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Diageo increases marketing spending in an attempt to ‘win with customers’ as prices climb.

Diageo increased marketing spending by over 6% in the last year, resulting in good growth for brands such as Guinness and Johnnie Walker. Despite the increase, spending grew at a slower pace than previously.

Diageo increased marketing spending last year, albeit at a slower pace, in an effort to “win with consumers” and cushion the impact of increasing pricing due to inflation.

The beverages company, which owns brands such as Guinness, Johnnie Walker, and Baileys, boosted organic marketing spend by 5.6% to £2.85 billion in the fiscal year ending June 30.

The increase followed a 24.7% growth in the same time last year, a steeper-than-usual surge as the company recovered from the pandemic.

 

Investment in its brands enabled the corporation to achieve net revenues of £17.1 billion. While this constituted a 6.5% organic increase, the company did observe a modest reduction in volume sales, which it attributed in part to the impact of higher prices.

Organic volume fell by 0.8%, while prices rose by an average of 7.3%.

This increase reflects the company’s continuous investment in its “strong brands” throughout the year, according to a statement issued following the results announcement.

 

While organic marketing spend increased in absolute terms, it was lower as a percentage of net sales in 2022.

The organic operating margin of the company increased by 15 basis points, with marketing adding 14 basis points. It contributed -43 basis points to the organic operating margin the prior year.

Diageo credited its increased margin in the fiscal year 2023 to “disciplined cost management.” It saved £450 million last year, increasing from the previous year’s savings of £400 million. Aside from procurement, shipping, and production, marketing effectiveness was emphasized as one area where savings may be made.

 

Diageo outlined its “living and breathing” effectiveness culture, as stated by Kiel Petersen, Diageo’s vice president of customer value generation and end-to-end commercial planning, in an interview with Marketing Week earlier this year. According to Peterson, the corporation has effectiveness “bake[d] in” to enable the correct degree and method of investment behind brands like Johnnie Walker.

Diageo recognized Johnnie Walker as a standout brand after a great year in fiscal 2022. By retail sales value, Johnnie Walker is now the world’s largest multinational spirits brand. In a year when volume was down across the board, it increased organic volume by 9% year on year, even when compared to a strong competitor.

 

Diageo put the majority of their stated marketing budget in scotch, with Johnnie Walker being by far the most prominent brand. The corporation stated that it will boost the absolute amount of advertising and promotional spending in the foreseeable future while maintaining its reinvestment rate in the scotch business.

Following scotch, vodka and beer received the biggest proportion of marketing investment from Diageo in its fiscal year 2023.

 

Guinness was another brand lauded for a successful year. According to the corporation, the beer brand enjoyed its “best year” since they began tracking it. It increased net sales by 20% in Europe. Despite its premium positioning and association with the pub and on-trade, Guinness is currently Ireland’s number one beer by volume in the off-trade.

 

The firm cited innovations behind the brand, such as non-alcoholic product Guinness 0.0 and at-home serving product Nitrosurge, as contributing to the brand’s sustained success.

 

The annual results were Debra Crew’s first since taking over as CEO of Diageo in June, a month earlier than expected, following the death of her predecessor Sir Ivan Menezes, who was set to retire in July. Crew is a former marketer with experience in FMCG and tobacco firms.

Today, she discussed some of her goals for the company, notably in the tequila area. Diageo owns the tequila brands Don Julio and Casamigos. It sees chances to grow not only its brands but also the category as a whole globally.

“I want to take tequila around the world,” Crew explained. “We are the people who have successfully done that with so many brands.”

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