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Diageo Innovation

Diageo finds tonic to shift innovation around the customer journey

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By Seb Joseph, News editor

March 25, 2015 | 4 min read

Diageo is channelling innovations for all its brands around how they fit into the lives of drinkers rather than serving them different flavour extensions in a bid to lift the commercial impact of new launches.

Diageo

Innovation has laboured to reverse the sales woes of the world’s biggest drinks maker though it is certain its new approach will woo consumers at scale. A focus on creating accessible drinks and not just premium alternatives is Diageo’s solution, which will try to show people different ways of drinking the likes of Pimm’s and Smirnoff.

The approach will look to lift more of the category than Diageo’s previous flavour focus, a shift emblematic of the pressure it is under to sweat all parts of its marketing to spike sales. Around 13 per cent of the company’s UK turnover comes from innovation and it hopes to lift this figure to a fifth (20 per cent) over the next five years.

The innovation issue isn’t just restricted to the UK and the plan's success rests on the company's ability to destroy the misconceptions that people have about spirits in other developed regions. Louise Robinson, head of innovation at Diageo, told The Drum: “Lots of people have perceptions that spirits are really potent and have high [alcohol content] but actually dilute them and they’re really only between four and five per cent, which compared to a glass a of wine is a third of the alcohol content.”

Achieving this target will not be easy in an ever-changing customer landscape rocked by shifting customer expectations and the ubiquity of connectivity. Indeed, Diageo admittedly is playing catch-up to rivals but is adamant it will not rush innovations, opting to balance shorter-term product extensions with longer term strategic bets. The trepidation is born from it wanting to win the battle for the lucrative millennials, who are non-too impressed by flavour extensions and want something different.

It is why the business is hoping the launch of Smirnoff Ice Double Black kickstarts the ready-to-drink range. The Smirnoff Ice brand has been in 10 per cent decline for “some years,” revealed Robinson and yet the bulk of this is due to a 30 per cent decline between the “legal drinking age” and 24 year-old group, while 25 to 35 year-olds increased their consumption by 29 per cent.

Despite the focus on younger drinkers, Robinson promises this “raft of innovation” will be “a lot more generic”, stretching to both women and older drinkers. Marketing for the various innovations will mirror this consumer breakdown with much of the promotional spend pumped into digital, sampling and off and on-trade activity.

“We’re thinking about what occasions people are drinking our products in and how do we interact with them while they’re on the move and thinking about those occasions,” added Robinson.

“We’re going through a definitive strategic process with our insights team to look at what we know about customers and then put that all into a melting pot to understand where our brands can fit into their lives. When then give that to our [teams] to produce the liquid.”

Diageo’s “definitive strategic process” has already brewed several extensions, most notably Pimm’s Cider. The concoction of Pimm’s No.1 and British cider, blended with hints of Pimm’s strawberry and cucumber flavours, originated from a customer request that noted a gap in the fast growing flavoured cider category. The company took the request and decided that the liqueur was the right liquid to benefit from the occasion and then briefed its mixers to come up with a suitable recipe.

Innovation is the latest part of Diageo’s marketing mix to be affected by its renewed focus on measurable initiatives as it looks to cut costs by €200m by 2017. It scrapped its marketing innovation team last year as part of the plan and pulled regional markets from emerging markets.

Diageo Innovation

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