Diageo was formed. Some particular highlights:
- Brandhouse (South Africa) – 1st overall and 1st medium sized company
- Colombia – 2nd in market and 9th in all Latin America
- GB – 10th place at first attempt
- Australia – 4th at first attempt
In the coming year we will be working to improve on these results as we strive to be employer of choice in all our key geographies.