Diageo plans to boost marketing spend

15 February 2010

LONDON: Diageo, the UK-based spirits group, plans to increase its marketing expenditure in the second half of this year, but will take a targeted approach when allocating resources.

The owner of brands such as Guinness, Johnnie Walker and Smirnoff reduced its outlay in this area by 5% worldwide over the first half of its financial year, when organic and net sales both fell by 2%.

Within this, media budgets declined by 2% in Asia Pacific, 5% in North America and 14% in Europe, while Latin America, Africa and the Middle East were up by 9% overall.

Looking forward, Nick Rose, the company's chief financial officer, argued "we will be driving more marketing to drive the top-line in the second half."

"We're not factoring in trading up but we are factoring in a reduction in promotions and a reduction in trading down," he added.

"There are a number of companies driving good volumes but with a negative price and mix impact."

According to Rose, the organisation has maintained its "share of voice" during the last two quarters, largely as a result of falling media costs and "procurement efficiencies".

With regard to the media deflation currently observable in many countries, he added "we expect that to peter out and reverse in the second half."

Paul Walsh, Diageo's ceo, further suggested that the extra funding being devoted to communications will mostly be focused on key growth areas, including the UK, and away from struggling nations.

Spain is one country that falls into the latter category, as the number of people drinking in bars and nightclubs there has fallen in the downturn, meaning the "opportunities are not as great."

"There is nobody going to those places. For us to spend money advertising there would make no sense," Walsh said.

"It's about holding on to our position rather than investing in growth. In Spain, our aim is to hold our share."

Data sourced from Wall Street Journal; additional content by Warc staff