Diageo backs its effectiveness plan, increases spend

Diageo, the alcoholic beverage company, is seeing the benefits of proving marketing effectiveness, with increased transparency on quality, and performance of its marketing campaigns convincing executives to further boost marketing budgets. 

“We built a lot of sophistication in the data, analytics and tools we now have to assess marketing effectiveness,” said CEO Ivan Menezes on its recent Q2 2023 earnings call. 

“As we look to the second half [of the financial year], we see very good opportunities to step up the investment behind our brands. This is built up by market, by brand and very much with the degree of confidence on returns,” he said. 

Why it matters

By building a data and analytics operation to better understand its marketing effectiveness, Diageo has been able to make more informed investment decisions with clarity around what is working and what isn’t. This experience offers a case study to other brands on the same path. 

By the numbers

• Net sales up 9% with growth across all regions.
• Volume grew 2% even as brands implemented strategic price increases.
• On a constant basis, Diageo is 36% bigger than pre-Covid.
• Strong growth in Scotch, up 19%; tequila, up 28%; and Guinness, up 17%.

Thinking long term 

Marketing at Diageo is not just to make the second-half sales numbers, it is about the next three years, Menezes said.

“Everything in our business – upweights and marketing – are not for short-term return alone. You do get some short-term impact, but the bulk of the impact really comes down the road and in line with our goal to be a very reliable top-tier compounder,” he explained.

“This flywheel of Diageo [is to] upweight investment, drive efficiency and get quality top-line growth…We want to ensure we’re setting ourselves up well for the quality of growth through the medium term, but it’s going [with] very specific brand opportunities where we have a high degree of confidence in the return that we will get for this investment,” he added.

“The quality of our marketing continues to step up significantly, and I feel really good about that.”

Sourced from Seeking Alpha

[Image: Diageo]