Diageo Australia's David Smith: How We Can Grow the Spirits Category

Diageo Australia has had a strong year in terms of growth, innovation and investment. The business opened the new Bundaberg Rum Visitor Experience in Queensland, launched a $20 million investment into the RTD category, continued to advocate on responsible drinking and Australia’s nighttime economy, and leveraged on long-term partnerships with the NRL and celebrity Matt Preston.

The business also saw a change of hands in leadership, with David Smith joining in September 2015 as Managing Director. New leadership can often mean change, but not in this case. Instead, Smith recognises the hard work done by the Diageo Australia team prior to his appointment and looks at how to build and grow the spirits category even further for the future.

The business was recently voted by the alcohol industry as Supplier of the Year 2016 at the Australian drinks Awards, recognising its efforts to growing the spirits category by building close relationships with trade. This is key for Smith, who sees working in partnership with the on and off-premise channels as not only an opportunity to grow the category but to also grow one another’s businesses.

“It’s really been a three-year journey, pre-dating me, to purposefully look at getting better at growing the category as well as collaborating and partnering with our customers, and the commercial team have spearheaded that and worked very hard,” Smith said.

One key change Smith has implemented however is placing heavier investment behind Diageo’s core brands.

“I’ve tried to bring about a bit more focus so that we’re not spreading ourselves too thin from a marketing budget perspective,” Smith added. “[Instead] putting more money behind our core brands to make a difference and drive brand equity and sales through the stores of our customers.”

Smith said that the most important thing for the business is taking a category approach; thinking about how to grow both the spirits and alcohol category for its customers which, according to Smith, doesn’t always mean more volume.

“The Mad Men and cocktail culture have really come in and people are beginning to take that home with them and getting more confident with mixing and drinking better, so premiumisation is a big part of continuing to grow our customers’ businesses,” Smith explained.

“Continuing to work with our customers on innovation is also absolutely key. We are doing less but bigger innovation, even so in saying that we’ve just launched five new pre-mix products that we think are great and very differentiated. We’ve launched two Johnnie Walker products in the last two months which are both very interesting, and we’re launching two new Bundy products - Bundy Black, which is a 12-year-old rum, and Solera.

“So we’ve got innovation that’s going to rejuvenate and reignite the RTD category with on-trend propositions and then innovation that’s going to premiumise the spirits category, and we’re really pleased that Scotch whisky is now the biggest segment of the spirits category in Australia, overtaking bourbon, and we really want to continue that trend.”

You can read more about Diageo’s new RTD products, including Lazy Bear Rum & Dry 330ml, Smirnoff Pure 330ml, Pimm’s Sparkling Cup 750ml, Pimm’s Lemonade & Ginger Ale 330ml and Gordon’s Elderflower Spritz 330ml, here.

The Johnnie Walker products Smith mentions are the new Select Casks and Red Rye whiskies. The first is a 10-year-old, chill-filtered blended Scotch whisky that has been matured in first fill American Oak casks and finished in ex-rye whisky casks to create a rich, creamy and spicy whisky. The second is the first in a limited edition experimental whisky series created by the distillery’s Master Blender, Dr Jim Beveridge. Johnnie Walker Blenders’ Batch Red Rye Finish is a blend of malt and grain whiskies, drawn from first fill, ex-bourbon casks and finished in ex-rye casks for an intense and sweet whisky with fresh fruit and spice.

“We have a great collection of brands and we’re investing money to grow them for the future. I think that retailers can be really confident that people will walk through their doors and be looking for Diageo brands because we are increasing the investment that we’re putting into above-the-line marketing.”

Bundaberg kicked off a three-year partnership with the NRL in April, marking Diageo’s biggest sponsorship agreement in almost a decade. Smith said the alignment has already successfully driven awareness and engagement for the brand. In the last few weeks, Bundy has been airing its new campaign for Lazy Bear Rum & Dry, which returns the brand’s famous mascot, the Bundy R. Bear, to games and big screens across the country. Diageo is also investing heavily in advertising for Johnnie Walker and will launch a new Smirnoff campaign this month.

“We’ve also got a great tie-in with Matt Preston who we advertise and do a lot of social media with. Matt Preston is going to be getting behind Pimm’s, Baileys, Tanqueray, and a lot of cocktail creation across our products,” Smith added.

Smith is also forecasting growth in visitor numbers to the Bundaberg Rum Distillery, following the opening of the new Visitor Experience earlier in the year.

“We’re really proud of that investment. It creates a great tourist beacon for the town and of course it’s great for the brand because we can really engage people with the wonderful world of rum and the wonderful world of Bundaberg Rum,” Smith said. “We’re looking at a significant 30-40 per cent increase in our visitor numbers, we’ll take it up to 100,000 visitors per year and maybe even beyond that.”

This is an edited version of the original story. Read the full interview in drinks trade magazine - October/November.