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Interview, Part 2: Diageo NA’s Deirdre Mahlan And James Thompson

March 14, 2018

In the second part of our interview with Diageo NA president Deirdre Mahlan and James Thompson, the conversation touches on the solid gains occurring across Diageo’s portfolio of whiskies, as well as the resurgence of Captain Morgan and plans to reinvigorate the company’s key vodka brands.

SND: Bulleit has been a major success story. How much upside does the brand still have in the U.S.?

Mahlan: From the beginning, Bulleit has grown in a grassroots way, driven by consumer pull. It’s still fairly concentrated in terms of where it draws its volume. It’s mostly coastal. It started out big in California and then became significant in New York, but it still has great opportunity in markets like Florida and the entire central part of the country. Bulleit Rye is the biggest rye in the U.S. and continues to grow.

SND: In vodka, what are the main challenges facing Smirnoff, Cîroc, and Ketel One? And how do you plan to restore their momentum?

Thompson: We’ve built up a lot of data over the past five years and invested in new tools to better analyze it in real time. We’re able to understand buying behavior almost down to a zip code level, while also looking at macro trends. On Ketel One, our previous marketing platform was “Gentlemen, this is vodka.” We now understand that a lot of growth in vodka is coming from women drinkers. So we’re re-engineering where Ketel One can appeal, telling consumers it’s exceptionally smooth, family-made, and totally GMO-free, which is important because the new generation of vodka drinkers is very conscious about what they put in their bodies. Looking to Cîroc, there aren’t many brands that attract as diverse a range of consumers, and urban-centered consumers in particular. We’ve started to see upticks in trial again, which is very encouraging. We’ve been focusing on what Sean Combs calls “Blue Dot”—the core vodka—and two flavors, Apple and Peach, and it’s beginning to bear fruit. Smirnoff is an excellent example of a big brand doing the right things to prepare for its next phase of growth. We’ve seen the core Smirnoff Red start to improve its share performance. We need to get our flavors back into the same position, and we have plans to do so. It’s a combination of getting the operational excellence right on the brand, but also telling our quality story.

SND: Where within the Johnnie Walker line are you seeing the best performance?

Thompson: Johnnie Walker’s net sales were up about 9% in the first half, and it’s growing across the range, particularly at the super-premium and luxury levels. We’re particularly heartened by the growth of Black Label and Blue Label. With Red Label, there’s energy behind simple serves like Johnnie Walker and Ginger and Johnnie and Soda. On election night in 2016 we launched our Keep Walking America campaign, which was a big hit on social media. It effectively tells the story of why the brand exists: to celebrate and inspire progress for people.

SND: On Crown Royal, are more flavor innovations part of the plan going forward? And are consumers converting to Crown Royal Deluxe after entering the franchise through flavors?

Mahlan: Crown is an incredibly strong franchise, and again, it’s concentrated in relatively few states, with Texas being the stronghold. If you’re in Connecticut or New York, you don’t see much of Crown. Since the introduction of Regal Apple in particular, but also Vanilla, we’ve been able to recruit new consumers into the brand. Regal Apple is still growing by double-digits three years after its launch. But we don’t expect Crown to have a flavor-led strategy—you won’t see a new flavor every year. We’ll have a small selection of flavors to bring new interest to the brand, along with limited-time offerings.

SND: In rum, what’s driving the recent gains for Captain Morgan?

Thompson: The Captain grew 3% in the first half, and we might be able to drive it even faster than that. Two and a half years ago we put in place what we call the Activation Army, which focuses on programming and accounts that particularly appeal to millennial consumers. That’s been a big part of the growth, combined with the new product development, such as Cannon Blast and LocoNut. We’ve also gone back to basics on the advertising, with a more fun and energetic feel. We’ve been using different media strategies to tailor our message for the various age groups.

The full interview with Diageo NA’s Deirdre Mahlan and James Thompson, along with accompanying data, appears in Impact’s March 1&15 issue.

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