Diageo credits 5% uplift in marketing spend with UK sales growth
Diageo’s increased marketing spend in Europe has helped the maker of Guinness and Tanqueray Gin grow its sales by 4 per cent in the UK in the second quarter, boosted by an 11 per cent surge in sales of Baileys, according to the Q2 results.
Diageo
The drinks giant this year rolled out a comprehensive marketing strategy around the Irish cream liqueur, to build on the brand’s ongoing transformation from a Christmas drink to a year-round option, focussing on pairing Baileys with coffee.
Smirnoff net sales were up 1 per cent supported by a full year of the £4.5m ‘We’re Open’ platform, while Guinness net sales were up 1 per cent, which Diageo said was a result of its Rugby World Cup activation and “improved distribution and innovation successes from ‘The Brewers Project’”.
The ongoing trend of drinking gin in the UK also helped Diageo, with sales of Tanqueray growing double digits (12 per cent), driven by “expanding distribution with improved visibility and increased bartender advocacy”.
Overall, net sales declined 3 per cent as organic growth in each region and acquisitions were offset by adverse exchange and disposals.
Diageo said its 5 per cent increase in marketing spend benefitted from procurement savings resulting in an underlying investment increase of 10 per cent.
Elsewhere, North America delivered net sales growth of 3 per cent, with whiskey, scotch and tequila driving a positive mix. Marketing in North America was down 2 per cent as a result of procurement efficiencies and more focused spend on innovation.
Ivan Menezes, chief executive, commented on the results: “This is a good set of results delivering what we set out to achieve this time last year and demonstrating our momentum. This better performance reflects the work we have done to strengthen our big brands through marketing and innovation, as well as expanding our distribution reach.
“Our six global brands and our US spirits business are all back in growth and we have seen a significant improvement in the performance of our scotch and beer portfolios. We have also made significant progress this year in our aim to improve the role of alcohol in society, partner with our communities and reduce our environmental impact.”
Speaking about the impact of Brexit on the business Menezes said this morning that Diageo’s focus will be to keep Scotch whiskey “healthy”, a category that accounts for 24 per cent of the drinks company’s business.
“The UK is only about 6 per cent of our business, secondly we have the most successful export industry in the food and drinks sector,” he said in an interview with CNBC this morning. “Scotch whiskey which is about 24 per cent of our business so we are positioned well to keep growing across the global footprint we have.
"North America is a big engine for growth and is performing better, so from out of Brexit our focus is really ensuring that we keep Scotch whiskey healthy. The trade agreements in Europe and around the world, Johnnie Walker was in over 100 markets long before Coca-Cola left the shores of America, our business is built on global trade and that to me is the most important aspect. We want to make sure we keep so that the scotch whiskey industry and our business remains competitive and healthy.”