Diageo stops 'ineffective' advertising and promotional spend

Drinks giant said closure of bars and restaurants was having 'significant impact on the performance of our business'.

Diageo: last year launched first global campaign for Smirnoff in 25 years
Diageo: last year launched first global campaign for Smirnoff in 25 years

Diageo is stopping advertising and promotional spend "that will not be effective in the current environment" as part of measures to mitigate the impact on its business of lockdowns taking place in countries worldwide. 

The drinks giant said it would also be deferring discretionary capital expenditure projects, while providing "an appropriate level of support to our key suppliers and customers to ensure we are strongly positioned for a recovery in consumer demand". Measures so far have included creating a £1m fund to support the wages of bar staff in the UK.

Diageo did not clarify which A&P spend would be affected by the move.

The closure of bars and restaurants in many countries, including the UK and most of the US, has taken a significant toll on Diageo’s sales. It said the on-trade accounted for about 20% of spirits sales in the US, while in Europe the figure is about 50%, although this varies between countries – meaning in some markets it is even higher. 

Diageo said that, in both regions, there had been an increase in off-trade alcohol sales, with UK supermarket sales of booze increasing in line with other groceries, while Los Angeles-based alcohol-delivery service Saucey has been one brand to experience a boom in demand. But Diageo added that it was unclear whether this increase in demand would be sustained. 

While Europe and the US have faced the greatest impact of coronavirus in recent weeks, it is now present in almost all of the world’s countries. Diageo added that it had been forced to close production facilities in India and Nigeria.

Ivan Menezes, chief executive of Diageo, said: "During this challenging time, our top priority is to safeguard the health and well-being of our people, while taking necessary action to protect our business. 

"I am confident in Diageo's long-term strategy and our ability to move quickly in this difficult environment. We will continue to execute with discipline and invest prudently to ensure we are strongly positioned for a recovery in consumer demand. I am proud of the resilience and commitment of our people as they work hard to support our partners, customers and communities."

Diageo last month appointed Omnicom Media Group to its global media planning and buying account, covering most markets worldwide. The company is set for a change of marketing leadership in July, when Cristina Diezhandino takes over from Syl Saller as chief marketing officer.