Diageo - Competitive Advantages

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Analysis of Sustainable
Competitive Advantages

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  • With innovative developments. Now they have to handle issues such as responsible drinking, demand for high quality at a lower price and ricing costs of raw materials.
    Retail sales and brand strategies were affected by the recession.
    5- consumers are increasingly rarely drinking wine at lunch, so the consumption per capita of wine has fallen.
    About consumers, they are also changing the way the drink. Instead of ‘out of home’, they prefer to drink at home, as they are not looking anymore for heritage or authenticity, but for an ostetatious ‘bling’, what has led companies to create new flavours from trusted brands and
  • Diageo - Competitive Advantages

    1. 1. 1/31/2015Diageo 1
    2. 2.  Company Information  Context of the industry  Internal Analysis  Marketing mix strategies  The firm’s core strategy  The future outlook of industry  Strategic recommendations 1/31/2015Diageo 2
    3. 3. Celebrating life every day, everywhere… 1/31/2015Diageo 3 Day(Latin) World(Greek)
    4. 4.  180 markets  Over 20,000 employees  Offices in 80 countries  Manufacturing globally: › Great Britain; Ireland; United States; Canada; Spain; Italy › Africa; Latin America; Australia; India; The Caribbean  Company values › ‘Passionate about customers and consumers’ › ‘Freedom to succeed’ › ‘Proud of what we do’ › ‘Be the best’ › ‘Value each other’ 1/31/2015Diageo 4
    5. 5. 1/31/2015Diageo 1759 •Arthur Guiness 1934 •MRMA ltd: public company 1961-1962 •Grand Metropolitan Hotels ltd 1971-1973 •Entering brewing industry •Acqusition Watney Mann ltd 1986 •Guiness & Distillers Company Acqusition 1987 •Foundation of United Distillers(UD) 1997 •DIAGEO created •Guiness & Grand Metropolitan merge 2000 •DIAGEO Sells Burger King & Pillsbury 2001 •Acqusition of part of Seagram
    6. 6. 1/31/2015 Diageo 6  Beverages industry analysis: › Beer, Wine and Spirits  Global beverages market: US$182.9 billion liters  Market growth: 1-2% annual increase over 1999- 2004 period. 1  Spirits market shares: › There is a consolidated very profitable market.2 › Diageo 28% › Pernod Ricard 19% › Bacardi 10% › Brown Forman 6% › Fortune Brands 5% › Other Brands 32% 1 Source: Impact Databank top 100 Premium Spirits. February 2009 2 www.diageo.com
    7. 7. 1/31/2015 Diageo 7 1 Source: Impact Databank top 100 Premium Spirits. February 2009 2 www.diageo.com
    8. 8.  Herfindahl-Hirschman Index - SPIRITS INDUSTRY HHI= 282+192+102+62+52+322 = 2330 This means that according to the US Department of Justice, the spirits industry is Highly Concentrated, as the result is above 1800  Strategy implications › Tough for new entrants, need to innovate constantly › Predictable market › Social Responsibility is important  Environmental factor › Life cycle analysis: Mature stage › The key factors for success are product innovation, distribution and product branding 1/31/2015Diageo 8
    9. 9. 1/31/2015Diageo 9
    10. 10.  High volume and low sales growth. Major challenge: the drinking habits change quickly  Beer and wine threaten spirits ´share of market around the world  The recession has had a negative impact on the on-trade and spirits sales in bars, clubs and pubs.  Consumers are more interested in the entire process and in the differences between products than ever before.  Specific marketing towards younger consumers in the wine industry.
    11. 11.  Internal Factors Analysis Summary - Strengths 1/31/2015Diageo 11 Factors Weight (a) Rating (b) Weighted Score (a*b) Comments Strong Brands in a diversified portfolio 0.22 5 1.1 The company has 8 from the world top 20 premium spirits brands* Global reach 0.15 4 0.6 Protects the company from economic uncertainty in any one particular region Fast response to customer and consumer trends 0.07 3 0.21 In-depth customer and consumer understanding. Constant innovation Effective marketing capabilities 0.10 2 0.20 Diageo spent $358.2 million advertising worldwide making it the 94th global advertiser ** Good financial performance 0.09 4 0.36 £1,204m Strong free cash flow; 15% increase in net sales*** *Impact Database ** AdvertisingAge *** Diageo
    12. 12.  Internal Factors Analysis Summary - Strengths 1/31/2015Diageo 12 *Impact Database ** AdvertisingAge *** Diageo
    13. 13.  Internal Factors Analysis Summary - Weaknesses 1/31/2015Diageo 13 Factors Weight (a) Rating (b) Weighted Score (a*b) Comments Comparatively weak wine brands 0.15 2 0.30 Diageo does not put enough resources in their wine division and looses share to Period Ricard Not a leader in emerging markets 0.13 4 0.52 Global trends show that Europe and NA are not growing and the only possibilities are in EM Overdependence of net sales on global brands 0.06 3 0.18 In 2009, GPB accounted for 58% of total volume and contributed net sales of £5,131 million. No bitter spirit in portfolio 0.03 2 0.06 Bitters are becoming the new trendy drink in developed markets such as NA and Europe Total 1 3.53
    14. 14.  4 Ps for Global Priority Brands 1/31/2015Diageo 14 Premium
    15. 15.  Corporate Strategy › Long-term sustainability › Corporate Social Responsibility › Cooperation with NGOs › Cooperation with communities › Cooperation with competitors › Creating shareholder value 1/31/2015Diageo 15
    16. 16.  Strategic Business Unit Strategy 1/31/2015Diageo 16
    17. 17.  Companies are looking into Latin America, Asia, and the Middle East in search for new consumers, as growth opportunities are hard to find in Europe and North America. Source: www.beveragedaily.com  They have to monitor consumer habits, financial data and invest in NPD, marketing and sales in order to success. 1/31/2015Diageo 17
    18. 18. 1/31/2015Diageo 18  US will have the most successful spirits market with U$48,147mn forecasted by 2012 following a growth of 8.1% from 2008.  In Europe and the US most of the spirits categories are predicted to experience higher value than volume growth.  Beer will continue to overshadow spirits industry in Europe, Japan and the US.  European market is expected to increase 1.5% each year between 2008 and 2012  In Japan, whiskey is set for huge growth after 2011/12 Source: Innovations in Spirits: Key product trends, growth strategies and forecasts to 2012. 1 April 2010. www.officialwire.com
    19. 19.  For the North American market: › Industry resilience › Economic recovery › Attractive demographics  For the European market: › Russia opening for imported spirits – Scotch whiskey › Focus on at-home drinks  For International: › Grab the growing middle class population › Main opportunities in LATAM (6-7% growth) and Africa  For Asia Pacific: › Make partnerships with local players › Take on technological and consumer trends for marketing 1/31/2015Diageo 19
    20. 20. 1/31/2015Diageo 20 Drink responsibly!!!

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