Diageo confident in premium future

20 April, 2010

Consumers are returning to premium purchases, according to global drinks giant Diageo.

During the past 12 weeks, US consumers have purchased more premium, super premium and ultra premium products than in the same period last year.

But chief marketing officer Andy Fennell warned that consumers will look to make more considered purchases than before the recession.

He said pre-down turn was about indulgence and enjoyment without necessarily having an occasion and post-recession is about consequences.

He said there is evidence that people will now visit two supermarkets and spend less on essentials in order to have more for indulgence items.

A survey of consumer spending by Booz & Company in 2009 showed that consumers were more likely to switch to less expensive brands of household products, food at home, clothing and health and beauty products than switch to cheaper brands of alcohol.

In markets around the world, including Asia, Africa and Latin America, ‘urbanisation’ is in play and people aspire to demonstrate their success through aspirational brand purchases and premiumisation is ‘on track already’, according to Diageo.

Fennell said international brands in developing markets are still small and there is headroom for penetration.

Global category director Alberto Gavazzi said the company looks at a country’s stage of development when deciding how to market a product.

“In developing markets, we talk about the product, the liquid, providence.

“In developed markets, we have to be much more creative."

Fennell’s post-recession feeling is that premium brands will survive if they appeal to consumers on both an emotional and rational level – and avoid ‘bling’.

The perception of ‘bling’ products is that they have a premium price but not necessarily the providence and quality to back it up.

Diageo said it may rethink its brand communication for Ciroc in the US, for this reason.

When talking about different sectors, Fennell said the on-trade is still an important place to launch brands and that consumers take their behaviour from the on-trade to the off-trade.

"Travel retail is a shop window," he added.

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