Diageo to reallocate marketing spend to underinvested brands to drive ‘future profit’
Diageo is to shift more of its marketing spend towards some of the “underinvested” brands and categories in its portfolio, as part of a ‘future profit potential model’ as its looks at new ways to ensure its profitability.
Diageo brand portfolio
The maker of Guinness and Captain Morgan said today (26 January) that it also plans to launch a new ‘growth driver module’ that identifies the marketing activities that have the highest ROI, to allow Diageo “to execute the optimal mix of activities that will drive growth for our brands faster”.
Overall marketing spend was up 4.2%, driven by ongoing procurement savings achieved by consolidating its spend with fewer agencies and using them more efficiently.
It’s a strategy that seems to be paying off for Diageo with revenue for the six months ended 31 December 2016 climbing by 14.5% to £6.42m, compared to the previous year, while profit increased by 28% to £2.06m.
Ivan Menezes, chief executive, Diageo attributed the growth to an “improved performance in our US Spirits business and across our scotch portfolio, driven by our focus on marketing with impact, innovating at scale, expanding our route to consumer, and winning in reserve.”
The drinks giant revealed that its Captain Morgan rum brand has now over taken Bacardi as the most popular rum in Europe driven by the Original Spiced variant growing double digits in the region. This was no doubt buoyed by the brand’s tribute to Leicester City’s Wes Morgan, which Diageo hailed as its most successful social media campaign in Europe. Impressions topped 50 million while the number of those posts that were shared through word-of-mouth or earned social hit around 26,000.
Menezes added: “Our productivity work is on track, driving efficiency and effectiveness across the business. Our work on trade and marketing spend gives us better data enabling smarter, quicker decisions that generate higher returns."
Diageo also saw a return to growth in the embattled Chinese region. In mainland China, net sales grew 44% as a result of strong underlying momentum in Chinese white spirits and scotch returned to growth.