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30 July 2022
Diageo’s flywheel approach pays off
Brand growthAlcoholic drinks industry (general)Strategy
Diageo increased its marketing spend ahead of net sales in the last financial year and reported that the drinks giant is now 28% bigger than in pre-COVID 2019.
A&P investment contributes to flywheel effect
Advertising and promotional spend was up 25% in the financial year, as investment was put behind Diageo’s portfolio of premium brands. During the year the company’s ‘Super Premium+’ brands grew 31%.
On an earnings call, chief financial officer Lavanya Chandrashekar attributed business growth to a flywheel strategy: “As we invest in the business, we strengthen our brand equity, and we’re able to drive more price, drive more productivity, drive more premiumisation, drive volume growth, drive market share growth, and that allows us to continue to invest in the business.”
As does understanding and resilience “We’re staying extremely close real-time to understanding shifts that are happening in occasions, in motivations, in the brands and price points that people are buying,” said CEO Ivan Menezes.
While premium brands are currently driving growth, the diversity of Diageo’s portfolio means it has the “agility to switch and move”, whether that’s support for cheaper brands or for smaller sizes of premium brands.
Data and flexibility drive ROI
“We do not have a target reinvestment rate for our marketing spend but we do have a lot of discipline in making sure that we get a good return on investment for all of our marketing dollars,” said Chandrashekar.
One way that’s done is through the effective use of data. A proprietary tool called Sensor, which helps measure the relative effectiveness of media spend across digital platforms, drove a 30% improvement on ROI from digital spend in the US.