Diageo targets shoppers in emerging markets

30 August 2010

LONDON: Diageo, the alcoholic drinks specialist, is setting its sights on aspirational consumers in developing nations from China to Nigeria.

The company boosted its advertising and promotional expenditure by 14% in the last six months, after posting a reduction of 5% during the previous two quarters.

"We spend over £1.4bn ($2.2bn; €1.7bn) a year to build our brands. We spend it behind campaigns which drive sales and build brand equity and we spend it effectively," said Paul Walsh, its ceo.

"We made our allocation decisions through two lenses: firstly, we invested behind proven growth drivers which we can execute at scale."

"Secondly, we invested where we saw opportunities emerge by market or by category."

More specifically, Diageo's outlay climbed by 20% in North America, 8% in Asia Pacific, 7% in Europe, and 20% in geographies like Africa and the Middle East in the last six months.

"In the developed markets, we prioritise resources on the biggest value creating opportunities," said Walsh.

"In the developing markets which are experiencing more stable growth, we have capitalised on our leading brand positions and great routes to market."

This latter group of countries now contribute a third of Diageo's net sales, and delivered an uptick in demand of 11% in the 12 months to June.

"We have strong exposure to all the developing regions in key categories: scotch in Latin America, Russia and Asia and beer in Africa," said Walsh.

"The market fundamentals for the future are positive: high population growth, rising personal affluence and a large increase in the number of middle class consumers who aspire to our brands."

Indeed, Africa has become a major subject of focus, not least thanks to Diageo's joint venture with Heineken and Namibia Breweries, called Brandhouse, in South Africa.

"In South Africa, we operate across all the beverage alcohol categories and we generate consumer insights to direct our targeted marketing programmes," said Walsh.

"Our investment behind our scotch brands in the year has positioned us well as the economy starts to improve."

Guinness also commands a sizeable African following, and Diageo raised the brand's local marketing spend by 8% in the last six months, enhancing its figures in Nigeria, Cameroon and Ghana as a result.

"Guinness remains the only true pan-African beer brand with strong equity and a significant price premium," said Walsh.

Elsewhere, Johnnie Walker Black Label has gained ground in China due to "significantly increased" communications support, while Russia is providing equally considerable opportunities.

Alongside these and other core outlets such as India, Diageo is looking further afield to Angola, Tanzania and Vietnam, anticipated to form the next wave of profitable countries.

"In developing markets improving accessibility can be a powerful growth driver," Walsh added.

"In Africa, for example, innovation around canned beer and premix spirits has brought our brands to new consumers and into new occasions."

Data sourced from Diageo; additional content by Warc staff