Posted on : 2024-03-03 21:39:37
Article : Good morning Monday management Solution of TASK 283-Diageo: We will not pursue ‘short-term’ market share growth at expense of brand equity.
With over 200 brands and sales in nearly 180 countries, Diageo portfolio has remarkable breadth and depth. From centuries-old names to the latest innovations, Diageo is committed to building and sustaining exceptional brands. Their ambition is to be one of the best performing, most trusted and respected consumer products companies in the world.
In 2023 Diageo lost market share in 70% of its portfolio in the six months to the end of December. However, Diageo business will not resort to leaning on price promotions to drive “short-term” share growth at the expense of brand equity. Driving market share growth has been outlined as a key priority for Diageo as it reported falling sales in the first half of its financial year. The drinks company is clear, however, that it will not pursue “short-term” share.
Diageo, which counts brands such as Johnnie Walker, Guinness and Don Julio among its portfolio, saw organic sales value decline 0.6% in the six months ended 31 December 2023. While its volume sales declined 5.2% versus the same period the year before. In its first half, the drinks business held or grew share in just 30% of its sales portfolio. Although the business did see its market share grow in most European markets, as well as in China and Canada, its share of total beverage alcohol in its biggest market, the US, declined by 17 basis points in the six months to the end of December.
Debra Crew, Diageo CEO expresses that the company is not interested in gaining ‘short-term’ driven by significant price promotions. She accepted that the market share losses “look quite stark” is attributed largely to the US, where price competition has intensified, at the expense of Diageo’s brands. Recovering market share will be a priority for Diageo going forward. “But to be clear, they are focused on doing this the right way: winning high-quality market share,”. Crew said “We manage our business for the long-term.”
Rather than leveraging heavy promotional activity, Diageo is looking to improve distribution of brands where it has lost market share both in the on and off-trade, and utilise innovation, particularly in its whiskey portfolio, where it has seen market share losses. Brand activation will also continue to play a role for the business. Sustained marketing investment is a key component of Diageo’s pursuit of “quality” market share growth. Diageo is committed to “consistent” and “sustained” marketing investment to reach its goals.
Diageo saw its marketing investment increase by 3.8% in the first half. It highlighted its “disciplined” approach to how it spends its advertising and promotional budget. The business CFO did say that it expects its re-investment rate in marketing to moderate in the second half of its financial year. This is due to high year-over-year comparisons and the company taking advantage of the marketing “efficiencies” it has made.
End point- While your short- and long-term marketing goals are very determined by your brand’s positioning, competition, life cycle, distribution, etc, the rule of thumb is that the companies invest in long term brand building will recognise the biggest gains on overall share volume and profitability. This may seem counterintuitive in the current Mach speed world we live in, where consumer attention is limited and short-term ROI in terms of sales please your stakeholders’. The tension between longer term goals (brand equity, purchase intent, share) and short -term objectives (m sales activation/volume) has never been more pronounced than in this age of immediate data.
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