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tv   Leaders with Lacqua  Bloomberg  March 14, 2018 9:30pm-10:01pm EDT

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♪ francine: household names, some dating back centuries, but the company that owns them has not reached the legal drinking age. turns 21.iageo with over 200 brands sold in 280 countries, it is the biggest single producer of spirits in the world. driving the business ford is a man with the company since its inception. today on "leaders with lacqua," we meet ivan menezes, chief executive of diageo.
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ivan menezes, thank you for joining us. how has the drink business changed since you joined? ivan: it is such an exciting time, the last two decades. the big shifts is that the consumer is a lot more ,nterested in premium brands talk tales.talk tale the business has grown terrifically around the world, emerging markets coming through stronger, and the developed world is also in good growth, but the core dynamic at work is that people around the world want great experiences and those who choose to drink want to drink better, and that is a good thing for diageo. francine: what attracted you to the drinks business? do you remember that day you walked in the door? i am a brands person. i grew up in the consumer business. i have always loved brands. to me when i got the call from
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plc at the time, two of my favorite brands were in the company at this time, guinness and johnnie walker. it was not a difficult decision. johnnie walker is 198 years old. guinness was started in 1759 him and our job is to make these great brands greater, and that is what attracted me to the company. francine: to consumers now trick more at home? you talk about the premium ization, but they also won a story that goes with the brands they drink. ivan: depending on the country and culture and how socializing takes place. our brands participate in moments of celebration, relaxation, being out with friends, and are built into the fabric of culture, so right now for example lewinsky has a real
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renaissance around the world. -- for example, whiskey has a real renaissance around the world. tellingwhat we love, those stories and getting that connection with the consumer. francine: how much does scale matter? do you need to be bigger to demand better premiums? it is interesting. it is both. my key job is to keep a big company small, so scale does matter, and we have a wonderful portfolio with market-leading brands across all the major categories, but at the same time you need to be entrepreneurial, very connected to wear trends are going, and move with speed, and to meet the magic of diageo is to get the best of both. francine: what does that mean? that youhe local brand acquire, spending time rebranding and giving people the
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story about the more famous global brand so they buy into it? ivan: that and spotting trends. i came back from johannesburg this week. what is interesting is how the gin craze has got to south africa. we have a brand called tanqueray , which is doing very well and the last few months, and for a company like us when trends like that develop, you have to ride them quickly. encourage our teams on the ground to keep there is to what is shifting and building l brands quickly. aancine: that seems like nightmare. how do you do that? how do you stay on top of the trend? do you go to bars to see what the people are drinking? connectedlearly state , her teams do, to understanding what the conversations in culture are about. we look at trend-leading bars and bartenders and what they are excited about.
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we track what is happening on social media with adults and what they are talking about. that is what our marketing teams around the world need to be really good at, and it is an exciting part of the job. francine: you own two of five the most important brands in the world, johnnie walker and smirnov. had you keep them relevant? ivan: i always say to make sure the brands like these built over hundreds of years are highly aspirational and relevant to the next generation of consumers coming through, so the twentysomething year old in needs toohnnie walker be and stay relevant, cool, aspirational, and that consumer needs to be willing to pay a premium for this wonderful whiskey. that is how we define our jobs. so these brands have to stay connected to culture because things change. how young people socializes changing, and we have got to make sure our brands fit in with
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the trends. i call that the day job at diageo. francine: what is that, marketing? does that change? do you replace billboards with bloggers come or go to celebrities? ivan: in brazil, one of the things we do is have this wonderful truck beautifully decked out with johnnie walker that moves around the country and goes to communities and we host little events and introduce people to the whiskey and tell them the story about all the single malts behind johnnie walker, the factor that johnnie walker black label, the youngest whiskey was distilled before the financial crisis. you tell them the story, and it is amazing how much interest we get, and when you bring a consumer into a brand through a mentoring experience as we would call them, you get them for life. say the thing about our
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business is what you drink are what you serve at home says a lot about you, and so our brands need to live up to that expectation. francine: ivan menezes, talk to me about the u.s. it is your largest market. due expected to remain so 5-10 years from now. ivan: the u.s. is about half of the profits and third of sales , but what is attractive about the u.s. is the demographics are positive. i refer to it as our biggest developing market. you have the multicultural population that is very strong, latino, african-american, asian, all of which bode well for premium brands. it is also a young population. you have the growth of americans turning 21 at a faster rate in europe, and finally the taste profiles are changing. there is a huge interest in the cocktail culture. elegy is is hot -- mix
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hot. francine: thank you for now. coming up, trade barriers, terse him and how to grow the spirits business in emerging markets. more with ivan menezes next. ♪
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♪ as well as running the biggest spirits company, ivan menezes sits on the advisory andd of a business council the u.k.-india executive forum. his roles demand a deep understanding of the challenges and opportunities of international business and the eternal hunt for growth. in 2017, more than a third of diageo's $15 billion in revenue came from north america. africa, asia, 13% from
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so are emerging markets getting a taste for spirits? ivan menezes is back with me. ivan, can you see a clear pattern? some of the developing economies getting the same taste as the western ones? ivan: very much so. penetration of spirits is still low in places like africa, latin america, and asia, but people's aspirations for great brands is very high, and with the growth of the emerging middle class in the emerging markets we see about 500 million coming into legal drinking age. there is a really exciting opportunity for us. it is not a straight line. this is the nature of emerging markets. i was in south africa this weekend will be in nigeria next week. there are ups and downs, but what you need to do is stay very consistent in building your brand's, categories, and
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business for the long haul. you will have tough years, and we have come to that, but over are the growth prospects really exciting because, again, we play in the space that is an enforceable -- unaffordable indulgence, unaffordable luxury. our brands play a wonderful role in that space. as per capita income rises in the emerging world, the trend for people drink better continues to be strong. francine: at the same time how do you go against a local spirit or local drink? or do people drink both? ivan: the key is having brands resonate at the local level. francine: so taste? ivan: not just. the way you build the brand come in brazil, johnnie walker is , andas an iconic brand that is how we built the brand.
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we have a campaign of keep walking, brazil, where we really connected with the consumer and view it as my brand. i always tell our marketers around the world that you have to keep your brands connected at a local level. yes, they are big global brands, but the same thing is true in india right now, which is the biggest whiskey market in the world. most's local whiskey and we own a lot of that, but the aspiration to move into scott whiskey is high, even though the price points are high, and we are keeping scotched very relevant. -- scotch very relevant. francine: is that a big headache for you, that you have to get the price right? ivan: price is an important factor in the brand value equation, and for our premium they carry toce
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local alternatives is something we watch closely, but at the end of the day our brands are affordable. hanoi step up to a bar in and order johnnie walker blue label, you're not adding the farm. you are not buying a fancy watch, but it is a great occasion. we keep the specialness of our product, but it is also affordable. getting that price favor equation right is important. francine: what about the bottles? i remembered you coming in to bloomberg and showing me some smaller sized bottles for certain emerging markets, and i don't know if that is because of how they drink or it goes back to affordability? ivan: it is a combination of both. there are occasions where small , or in ae going out beer outlet we have a program for example where people in vietnam or africa largely drinking beer, on special occasions they may take a small bottle of johnnie walker black
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label and share it amongst friends around the table, so the small formats address affordability, but they are tied to the occasions come and that is something we managed to our understanding of the market in the consumer. processcial distilling generations of knowledge, the best can only get better. here is to another 600 years. francine: talk to me about china. do so differently to the chinese consumer than the american consumer? ivan: the big thing about china is most of the value happens market is, so the enormous and very profitable in china, and it is so ingrained in
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culture and ingrained into entertaining and how it is consumed with friends or business colleagues with food, and so we have a brand that is doing really well. it grew 75% this year. it is highly aspirational, but connected to the food culture. typically in the u.s. most of your spirits consumptions would be pre-dinner, after dinner, cocktails, going out, so the occasion and cultural understanding is important. this is what makes the business so fascinating. we don't have one weight to build a brand. we have to get deeply immersed in local culture and tradition and find a way to stay contemporary am aspirational, in that context. francine: i don't know if it is comparable, but do people drink more if they drink with food than before dinner and after dinner and lunch? ivan: the main difference i
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would say is the ritual of celebration and toasting that happens in the case of china. it is not so much drinking more, but a more social occasion. there is more ritual around celebrating each other, toasting each other, and that's where the brand place a magical -- plays a magical role in china. ivan: if you look at china and india, and maybe latin america, where do you see the most potential longer-term? big onesould say the for us, i see india, china, africa having a lot of growth. latin america is a very important business for us. that will continue to grow. overall, the emerging markets for diageo still represent a lot of runway for growth. we are early in the stage of development of premium spirits brands, and as economic and gdp
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growth happens, we see a lot of opportunity. the demographics are in our favor. the taste profiles are there. people are drinking and choosing better brands. we benefit from that trend. ivan: if if households become less rich, do they cut down on alcohol consumption before anything else? ivan: again, typically our brands played in the affordable, special occasion space in many of these markets, and you would see a slowdown on premium brands where consumers may choose a johnnie walker red label instead of a black label, when their pocketbook is under a bit of pressure or they may celebrate may be four times a year, so you would see those adjustments take -- may celebrate four
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times a year instead of six times a year, so you would see those adjustments take place. you want the brands to have that connection with consumers so they would step up their consumption or the number of occasions in which they enjoy you when things get better. francine: thank you. up next, some whiskey being created now that won't be ready to drink for more than 40 years, but what will the drinks industry look like then? more with ivan menezes next. ♪
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hiscine: ivan menezes knows business well. over two decades he has held numerous management positions coo,ing as diageo's president of north america, chairman of asia-pacific and latin america. diageo hascoo, president of north america, chairman of asia-pacific and latin america. more women in senior roles than any other ftse 100 firm and will soon have gender parity on its board. ivan menezes is with me here on "leaders." when you look at how your employees would describe you, and that says a lot about how the people perceive the
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executive. approachable, focused on possibility, itanding, and i call high-low, stay at the big picture strategic level, but not the execution. customers, enjoy picking up the phone to a brand manager in ethiopia and asking , so how the brand is doing i hope that is what they would say. francine: how much do travel? do you enjoy traveling? is that the only way to be in touch with the local person and how local markets are doing? ivan: totally. i really believe in being out in the markets, and it is important because it gives me the best read of how our business is performing, and the opportunity to contribute to the local teams
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was a weather meeting with local government, our customers and i say bars and and shops don't lie. you get a true understanding of how we are performing in the market, and meeting our people. so i get a lot of energy from being out. i actually don't enjoy being in headquarters. ivan: do do you go incognito? ivan: i do both. i go out and decide which shops, bars, and restaurants i will go in and take a look, so i love to i am in on my own when a market and just walk the streets and get a good feel for the culture. i enjoy that. as i said, you learn a lot. also focus quite a lot on drinking responsibly. does that come from you, from pressure around you that makes
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you do that, or something that came from within? ivan: no, it is very much in the core values of diageo and something i am really proud of. we are in a category which has been around for centuries, and we take the view that for people who choose to drink, we want them to drink in moderation and believe that is perfectly normal as part of a balanced lifestyle. however, we also realize the consequences for society when it is misused, so everyone at diageo is passionate about making a difference in reducing alcohol harm in society, be it excessive drinking, under age driving, drink driving. ivan: is that government or schools? -- francine: is that government or schools? ivan: we work with governments,
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schools, ngos, communities, very integrated into mexico city, we worked with local police on a drink driving program and have had good success in reducing the level of drink driving, which in many emerging markets is still an issue. so we have teams on the ground , we do ita source of with real pride in real commitment, and our employees believe passionately in the work we do for the field. aboutne: talk to me diversity. why have you achieved gender parity on the board whereas no one else really has. a lot of people fail. you succeeded. ivan: it started from our core values. we always put inclusion and diversity at the heart of diageo . i am very proud of for track record. board, 30% of senior women -- senior leaders are
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women, and i see that improving them up but it is not just gender diversity and nationalities, diversity in ethnicity, sexual orientation and diversity in style, and to me -- i have been in business years -- the power of having diversity in the team, including thinking styles, i think is huge, and i see the benefit in years spades. i am really pleased with where diageo is on this journey come and i think we can take it further. francine: why do other companies fail then? ivan: i think you need the conviction and belief, so i grew up in india and i grew up in a multicultural society as a minority. me, the importance of
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everyone coming to work feeling included, valued, is how you get the full potential of me people, and what we put at the fabric of diageo is creating an environment where you can truly be yourself no matter what your background and where you come from, and one of our core values is valuing each other, and that is at the heart of the company. i am really proud of the culture that all of our employees have created, and that is when good things happen. we have seen this and warmest progress in much more diverse leadership. francine: ivan menezes, thank you so much. ivan: thank you. ♪
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♪ >> markets in the asian pacific falling for a second day, caution is the order. fed meeting takes place next week. chinese logistics a big one here. million for manipulating stock prices, six times what the company made. president trump also in the mix. he set two targets, chinese tech, announcing a tariff could come next week. also coming up, justin trudeau is confident nafta talks will succeed. he tells bloomberg it should be
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a win win win situation. this is "bloomberg markets: asia ." a little bit of a narrative in terms of how conducive market is. mark cudmore saying i have bad news for you guys. you aren't going to get an answer anytime soon if you are trying to work out if the trade talk is just tough talk or result in a trade war. whether all of these mixed messages on inflation on the data front is going to give any clarity on where the fed is headed. >> one has to be patient. , twopoint on inflation data points doesn't make a trend. five does. i guess we have to wait on what donald trump is saying and what is coming out of the

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