Diageo Uses Yachts for Marketing

Diageo Plc (DGE), the world’s biggest distiller, is courting cash-rich Europeans with luxury boat parties and male models as sales of high-end brands in the region outpace cheaper spirit labels.

“We’re not going to just make a television advert,” said John Kennedy, head of the company’s Western European business, in an interview with Bloomberg News. “We’ll have big, spectacular experiential marketing.”

Sales of Diageo’s higher-priced Reserve brands, which include Tanqueray Ten gin and Zacapa rum, grew 11 percent in western Europe last year while net sales fell 5 percent. The company has increased its marketing spend on Reserve brands in the region while cutting expenditure on promotions in western Europe as a whole.

The company chartered a luxury yacht, naming it the John Walker & Sons Voyager, which set sail from Shanghai on Sept. 20 and traveled through the Asia Pacific region over six months. The boat has now docked at European cities including Athens and London, promoting the company’s high-end Johnnie Walker Scotch whisky brands, including Odyssey, a newly created triple malt whisky retailing for about 750 pounds ($1,140) a bottle.

The 1920s-style yacht has hosted parties attended by celebrities including model David Gandy, who appears in advertising campaigns for Dolce & Gabbana Srl’s Light Blue perfume lounging on a boat in white swimming shorts. Gandy also helps promote Diageo’s Johnnie Walker Blue Label whisky.

Consumer Confidence

Even as European economic growth stagnates, consumers in the region still have relatively high levels of average income and want to treat themselves, Kennedy said at the company’s head office in London two days ago.

The euro-area economy, which has contracted for six quarters, probably stagnated in the three months through June, according to a Bloomberg survey of economists.

Euro-area consumer confidence increased more than economists estimated in July, the European Commission said last month, adding to signs the 17-nation currency bloc is emerging from the region’s recession.

Diageo has considered opening a Johnnie Walker sales branch in Europe, echoing the bespoke houses the company has in Shanghai and Beijing, where the average bottle of whisky costs 1,500 pounds, Kennedy said.

Emerging Markets

Diageo, which competes with companies including Pernod Picard (RI) SA, is seeking to expand in Asia and Latin America where faster economic growth is helping spur alcohol consumption.

Organic sales in Asia Pacific rose 3 percent in the year through June, a slower pace than the 4 percent reported in the first nine months, the company said two days ago.

Diageo shares fell 0.4 percent to 2,068 pence as of 8:31 a.m. in London, bringing the advance to 16 percent this year. The stock reached a record 2,085 pence on April 3.

In Europe, the distiller sees potential to grow sales of brands including Ciroc vodka and Don Julio tequila. Reserve brand sales in the region are dominated by single malt whiskies, Kennedy said, providing an opportunity to increase the proportion of sales from other spirits.

“Europe is the global luxury capital,” Kennedy said. “We’re talking about affordable luxuries, not driving a Porsche through the centre of town.”

(Source: Google News: Bloomberg News. View the original story here.)