Spirit of Innovation Boosts Diageo

Michael Ward leaves you under no illusion as to how important innovation is regarded within Diageo and how they harness it to put their brands in the right place at the right time. “Innovation drives our company forward and for us, that means staying ahead of consumer trends everywhere, creating new products, categories and experiences.” Last year, Diageo’s investment in innovation was rewarded with a number of high profile ‘wins’ for the company that helped to shape their overall performance.

The ability to react to and to anticipate future trends determines the fortunes of a company’s innovation policy, and according to Ward, Diageo have the mechanisms in place to do just that. “Our thinking starts with the consumer. We have proprietary tools and techniques that allow us to identify promising opportunities now and in the future. This could include identifying unconscious compromises consumers are making on key occasions or emerging, significant changes in consumer attitudes, as first recognised among leading opinion leaders”.

Limited edition offerings push the Johnnie Walker brand

Ward highlights several of the new product highpoints that have not just won the plaudits of the industry, but have “driven innovation at scale” and made it a “banner year for Diageo’s innovation”. Last year, he cites White Walker by Johnnie Walker and Tanqueray Flor de Sevilla, as well as recent innovations that continue to have momentum, including, Crown Royal Regal Apple and Ketel One Botanical.

Ward credits a strong “consumer focus” with spawning the creation of the limited edition offerings of ‘White Walker by Johnnie Walker’ and ‘The Game of Thrones Single Malt Scotch Whisky Collection’. Many might have baulked at partnering the Johnnie Walker brand, a brand nearly two hundred years in the making, with cult TV show Game of Thrones, but Ward felt the decision allowed the brand to “capture a cultural moment, tap into the Game of Thrones global phenomenon, and to open up the scotch category to a whole new set of consumers across a number of markets.” The results more than vindicated Diageo’s courage.

Just how willing Diageo are prepared to push the boundaries with the Johnnie Walker brand have recently been illustrated by the adoption of Johnnie Walker as the face of a Whisky High Ball campaign. Launched in July, the Whisky High Ball is another “promising opportunity” on Diageo’s radar.

Flavour innovations cater to summertime drinking

Ward also points to the contribution of new product development from prior years, to last year’s sales growth. Nearly five years ago, the company added an apple extension to the Premium Canadian Whisky brand, Crown Royal. Regal Apple recalibrated the brand and, with the help of Comedian JB Smooth, recruited a diverse range of new drinkers to the brand. Subsequent flavour extensions, such as vanilla, salted caramel and this year’s peach, have further broadened the congregation. Crown Royal flavours have helped to make the drink highly versatile and it is enjoyed as a long drink, put in cocktails or even drunk as a shot. The recent limited-edition peach flavour was positioned to another new ‘occasion’, the ‘summertime’.

Consumer insight drives the innovation of natural products

In a challenging US vodka market, Ketel One Botanical was another fresh approach that helped to illuminate Diageo’s 2018 and 2019 annual results. Their insight in the US told Diageo that their target audience wanted to drink more ‘natural’ products with fewer calories and a lower ABV. In Ketel One Botanical, they gave consumers a 30% ABV vodka with just 73 calories, no artificial flavours, sweeteners or added sugars, made with 100% non-GMO grain. The flavours meanwhile of Peach & Orange Blossom, Cucumber & Mint, and Grapefruit & Rose made the drink appropriate to trends tracked in the soft drink’s arena.

Botanical reinvigorated the Ketel One brand in 2018/19 and net sales jumped by 10%. The innovation not only encouraged existing consumers to try out the new product, but it also brought new consumers into the brand. It is relatively early days, but Diageo will now be confident that Smirnoff Zero Sugar Infusions, a product motivated by similar insight, will have a comparable impact.

Relentless curiosity and consumer centricity fuel a culture of innovation

Diageo’s innovation success is not just defined by its ability to identify trends, but the agility with which they can act on them. The speed with which Gordon’s Premium Pink Distilled Gin went from conception to shelf in 2017, enabled the drink to ride the crest of the pink gin wave last year. Tanqueray Flor de Sevilla, unveiled in 2018, further strengthened their presence at the forefront of a rapidly developing flavoured gin segment and put a considerable sheen on their gin results last year.

Diageo never stand, still and are successfully utilising innovation to service a constantly evolving consumer. All the evidence shows that the attitude to alcohol of tomorrow’s drinker is changing and Ward says that Diageo, among other “disruptive new opportunities” are investing in the expanding low and no alcohol segments.

Diageo subsidiary, Distill Ventures, a nursery for start-up brands, can even boast the creation of a whole new category, Zero Proof spirits. They are taking Seedlip, the world’s first distilled non-alcoholic spirit, to a mass audience and the early signs have been very heartening. Ward states that “while comparatively small today, these new innovations have the potential to become the big brands of tomorrow.”

Ward recognises the importance of cultivating the next generation of brands to keep Diageo’s portfolio relevant to the future trading landscape and is optimistic for some of the brands further down the conveyer belt. “We also focus on innovating to create the next great brands in the Diageo portfolio and continue to be encouraged with the consumer reception to recent launches like Blade & Bow Bourbon, Roe & Co Irish Whiskey and Villa Ascenti Italian Gin.”

Ward appreciates that “there is no tried and true formula for successful innovations, but we are seeing real success by combining consumer centric discipline, relentless curiosity and creativity.” Diageo’s 2018/2019 results are a considerable endorsement of their current innovation processes and strategy.