Diageo: Focus on effectiveness helped us up media spend by $260m

Diageo’s marketing effectiveness tool Catalyst has allowed it to significantly boost media spend while making savings on "non-working spend" such as agency fees, its chief financial officer has said. 

Kathryn Mikells was speaking at a press conference following Diageo’s half-year results covering the last six months of 2019 alongside chief executive Ivan Menezes.

The maker of Smirnoff, Johnnie Walker and Guinness reported net sales of £7.2 billion (US$9.43 billion), with both organic and reported growth of 4%. Diageo’s total marketing spend for the period was up 6% to £1.12 billion (US$1.47 billion). 

Mikells said Diageo’s approach to marketing spend was about "driving gains in terms of what we would say is effectiveness as well as efficiency". Catalyst, she said, allowed all of Diageo’s marketers to "look at the returns from different programs across different brands" and could be used "down to the level of detail of how they plan their week in terms of their media spend".

This was accompanied by "very closely" managing non-working spend, she added, allowing more to go into working spend. 

She said: "If we look at the media numbers in total and went back two or three years ago, we’ve upweighted media by £200 million [US$262 million] – if you add the efficiency we’ve driven, that would be worth another £100 million [US$131 million]."

Catalyst has also helped Diageo understand that it can make shorter ads but achieve the same level of effectiveness, Mikells said – meaning "we’re able to make more ads, but they’re shorter and they play very well". That is in contrast to both Procter & Gamble and Unilever, which are making fewer ads as part of efforts to make their marketing spend more efficient.

But Mikells admitted that, like the two FMCG giants, Diageo has been consolidating the agencies it worked with, saying: "We tend to be able to use our scale in terms of getting better pricing."

Discussing the performance of Guinness, Menezes revealed that the stout now accounts for one in 10 pints served in pubs in London – an all-time-high market share – and that it was growing in every region of the UK. He put this down to the "quality of the marketing", including the brand’s celebrated advertising and its Six Nations sponsorship, as well as "a lot of focus on ensuring the quality of beer served in pubs is good".