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Diageo Claims Edge In Key Multicultural Segment

November 18, 2011

Diageo is projecting that multicultural consumers will account for 80% of value growth across core spirits categories by 2015, and the company is aggressively courting that segment with an array of initiatives involving several of its top brands.

“Multicultural expertise is at the core of our growth strategy,” Diageo North America chief marketing and innovation officer Peter McDonough told analysts in New York yesterday, noting that the group is now significantly upweighting its multicultural media spend versus even a year ago. Some 35% of Diageo NA’s total media spend is now devoted to the multicultural segment (19% dedicated to African-Americans and 16% to Hispanics).

A focal point of the effort is a massive year-long advertising buy on Spanish-language TV network Univision, which began with a Hispanic-targeted Ketel One spot this summer. “I recently met with senior Univision executives, and no one else (among our competitors) is doing this,” said Larry Schwartz, president of Diageo USA. According to Diageo, Hispanic consumers alone will account for 50% of value growth across core spirits categories by 2015.

Diageo says its emphasis on multicultural channels is already paying dividends. McDonough cited SymphonyIRI data showing that Diageo’s spirits sales in multicultural accounts are growing at 3.1% versus total category growth of 1.8% in recent weeks, while its PABs (progressive adult beverages, such as premixed Smirnoff cocktails and Parrot Bay cocktail pouches) are growing at 8.6% versus category growth of 2.6%.

At the individual brand level, McDonough acknowledged that since the beginning of the economic downturn, top Diageo label Smirnoff vodka had seen a decline in its appeal to African-American consumers, an important audience for the brand. But he credited Smirnoff’s DJ-focused “Master of the Mix” reality show on the BET network—whose premiere for the second season earlier this month garnered 1 million viewers—as helping to reinvigorate the brand among the African-American demographic. After sliding in IRI channels through much of the first half of the year, Smirnoff has returned to growth since June.

Meanwhile, upscale vodka Cîroc also continues to thrive among the African-American segment, a key driver of its explosive growth over the past few years. Its new flavor extension, Peach, has met the same strong demand in the early going that its predecessors, Red Berry and Coconut, enjoyed when they rolled out early last year. “I just gave the order to produce 250,000 cases of Peach to meet demand through December,” Schwartz said.

Other recent Diageo launches designed to elicit multicultural appeal include Nuvo Lemon Sorbet and 22 Marquis (a sparkling liqueur in which Diageo took a 20% stake a year ago for $10 million with an option to later take full control), both geared toward the African-American community; and Smirnoff Ice Tropical Fruit and Buchanan’s Master, both aimed at Hispanic consumers.

Buchanan’s, a blended Scotch that was basically flat through the early years of the 2000s, is an example of a smaller brand that’s taken on outsized multicultural influence, especially since the recession hit. “It’s a little jewel of a brand, now at around 250,000 cases,” said Schwartz, representing a near doubling of its volume since 2007.

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