Diageo, the global drinks giant, is leaning on its super premium segment to drive the company’s growth because it sees huge headroom, says the company’s president for Europe.
Why it matters
Diageo straddles the mass market and the super premium, mostly in spirits. But even then its leading Guinness brand carries a premium cache if not a premium price point that has driven strong sales across much of the world, particularly in the once lager-dominated UK.
A distinctive experience is at the core of both this and the super premium, which tracks important consumer trends that the company is betting on.
It appears to be working, with the segment contributing 57% of net sales over H1 2023 and demonstrating a 10% compound annual growth rate versus 2010.
Of course, this requires investment in those brands, of which its latest acquisitions have mostly been in premium spirits. Between 2021 and 2022, Diageo also grew marketing spend by more than a fifth, according to company reports.
Key: important moments
Speaking at Shoptalk Europe, Soraya Benchikh, president of the Europe region, explained how consumers are increasingly drinking “better not more”.
“We want to socialise in style, and this desire for specialness is what creates the opportunity for premiumisation.” The pandemic is key here: having spent much of it Zooming in our pyjamas, she adds, consumers are looking to “fabulous moments”.
The pandemic boost
The trend has its roots in the US where the super-premium spirits category – called ‘Reserve’ at Diageo – rose from 28% of the Diageo total two years ago to 42% today.
“In Europe, the reserve category is only 10%,” says Benchikh. “That’s massive headroom for growth.”
Premiumising the online experience
While premium brands drive profit, they also need volume and to retain the profit-driving premium feel, even when sold at major retailers. Recently, the company has been testing some new creative e-commerce executions with Tesco in the UK and Ireland, which have yielded the following results, according to Benchikh:
- Basic enhancements to images increase sales 26%
- Embedding video increases sales 36%
Reported by SPT. Additional sourcing: Diageo, Just Drinks
This article first appeared in https://www.warc.com
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