Diageo – Market Development and Brand Repositioning

Diageo is the drinks group behind the likes of Johnnie Walker, the scotch; Guinness, the beer; and Blossom Hill, the wine – a well-rounded product portfolio. The group recently announced revenue had increased 5% to £9.78 billion and operating profit had risen 2% to £2.45 billion for their financial year. This was despite the weak consumer spending in the US and Europe – their largest markets, suffering from recent recessions – where the net sales in the former fell 3% and 2% in the later. So how did Diageo remain resilient? By Market Development – expanding across several markets with the current product portfolio. And, as marketing and planning is a cyclical process, Diageo has not forgotten its core market, the UK: Guinness is about to repositioned.

Although, according to Ansoff’s Matrix, Market Development poses high levels of risk when initially expanding – moreover given localised brand names used in alcoholic drinks – the spread of revenue channels in the long-term reduces Diageo’s reliance on one economy. Therefore, a PEST analysis is always a fundamental influence on the marketing strategy. Diageo has furthermore proven the benefits of risk-taking: scotch drinks returned a 15% net sales growth in Latin America and 10% in Africa; most importantly, however, their market share increased as well as volumes. When their sales are boosted by GDP growth, and higher overall consumer spending, of emerging markets and one-off factors, like the World Cup in South Africa, it is important for the sake of raw-competitiveness that market share grows by a greater proportion to be hailed a success.

However, Diageo have clearly identified the UK market as their ‘Cash Cow’, which needs to be milked for all its worth, where as Latin America and Africa can be considered ‘Rising Stars’ – if one uses the Boston Matrix to analyse markets rather than products of a firm. Diageo’s repositioning of Guinness as sports brand, therefore, is a form of market penetration; this is a low-risk strategy, albeit with low scope for growth. The ‘Bring it to life’ campaign involves above-the-line T.V promotions, sponsorship of Sky’s 3D sports coverage – which is currently only available in pubs – and nostalgic football advertisements in newspapers. While none of this is particularly innovative, Guinness’ brand image is consequently associated among sport viewers – and not sport hooligans.

If there is one lesson to be learnt from Diageo it’s diversity: a strong product portfolio in a variety of markets sold through a focus on traditional and new marketing strategies.

© Joshua Blatchford author of Manifested Marketing 30/08/2010

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