Brian Duffy is more familiar to most of us as the former Managing Director and the current Chairman of Diageo Ireland and up until recently, the hat also fitted for Global Brand Director for Guinness.
But following a change in Marketing structure in June 2009, Diageo now views its business in terms of categories rather than brands – and so things have changed, not least for Brian himself.
Just what this means exactly is the subject of a conversation I’m now having with Diageo’s new Global Category Director for Beer.
Brian’s appointment follows the that of David Gates as Global Category Director for Whisk(e)y and Ed Pilkington as Global Category Director for Vodka, Gin and Rum.
Now it’s not as if senior management in Diageo just suddenly had a light-bulb moment, realizing that a concerted focus on category opportunities and strategy can produce better results than merely concentrating on individual brands.
“These appointments are a statement of intent, that we want to leverage this more,” he explains as I sit in his fourth-floor office in the Guinness Storehouse casting an admiring panoramic eye over the second largest brewery in Europe.
It being a very mature market already in Ireland, his concentrating on his own particular category is unlikely to rock the beer boat that much here as a result.
But his building on the single brand approach with beer category marketing elsewhere will enable Diageo – already enjoying a healthy beer business in many countries – to contemplate considerably expanding its universe.
“We’re already selling Guinness in over 150 markets and are committed to developing our overall beer business based on priority opportunities,” says Brian, “China is perhaps the most often-quoted candidate for growth opportunities in Asia and we are currently testing and learning about our potential there. It’s a vast market and undoubtedly has attractions for us.”
In the meantime he sees more immediate opportunities to grow the brand in South East Asia, Indonesia, Malaysia, Thailand and Vietnam before China.
Guinness’s potential in the US is similarly substantial.
“It’s the most valuable beer market in the world and Guinness is a respected and admired brand there and that’s a great platform for us on which to build our business. Diageo’s spirits business in the US is a significant priority for us but we are also optimistic about our potential rate of growth in terms of beer.”
The opportunities for Guinness include raiding the ‘craft’ beer market category.
Thankfully for Diageo Ireland, Guinness might be common as muck commercially here in Ireland where it’s taken for granted by the consumer, but many countries beyond these shores consider Guinness to be somewhat unique in a taste profile, one capable of being considered artisan elsewhere — including the US.
“Craft beer in the US is growing by double digits in a market that’s in decline overall and Guinness, with its distinctive taste, quality, heritage and provenance has a strong appeal for ‘craft’ consumers at a time when the US beer drinker is actively more embracing of different beers.
“In the US we have FES on sale alongside draught and have been testing Guinness Black Lager in San Diego and Chicago.”
The Global Category Director for Beers sees the US as an opportunity area for sure.
At just 0.5 per cent market penetration, Guinness has potential as a small part of a declining beer market in a land where craft/taste beers are developing volume growth.
This has obvious implications for St James’s Gate which brews more than one billion pints a year of which 70 per cent is put on the export ship.
“Over 35 per cent of Diageo’s worldwide beer sales emanate from Dublin,” he explains, “Some 50 per cent of the Guinness sold globally is brewed at St James’s Gate and the brand generates over £1bn in sales for Diageo each year. That’s over 12 per cent of Diageo’s net sales annually.”
Ireland therefore represents a key brewing and manufacturing hub for two of Diageo’s global priority brands – Baileys and Guinness. Together they enjoy net export sales alone of €1 billion per year.
“Exports are important at both a trade and a macroeconomic level in Ireland. We all realise the critical value of exports to Ireland’s recovery.”
By the same token, conditions must remain favourable for Ireland to be an export base for the company.
“We want to continue to export from here. It’s the home of the Guinness brand with a lot of history behind it, but it needs to be competitive to succeed – labour costs, input costs, taxation – all that creates the value chain for our business needs to be right. Exports are the biggest part of what’s brewed here but we need a strong domestic business to maintain that critical mass.
“So success in the trade here is really important, not only for Ireland but for the critical part that our Irish sales play in our overall volume and business overseas.”
Of course he can see that the on-trade here is having a really tough time at present.
“The on-trade has been badly damaged by the recession and has lost a significant part of its role and business – not irretrievably, I believe. Like everyone else, I’m hoping that the arrival of a new Government (who’re faced with the same challenges as the old one) can perhaps mark a line in the sand in terms of looking forward and rebuilding over the next five to 10 years and re-establishing the confidence in our country and in ourselves. I hope and believe that the on-trade and the role it plays in tourism and Irish society will be a key part of that recovery and restoration.”
Most of Brian’s waking hours will now be taken up with developing beer as a category within Diageo – not just Guinness – so it’s perhaps just as well that his role as Chairman of Diageo Ireland takes up no more than five to 10 per cent of his day.
“Diageo’s operation in Ireland is large and multi-faceted comprising our Supply, Demand and Global Brands,” he explains, “Our domestic Irish business on its own is a very significant contributor to Diageo and coupling that with our International Supply and management of our Global brands, Guinness and Bailey’s, we have a major enterprise. It would be an understatement to say that there’s a lot going on!
“As a board we review the overall business, how we’re performing, our financial compliance and governance and we plan ahead on the key strategic elements of our operations.
Some are surprised to learn that Guinness represents only half of Diageo’s total beer business. There’s much much more to it.
“Beer represents over 22 per cent of Diageo’s total Net Sales Value,” explains Brian, “Around half of this is Guinness and the rest is made up of a series of local priority brands.
“For example we sell over a million Hectolitres of Harp in Nigeria. Tusker is the leading beer in Kenya and Red Stripe has a strong consumer base in the Caribbean, the US and Britain. We see those assets and others having the opportunity to expand too.”
Korea, for example, has become a relatively new and developing market for Diageo.
“It’s growing quickly and we’re very pleased with our performance. Quite a few other markets out there have real potential that we’ll be going after in order to grow our beer business and that business will be primarily Guinness.
“But we’ll be looking at other things too because the beer category internationally is healthy and is a category that will continue to grow and continue to premiumise.”
And the omens are favourable. In the first six months of Diageo’s fiscal year Diageo’s beer sales grew in Africa, North America and in Asia Pacific.
Clearly Brian Duffy speaks of a two-track world. Here in Europe, recession rages (with Ireland in the eye of this recession) so the biggest growth opportunities lie overseas.
“Europe represents about 40 per cent of our beer business and the rest of the world, the balance.
“We have to get that 40 per cent growing, but also move forward on the 60 per cent where the environment for growth is much stronger. I believe that there are many opportunities for our beer business to grow into the future”.
He expresses optimism too that North America will eventually emerge from recession. Indeed, there are already signs that it is doing just this, he says, “…. and we expect to grow there”.