Three ways Diageo plans to use marketing to grow market share

Diageo is on a mission to ramp up its global market share, with marketing set to play a major role in tapping into key consumer growth trends.

Describing itself as a “startup company” in market share terms compared to its rivals, Diageo wants to grow its value share of the total beverage alcohol market from 4% in 2020 to 6% by 2030.

The parent company of Johnnie Walker, Guinness and Baileys has gained or held market share in 85% of its global markets this year, up from 65% in 2020, according to chief executive Ivan Menezes.

“For me, this is a reflection of the quality of execution and the investment we put back into the business, where we’ve been increasing our marketing investment,” said Menezes speaking at the company’s Capital Markets Day yesterday (16 November).

Referencing its recent quarterly growth, Menezes stated Diageo expects organic net sales during the second half of 2022 to grow by 16% compared to the same period in 2021, with organic operating profit predicted to grow ahead of net sales.

The company highlighted three key ways marketing will aid in achieving its projected growth and market share goal.

1. Precision marketing

Speaking at the event, CMO Cristina Diezhandino said her marketing team supports Diageo’s premium portfolio through the use of effectiveness tools collectively known as Catalyst, a concept she calls “creativity with precision”.

“These tools have given us the opportunity to help us decide where to invest for greater returns within the brand’s markets and identify growth drivers within each brand. Over time we have perfected this methodology and we added on new methodologies,” said Diezhandino.

With strong data to back up its investment, marketing is able to “make smart returns” and progress with plans, which it is hoped will drive market share gains.

“Given the fact that we can now prove ourselves that investment is performing in certain ways, we can go to our chief financial officer and say we can actually afford to invest smart and show the return,” Diezhandino explained.

“The degree of confidence we have in our investments is unprecedented that’s why you’re seeing [growth] that you’re seeing. I think the best KPI for me is we’re taking market share in the majority of our markets.”

Diageo highlighted the data-driven repositioning of Baileys as a treat rather than an alcoholic beverage, as an example of precision marketing. Social posts showing Baileys as a treat, or part of a dessert, attracted 1.1 million tagged posts on Instagram.

2. Ecommerce

Diageo has a significant presence across third-party ecommerce channels. The company is the largest seller of spirits on Amazon in Europe, a leading supplier to Uber-owned drinks delivery platform Drizly in the US and accounts for 26% of whisky sales on Chinese platform T-Mall.

Diezhandino explained Diageo’s development in ecommerce was not just down to sales, but also differentiation through experiences.

“We’ve done a lot of work with those platforms to understand how we can not only use them to sell our brands, but also promote content and provide experiences in those platforms,” she said.

The degree of confidence we have in our investments is unprecedented.

Cristina Diezhandino, Diageo

Menezes noted market share for its mainly premium retail brands “tends to be higher in ecommerce” compared to in-store sales, particularly in the whisky segment.

Diageo launched its ‘Rare and Exceptional’ online store in Singapore last year, linking the brand’s “network of luxury individuals” to premium and super luxury whiskys.

The company also converted its cocktail recipes website The Bar into an ecommerce store under lockdown, with full capability to sell and distribute products.

3. Premiumisation

Menezes pointed to the “phenomenon” of consumers “drinking less or the same, but drinking better” as a sign premiumisation is a trend that is going strong. The Diageo CEO pointed out that premiumisation is a global trend, seen everywhere from the US to Africa.

“It’s not just in China, or the US, it’s in Kenya, it’s in Latin America, it’s all over the world. At every level people are trading up and drinking better,” he explained.

In the search for better quality alcohol, Menezes noted consumers have steered naturally towards quality spirits despite higher retail prices. The overall spirits share of the total beverage market has risen from 20% in 2010 to 39% in 2020, according to data from market research firm IWSR.

Johnnie Walker on the insight powering its 20-year old slogan“We talk about spirits growing and taking a share of total beverage alcohol. We’re well-positioned to grow from [taking] beer and wine’s share to grow faster and that’s a lot of source for our growth,” said Menezes.

He added that Diageo is seeing higher growth in its top-end brands, such as Johnnie Walker Blue Label and Tanqueray No.10.

“If you look across price points, the more premium products are growing the fastest and we brought that to life. Diageo’s growth in the last many years is coming very much from the top end of our portfolio,” he said.

The burgeoning global middle class is also contributing to the trend of premiumisation, with around 700 million people joining the segment, a factor Menezes acknowledged benefits Diageo “enormously”. 

Around 50% of US households spend $200 (£149) a year on off-trade spirits purchases, which leaves huge spaces for growth according to Menezes, who admitted penetration of this segment is still a challenge.

Diageo is also “actively shaping” its portfolio through “premium brand acquisitions”. Back in 2015 the company purchased luxury tequila brands Don Julio and later Casamigos in 2017, while selling off its wine brands for $552m (£411m) in 2015.