Andy Fennell, chief marketing officer at Diageo, is on a journey to explore new markets and new consumers. In charge of the marketing budget of the world's largest alcoholic drinks company, he plans to up spending in Asia, Latin America and Africa.
The emerging markets are where he believes Diageo will find most of its future growth, accounting for half of the company's business within the next few years. In Asia, Fennell wants Diageo to be more inclusive to women in its marketing, and to deliberately tap into the rising female confidence in the region. Together with older consumers, the group represents Diageo's next consumer frontier.
For Fennell, the basics of marketing still hold true. However, it's no longer just about great, award-winning advertising - although Diageo still has plenty of that. 'Platform participation' is the buzzword, and Fennell is keen to emphasise that all of Diageo's initiatives now start with one big insight, one big idea.
For Fennell's agency partners, this is both an opportunity and challenge. The marketer is a firm believer in the role agencies plays, but are they delivering the collaboration and ideas he needs?
- What's the greatest marketing challenge you face today?
While the fundamentals of marketing are the same - you still need great consumer insights, and you still need to execute with flair and move with agility - the context for our marketing has changed.
I think of the advent and scale of broadband penetration - both on PC and mobile - as the biggest impact to marketing since the printing presses. Broadband has changed the relationship between the consumer and brand, the relationships that people have with each other, how governments are influenced and how advocacy groups work. The opinion of one citizen or person on another and their purchase decision is much more prevelant now.
Therefore, the way that brands behave, the way they include consumers in their activities and allow them to participate in the creation and execution of those activities has changed forever.
Secondly, we have a multi-speed world out there. We have parts of the world growing really fast - strong economies, healthy demographics and excitement about what our brand portfolio can offer. Asia is a big part of that, as well as Latin America and Africa.
The emerging markets are currently about a third of Diageo's business, and they will be 50 per cent of our business within three to four years. Yet in Western Europe and America things are much tougher, with slow growth forecasts. The challenge for us is to ensure we are successful in both environments. That means capitalising on the growth in emerging markets, giving them more investment, more people, and making sure our portfolio is right.
- What will it take for Diageo to succeed in China?
We are intent on becoming a big company in China, and we have multiple approaches to the market. We have a JV with Moet Hennessey for Johnnie Walker. We have also invested in Shui Jing Fang, a premium white spirits company. We started in the Eastern seaboard big cities and we are now increasingly penetrating the tier-two and tier-three cities.
We believe that to be successful in China, we need both an international business led by scotch, and a business that allows us to participate in the local white spirits sector, which we expect will always remain vibrant.
While in most of the world the local spirit is cheaper than the international spirit, baiju can be more expensive. It has different price points, and is closely connected to the meal occasion - particularly business meals. To fully participate in those occasions, we need a local partner.
The biggest challenge in China is the sheer scale of the country and population. When you compare the numbers to the developed world - Western Europe and America - they are huge.
And, of course, we are a Western corporation learning about doing business in China, so we rely on our local employees and our local partners to tell us how to approach the market.
- Have there been any hard lessons learnt along the way?
We've learnt it takes time. We are fortunate that scotch growth correlates with GDP growth, the reason is people look for ways to demonstrate their newfound status. But it's clear that we need to understand consumers locally and shouldn't parachute in marketing or sales programmes from Western Europe and America, or even from Latin America.
We need local consumer insight - a deep understanding of local consumers, what role drinks play in their lives, how they socialise. Only then should we ask what role our brands can play in their lives and what marketing we should be doing.
- What is Diageo doing to ensure that it is building new drinking occasions, as well as responding to consumers' long-held drinking habits?
First of all, we like to slip stream the consumers’ existing rituals. If our brands can play a role in the rituals which people already follow then that's a much easier task than trying to fundamentally change behaviour.
As an example, it is a tradition at Indian weddings that expensive scotch is served to guests. Diageo helped establish that ritual, and we want to make sure that it is always the Johnnie Walker labels that people choose.
Food and drinking is so connected in Asia. It is one thing that binds the region. Understanding how people socialise, particularly around food and the roles different alcohols play is essential.
Of course, we are a full portfolio company. We lead with scotch but our job is to make sure that we have one of our brands positioned against each of the rituals associated with food and drink. That's much easier than trying to get them to have a completely new ritual.
- What are the new consumer markets out there for Diageo?
There are two global macro trends, which are really interesting. In many countries, this is the first generation of financially and socially independent women. That means 51 per cent of the population suddenly has a lot more confidence. In Asia, there is a sense of greater female confidence as women express their choices, have their own careers and identities, and feel the confidence to buy the drinks they want.
The second is the dilemma of an ageing world population. While we still have some countries with very young populations - Vietnam for instance - in Western Europe, North America, Korea, Japan, and even China, the population is ageing and people are living longer. That presents us with a huge opportunity among people who are in their 50s or 60s to engage with them through our marketing.
A generation ago, we would have just talked to young men and relied on them to influence women and older consumers. If we do that now, we'll fail. In fact, we are discussing internally about not using age at all as a targeting tool. It depends on how people behave, not what age they are. The fastest growing social network users are over the age of 55, and with broadband you can be much more selective with your targeting, whether that's by hobby, lifestyle interest, or other sub-segments.
- So, you want to encourage women and old people to drink more alcohol. How do you balance that with what's good for society?
We know our products can be misused, and when they are it is bad - always. I have young children and I don't want them to feel any sense of embarrassment about alcohol. It's important that we teach society to treat alcohol responsibly and that means using our marketing skills to educate people to do the right thing.
In fact, we have a very rigid internal code to enforce, which is the same worldwide - regardless of local legislation. It is the marketing director's job to make sure that everyone on the team and on the agency side adheres to it. That's the enforcing mechanism.
- What are you doing differently to ensure you reach out to women?
We're taking a different content and media approach. Take scotch - historically, we have exclusively talked to men, and our advertising and media placement has been geared towards them. It means that the women we pick up are almost by accident.
Now, when we say we want our target to encompass both men and women, we aren't talking about a shift. We just want to be inclusive. It means changing our media strategies and through digital we can do that and be focused. Why can't scotch be cool for women? Christina Hendricks, the star of Mad Men, has done a good job of making scotch look cool to women.
We need more of that. Why can't we have female giants on Johnnie Walker? They would be just as inspiring as men, and in fact for women probably more so. Of course, we have a full portfolio and brands like Baileys that fit perfectly for young, independent women, and we will be making a bigger deal in growing those brands. Our innovation agenda is also working on products that are more likely to appeal to a female palate and fit with female rituals and drinking occasions.
- Which brand in your opinion is doing a good job in connecting with women?
Harley Davidson. Did you know the fastest growing segment of Harley Davidson motorcycle purchasers is women? Is this because the new chief executive is a woman? I don't know. But what I do know is that they have insights into what women want from motorcycles, such as a lower ride height, a softer clutch, and a more comfortable seat. It's not about spraying the bike pink. But it is about making the bike work ergonomically for people with a different frame.