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Johnnie Blue Label Marketing Strategy


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									                 innovation at diageo

    Finding Opportunity in Challenging Times
                 Masters the Science of Innovation
                     BY KRiSten WoLFe BieLeR

                              hese days, it seems that hardly a            McDonough is quick to point out one of
                              month passes without a new product     the positive purchasing trends that he sees:
                              release from Diageo. That is because   The premium sector of the spirits industry
“For each new        the world’s leading spirits company has         continues to grow, which is good news for
                     launched twice the number of new products       Diageo’s core brands—Captain Morgan,
product that         and line extensions this year than they did     Smirnoff, Jose Cuervo, Johnnie Walker

makes it to          the year before.
                          Why now? “I believe that Diageo has
                                                                     Black Label and Baileys—which all fall in
                                                                     this segment. “But it is clear that consumers
market there         truly hit its stride on innovation, with more
                     successful new products and line extensions
                                                                     are being more thoughtful about their
                                                                     purchases,” says McDonough. “There is more
are at least         that offer attractive organic growth for our    of a back-to-basics attitude, and consumers
                     flagship brands and the total company,”         are looking for brands they trust, with real
ten discarded        says Peter McDonough, general manager of        established credentials.”
                     innovation for the company.                           While the company’s focus remains firmly
during various            The approach is not without risk,          on their premium brands for this reason, the

stages of            McDonough explains, but so far it has paid
                     off: Recent IRI data shows Diageo had the
                                                                     marketing department will continue to make
                                                                     smart, selective investments in the reserve
development.         top three new spirit launches and eight of
                     the top 12 between September 2008 and
                                                                     offerings as well. Many ultra-premium and
                                                                     super-premium spirits categories continue to
In 2008 alone,       September 2009.                                 grow and McDonough reminds that trading up
                                                                     still occurs in this economy: “Some of our brands
we did over          Understanding Today’s                           in this category—Ciroc, Johnnie Walker Blue
                                                                     Label, Ketel One and Don Julio—have real
3,000 liquid         Consumer                                        momentum, and we need to make sure we are
                     Growth—both organic and new product-
prototypes in        driven—can only come with a sophisticated
                                                                     well-positioned when strong growth returns to
                                                                     the super-premium segment.”
our innovation       understanding of the consumer. “Consumer
                     dynamics have changed, and now more
                                                                           That said, the increased consumer focus on
                                                                     value has pushed many of Diageo’s lower priced
laboratory.”         than ever, it is critical that we keep the
                     consumer at the heart of everything we do,”
                                                                     brands into the spotlight, and the company
                                                                     sees opportunity here as well. “One of Diageo’s
                     says McDonough. “As we adapt our annual         strengths is in our range of offerings—we have
                     plans, both from a marketing and innovation     iconic brands across many price points, and as
                     perspective, it’s important we understand       consumers trade down, we’re well positioned
                     the consumer insights that are driving new      to hold them with brands such as Popov,
                     behaviors in our category.”                     Gordons and Seagram 7.”
                                                                                                       New Ways to Enjoy
Balancing Risk & Research:                                                                             Whisky and Bourbon
Smart Innovation                                                                                       Just in time
“Consumer desire for variety doesn’t change                                                            for the winter
during a recession. They are simply more                                                               months,
selective in what they’re willing to try,” says                                                        Diageo will
McDonough. “That’s why innovating off of                                                               launch several
our flagship brands is such an important part                                                          intriguing new
of our strategy. This means that we’ll do line                                                         brown spirits,
extensions using trusted brands and attempt to     flavor portfolio. And building off the success of   designed
develop new categories under iconic ones.”         Jose Cuervo’s Especial Gold, Diageo recently        to provide
     The recent introduction of Captain            released Jose Cuervo Especial Silver which          Bourbon
Morgan 100 Proof provides another excellent        will nicely tap into the growing consumer           lovers with
example. “Captain 100 strengthens Captain          interest in silver tequila. “The silver segment
                                                                                                       alternative flavor
Morgan’s appeal among men, 21 to 29, who           is currently experiencing rapid growth, and
                                                                                                       profiles, as well as bring new
are shifting to higher proof rums,” McDonough      now represents more than 20% of total tequila
explains. “Our quick work has resulted in                                                              consumers into the category.
                                                   sales,” says McDonough. “More than half
Captain Morgan 100’s position as a leader                                                              From Seagram’s comes
                                                   of silver tequila sales are driven in the ultra-
and put it on course to become one of the best     premium segment, so we know that consumers          Seagram’s 7 Dark Honey, a
selling new rums in the market.”                   have a real premium quality impression of           blend of whisky with a touch of
     Another brand benefiting from an exciting     what Silver tequila represents.”                    natural dark honey. At 71 proof,
line extension is Baileys. Since hitting stores        In spite of all the consumer research           it is meant to be enjoyed on
earlier this year, Baileys with a Hint of Coffee   behind each new launch, nothing about the           the rocks, with cola or simply a
has successfully broadened the brand’s appeal,     innovation in the spirits category is formulaic,    splash of soda water (available
and stimulated new occasions for Baileys to be     McDonough insists: “For each new product            in: 50ml: $1.99, 750ml:
consumed, including “after dinner, in small        that makes it to market there are at least ten      $16.99, 1L: $22.99).
gatherings after work, and most importantly, to    discarded during various stages of development.
                                                                                                           Under the
be enjoyed during the warmer summer months         In 2008 alone, we did over 3,000 liquid
                                                                                                       Jeremiah Weed
as a cold drink served over crushed ice, to        prototypes in our innovation laboratory.”
capitalize on the growing appeal of iced coffee                                                        brand comes two
beverages and cold frappuccino style drinks,”                                                          Bourbons, an
McDonough shares.
                                                   Giving Retailers the                                original and a
     This past year also saw the addition of       Tools for Success in                                cherry flavor.
Passion Fruit, White Grape, Melon and              the New Economy                                     Both at 90 proof
Pomegranate to the popular Smirnoff Vodka          One of Diageo’s most exciting areas of              and made with
                                                   innovation has been in response to one of           the highest
                                                   the most dramatic trends in consumption—            quality Bourbons
                                                   the shift towards home entertaining. “All           from Kentucky
                                                   indications are that the cocktail culture will      and Indiana, the
                                                   stay strong, even in tough economic times,”         Jeremiah Weed
                                                   McDonough says. “But this continued shift           Blended Bourbon
                                                   from on-premise to off-premise consumption          and the Cherry
                                                   has made at-home entertaining a key area of
                                                                                                       Mash Blended
                                                   growth for our innovation strategy.”
                                                                                                       Bourbon are
                                                       Diageo is bullish in the belief that although
                                                                                                       designed to be
                                                   consumers are going out less, they still want to
                                                   enjoy great tasting cocktails at home without       consumed with
                                                   the hassle of assembling multiple ingredients       cola, on the rocks
                                                   or having to prepare complicated drinks. This       or as a cold
                                                   conviction has made them the market leader          shot (available in
                                                   in the Ready-to-Serve category with cocktails       750ml, $17.99).
                                                   from established brands like Smirnoff, Captain
            innovation at diageo

                                             Morgan, Parrot Bay and Jose Cuervo [see             products, so we’ve developed thousands
                                             “Ready-to-Serve” sidebar].                          of what we call ‘Cocktail Concierge’
Diageo Leads in the                               But it isn’t limited to new product            programs that are designed to present
Ready-to-Serve Category                      development. Diageo has worked with                 our new products directly to consumers
Consumers have never been savvier or         their retail partners to find creative point-       while they are shopping.”
more demanding when it comes to the          of-purchase ways to capitalize on the at-                Finally, Diageo’s marketing team
quality of their cocktails. But research     home consumption trend. “We know that               will be implementing a “This Holiday at
shows that they still don’t feel confident   making cocktails at home can be daunting            Home” program, which communicates the
making them at home. The trend               for many consumers so we have developed a           message that “good times are still within
towards at-home entertaining has             retail merchandising strategy called ‘Simply        reach.” It will encompass advertising for
                                             Cocktails’ which allows our trade partners          Captain Morgan, Baileys, Smirnoff and
created tremendous opportunity for
                                             to offer a display and merchandising                Crown Royal, among others, as well
premium ready-to-serve cocktails,
                                             program that helps to educate consumers             as in-store merchandising and coupon
and Diageo has quickly established
                                             and simplifies their purchase decision for          opportunities. Innovation on its own
itself as the leader in this segment.        a more enjoyable shopping experience.”              isn’t enough, concludes McDonough:
             “I believe the launch           [See “Simply Cocktails” sidebar]                    “We support all of our products with
        of Jose Cuervo Golden                     In-store tastings is another priority.         marketing plans that drive the trial and
        Margaritas set a new                 “We know that recommendations                       consumption needed to build a consumer
        standard of quality in prepared      from store staff and sampling are often             franchise that our trade partners need in
            cocktails,” says McDonough.      the primary influences for trying new               growing their business.” ■
            “And last year we expanded
            our premium positioned
            range with four very
            successful offerings from        “Simply Cocktails” Makes                          “The concept really comes to life in the
            Smirnoff—the Smirnoff                                                              store and it’s a powerful merchandising
                                             At-Home Mixing a Cinch
            Cosmopolitan, the                                                                  strategy for building the business in the
                                             In an effort to dramatically alter the shopping
            Smirnoff Mojito, the                                                               years ahead. For shoppers, it removes the
                                             experience by making it more cocktail
            Smirnoff Pomegranate                                                               hassle of searching the store for various
                                             focused, rather than category or brand
Martini and most recently, Smirnoff                                                            ingredients, and eliminates the perceived
                                             driven, Diageo has created the “Simply
Tuscan Lemonade.” Rounded                                                                      complexity of making cocktails.”
                                             Cocktails” retail solution, a fully-integrated
out by Captain Morgan’s Long
                                             in-store merchandising program.
Island Iced Tea, Parrot Bay
                                                 There are three sections for
Tropical Mojito Citrus and                                                                     In further support of the program, Diageo
                                             consumers to choose from: First is the
Tropical Mojito Mango, the                                                                     recently increased its investment in Stirrings,
                                             “Ready Pour” section which features
range “provides bar quality                                                                    makers of a premium cocktail mixer portfolio.
                                             ready-to-serve cocktails (ex: Jose Cuervo
for popular cocktails that                                                                     The Stirrings portfolio consists of over 50
                                             Golden Margarita). Next is the “Easy
consumers are typically                                                                        products such as premium mixers (Mojito,
                                             Shake” section, which showcases
enjoying when they’re out                                                                      Cosmopolitan, Margarita, Pomegranate
                                             pairings of a spirit and a high-quality mixer
at their favorite bar,” says                                                                   Martini), cocktail garnishes (Margarita Salt,
                                             (ex: Stirrings Mojito Mix), which easily
McDonough.                                                                                     Pomegranate, Cosmopolitan), and classic
                                             empowers the at-home mixologist to
                                                                                               bar ingredients (Dirty Martini, Grenadine,
                                             “shake” their own drinks. Finally, “Simple
                                                                                               Blood Orange, Bitters).
                                             Mix” pairs a spirit with its signature soda
                                             or juice mixer to allow shoppers
                                             to easily make their favorite two-
                                             ingredient drinks (ex. Captain
                                             Morgan & Cola).
                                                 The program includes eye-
                                             catching graphics, end aisle,
                                             shelf sets and portable racks
                                             which will draw traffic and
                                             capture impulse purchases; it
                                             is also supported by sampling,
                                             drink recipes and food pairings.

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