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Interview: Deirdre Mahlan, President, Diageo North America

December 14, 2018

Earlier this week, Diageo offered analysts an update on its North American business, discussing the outlook for its core portfolio and the spirits market as a whole. Following the call, SND associate editor Shane English caught up with Diageo North America president Deirdre Mahlan to talk U.S. trends and hear what’s foremost on the drinks giant’s agenda heading into 2019.

SND: What are Diageo’s main priorities as we enter the new year?

Mahlan: Last fiscal year we improved our performance versus the industry, and this year we expect to continue that trend. Since I came on as president of North America three years ago, we’ve focused on three areas: The first is to have a clear portfolio strategy; the second is to use data and analytics to support growth and better execution; and the third is strengthening our brand equity over the long term by increasing our marketing spend and making it more effective. Within the portfolio, we’re allocating resources against the opportunities that drive the best returns. We’re being deliberate and forceful about acquisitions, but more importantly in how we inform our brand strategy, innovation, and investment choices within our existing portfolio.

SND: What advantages are you gaining from the push in data and analytics?

Mahlan: We’ve invested in technologies that allow us to take everything from macroeconomic and consumer demographic data to what’s happening in specific brands and categories, and build an algorithm that helps to predict brand performance. It also helps us evaluate returns on individual growth drivers in a given segment. Most recently we introduced a tool for our distributor sales force, which will allow them to collect data within retail stores. It takes in everything from the price point to the number of facings to where a product is on the shelf to assortments to display, which over time will help us when we talk to retailers about our brands. For instance, let’s say the store doesn’t have Crown Royal Regal Apple. We would be able to go in with predictive data to say that in stores like this adding this brand will increase sales by a certain amount.

SND: Are further marketing increases in the offing?

Mahlan: We’ve taken productivity gains and then upweighted our marketing investments in the second half of fiscal 2017 and 2018—when our spend grew by 6%—and we plan to continue to do that.

SND: On the innovation front, you recently introduced Ketel One Botanicals. How are they faring so far?

Mahlan: The Botanicals have been performing really well. The great news is that the data suggest there’s very little cannibalization, and that the Botanicals are recruiting consumers from white wine. We’re getting a significant amount of volume on the Botanicals and the core vodka has improved its performance as well.

SND: In whiskies, how is the outlook for Johnnie Walker?

Mahlan: There’s a huge opportunity for Scotch whisky. The consumer is in an exploratory mindset. We see it from millennials all the way through to baby boomers. We’ve been investing behind Johnnie Walker Black, and we think there’s an opportunity to recruit more consumers into Johnnie Walker Red. To make sure the brand stays relevant in culture, we’ve launched Johnnie Walker White Walker, which is resonating with Game of Thrones fans. The liquid is different from that of Johnnie Walker Black, and we think the flavor profile will recruit consumers into both the brand and Scotch whisky in general.

SND: Any update on Bulleit?

Mahlan: Bulleit is still growing by double-digits. Its visitors center is being built as we speak, and it’s on track to be open this summer. In terms of innovation, I’m not going to say very much at the moment, but we’ve done things around different barrel programs and aging and we’ll continue to innovate in a way that’s consistent with the equity of the brand. (Editor’s note: Yesterday, Diageo announced a new $130 million, 10-million-proof-gallon distillery investment in Lebanon, Kentucky to support American whiskey growth.)

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