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Diageo CEO Ivan Menezes On Strategy After Covid

October 25, 2021

While the past year and a half has presented unforeseen challenges to players across the drinks business, the pandemic has also opened up new growth avenues, argues Diageo CEO Ivan Menezes, who recently addressed the 45th Annual Impact Marketing Seminar on the topic, “A New Strategy After Covid?”

As chief executive of the largest spirits player worldwide—with sales nearing $18 billion in Diageo’s fiscal year through June—Menezes knows a thing or two about effective strategy. But he places even greater emphasis on listening to consumers and leveraging the trends driving the market, many of which have been accelerated by Covid. Far from being pessimistic, Menezes pointed out the growing international opportunities ahead for premium spirits. “It’s worth remembering how strong the sector’s underlying fundamentals are,” he said. “Globally we’re going to see 600 million new legal-purchase-age consumers, with 750 million more people able to afford international style spirits through the next 10 years.”

Diageo is focused on meeting those new consumers with innovations geared to recent trends, including premiumization, e-commerce, wellness, and a desire for new experiences. Highlighting the rapidly growing importance of e-commerce channels, Menezes said, “E-commerce accelerated everywhere through 2020, but the growth was very acute in total beverage alcohol. Digital is becoming pervasive along the consumer path to purchase. We’re seeing consumers discovering our brands, learning about them, reviewing products, engaging with content, purchasing product, or making reservations in the on-trade.”

Menezes also sees a trend toward consumers demanding “convenient, light, portable refreshment,” illustrated by the burgeoning growth of the ready-to-drink category, as well as more “lower-tempo” drinking occasions, often accompanied by food. “Within these lower-tempo occasions, more indulgent and higher-priced tiers overindex,” he noted. “A brand like Baileys is a great example of how we’ve responded to these occasions with the right creative content at the right time.”

Likewise, Diageo is aiming to satisfy pent-up demand among consumers eager for new experiences as the pandemic fades, with Menezes hailing the recent opening of Johnnie Walker Princes Street, its new flagship Scotch whisky experience in Edinburgh, which is “the centerpiece of our $250 million investment in Scotch whisky tourism.”

That ongoing track record of investment has continued throughout the pandemic, said Menezes, exemplified by the company’s recent acquisitions of Davos Brands in the U.S. and Chase Distillery in the U.K., among others, as well as the reopening of “ghost” distilleries like Brora and Port Ellen, “both of which won’t have their beautiful malts in bottles until we’re all long retired. You know, there’s a kid out there today who will be running Diageo and reaping the benefits of those investments in 20 to 30 years’ time, and that’s exactly the way it should be.”—Daniel Marsteller

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