Diageo today unveiled a raft of NPD across brands including Guinness, Smirnoff, Pimm’s, Captain Morgan, Gordon’s and Ciroc brands as it seeks to drive the proportion of sales coming through new innovation from 13% to 20%.
Louise Robinson, UK innovation chief, talked Marketing through the strategy.
Has the rate of product innovation at Diageo being accelerated for 2015?
In terms of the rate of innovation this year compared with previous years, it has massively ramped up. And that’s because over the past 18 months we feel we haven’t innovated at the rate we need to, in order to grow at the rate we want to.
We’re playing a bit of catch up. And what we want to make sure is we have a balance of shorter term range extensions with longer term strategic bets.
We want to make sure we get the balance right. We’ve had some really big innovations over the past 18 months such as Baileys chocolate Lux, Smirnoff Gold and the porters under the Guinness brand. We realised that actually we needed to build momentum again.
What’s the business need driving this growth?
We have an ambition for innovation to be 20% of our business. We realise innovation drives growth, and I think younger consumers in particular are always looking for the next new thing. So in order to drive their interest we’ve got to provide them with it.
The way I see it, innovation products are growth drivers for an overall trademark. They’re all about driving the growth of the umbrella brands as well as the category.
How much of this new innovation is in response to the decline in alcohol consumption across 18- to 24-year-olds?
18- to 24-year-olds don’t drink as much as they did 10 or 15 years ago and we don’t want to change that, we want to make sure we’re offering more relevant products.
Smirnoff Ice Double Black is absolutely targeted at that age group but I don’t think we are really with any of the others. Captain Morgan White, yes, but the others are much more general in terms of their target.
Why has there been a decline among this age group?
It’s been driven by a combination of things. We’re getting a lot more different nationalities and cultures coming into this country who may not drink, or may not drink as much as previous generations.
I think there’s an increasing importance on education and if you want to get into the best universities or get best results, you’ve got to work really hard and stand out from the crowd and you can’t really go out drinking.
And there are financial concerns as well. Either they are working as well as studying, or they’re working and don’t earn enough to save for a deposit on a house and also spend on treats like going out for drinks.
How closely do the marketing and innovation teams work together?
Really closely. The way our marketing team is structured is so that we have a team against each trademark and we also have an innovation team. There are literally hourly meetings [between the marketing innovation and R&D teams].
They look at lots of different consumer insights and retailer insights, to understand where the big opportunities and white space might be.
A good example is Pimms Cider. We had a meeting with a big customer that said it thought there was plateauing in the cider category.
We took that insight and gave it to our marketing and R&D team and looked to see which of our brands fits best in cider, and Pimms was the obvious choice.
Has Diageo’s marketing spend increased?
We’re absolutely increasing our overall spend. However what I would say is it’s more about how we support our overall trademarks.
So for example on Smirnoff core we’re not innovating at the moment, so we don’t have to shift our investment into innovation. Whereas on brands where we have a lot of [NPD] at the moment, we’re spending on the innovation. So what we’re doing is shifting our money to support innovation.
To what extent is Diageo prepared to take risks with innovation?
I think we take educated risks. All of our innovations have either come from or are embedded by consumer insight. So while the cider request came from a customer, we’ve obviously also done consumer research to understand whether the opportunity was there, so we’ve always got a level of confidence.
And we do testing where we’ll look at a panel of consumers and get purchase intent scores. So we do a bit of that.
However we haven’t done much of that with Pimms Strawberry, it just felt intuitively right. So to some extent on shorter term tactical things, we will be more risky. But we make sure we’ve done the due diligence.