tv Leaders with Lacqua Bloomberg March 16, 2018 9:30pm-10:00pm EDT
♪ francine: they are household names, some dating back centuries. but the company that owns them , has not even reached the legal drinking age. this year, 2018, diageo turns 21. with over 200 brands sold in 180 countries, it is the biggest single producer of spirits in the world. driving the business forward is a man who has been with the company since its inception. today on "leaders with lacqua," we meet ivan menezes, chief executive of diageo. 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. i would say the big shifts is -- the consumer is a lot more interested in premium burns, and mix elegy, and cocktails -- in premium brands, in mixology, cocktails. the business has grown terrifically around the world, the emerging markets are 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. at is a good thing for diageo. francine: what attracted you to the drinks business? do you remember that day you walked in the door? did you find yourself at home? ivan: i do. to me, imi brands person. -- i am a brands person. i grew up in the consumer business.
i have always loved brands. when i got a call from guinness plc at the time, two of my favorite brands were in the and johnnyguinness walker. it was not a difficult decision. to me, the great thing about brandst diageo, we have -- johnnie walker is 198 years old. guinness was started in 1759, and our job is to make these great brands greater, every day. that is what attracted me to the company. francine: do consumers now drink more at home? you talk about the ion of what a lot of people want to drink. are eitherso want us goes with the brands that they drink. home and also going out. depending on the country and culture and how their socializing takes place. our brands participate in moments of celebration, relaxation, being out with friends, and are built into the fabric of culture. for example, right now is seeing
a real renaissance around the world. young people are interested in whiskey, how it is made, where it comes from, the stories behind it. that is what we love, telling those the reason getting a connection with the consumer. francine: how much does scale matter? do you need to be bigger to demand better premiums? but also where your product gets placed in a bar? ivan: it is interesting. it is both. i always say 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 very entrepreneurial, very connected to where trends are going and move with speed. to me, the magic of diageo is to get the best of both. francine: what does that mean? is it finding the local brand that you acquire, spending time rebranding and giving people the story about the more famous global brand so they buy into it? ivan: that and spotting trends.
i just came back from johannesburg this week. what is really interesting right now is how the gin craze has got to south africa. we have a brand called tanqueray, which is doing remarkably well just in the last few months. and for a company like ours, when trends develop, you have to ride them very quickly. so i always encourage our teams -- i always look for our teams on the ground to keep their years to where culture is shifting, and building our brands quickly in that context. francine: that seems like a 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? i don't know how you spot that. ivan: we have a variety of ways. we clearly stay very connected them our teams do, to understanding what the conversations and culture are about. we look at trend-leading bars and bartenders and what they are excited about. 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 of the most important brands in the world, johnny walker and smirnoff. how do you keep them relevant? ivan: our job, i always say is to make sure the brands like these, which have been built over hundreds of years are highly aspirational and relevant to the next generation of consumers coming through. so the twentysomething year old in brazil, johnnie walker needs to 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 socialize is changing, and we have got to make sure our brands fit in with the trends.
i call that the day job at diageo. francine: what is that, through marketing? does that change? do you replace billboards with bloggers or do you go to celebrities? is a product placement? ivan: it is a combination. for example, 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. introduce people to the whiskey. we tell them the story of all the single malts behind johnnie walker, the fact that in 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. when you bring a consumer into a brand through a mentoring experience as we would call them, you get them for life. i always say the thing about our business is what you drink or
what you serve at home says a lot about you. so our brands need to live up to that expectation. francine: ivan menezes, talk to me about the u.s. it is by far your largest market. do you expect it to remain so in 5-10 years from now. ivan: north america is about half of the profits and third of sales for diageo, but what is attacked him about the united states is the demographics, they are very positive. i refer to it as our biggest developing market. you have got the growth of 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 a growth of americans turning 21 at a faster rate than in the europe there we had and finally, the taste profiles are changing. there is a huge interest in the cocktail culture. mixology is hot.
♪ francine: as well as running the world's biggest spirits company, ivan menezes sits on the china-britain advisory business council and 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. 20% from asia, 13% from africa, so are emerging markets getting a taste for spirits?
ivan menezes is back with me. ivan, can you see a clear pattern? i guess, are some of the more developing economies getting the same taste as the western ones? ivan: very much so. if you look at our category, penetration of spirits is still low in places like africa, latin america, and asia, but people's aspirations for great brands is very high. with the growth of the emerging middle class in the emerging markets, we see about 500 million coming into legal drinking age. that 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 week, i will be in nigeria next week. there are ups and downs, but what you need to do is stay very consistent in building your
brands and categories and business for the long haul because, there will be a cycle. you will have tough years, and have certainly gone through that. but over time, the growth prospects are really exciting because, again, we play in the space that is an affordable indulgence, an affordable luxury. when people want to socialize and celebrate, our brands play a wonderful role in that space. as per capita income rises in the emerging world, the trend for people drinking better continues to be strong. francine: at the same time how do you go against a local spirit or local drink? do you or do people drink both? ivan: the key in making our brands is having them resonate at the local level. francine: so taste? ivan: not just. the way you build a brand, in brazil, johnnie walker is seen as an iconic brand in brazil, not as an international brand. that is how we build the brand.
so, we have a campaign of "keep walking, brazil," where we have really connected to the consumer, and they see 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 of it is local whiskey and we own a lot of that, but the aspiration to move into scott ch whiskey is very high, even though the price points are high. we are keeping scotch very relevant in local occasions. francine: i was going to talk to you about pricing. is that a big headache for you, that you have to get the price right so that it is aspirational, but not too expensive that they will go for another round? -- another brand? ivan: price is an important factor in the brand value equation, and for our premium premium thatrice
they carry to local alternatives, it is something that we watch closely. but at the end of the day our brands are affordable. if you step up to a bar in hanoi and order johnnie walker blue label, you're not betting 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 value equation right is important. francine: what about the bottles? i remember you a couple of years ago coming in to bloomberg and , showing me some smaller sized bottles for certain emerging markets. i don't know whether 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 groups are going out, or in a 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 label and share it amongst
friends around the table. so, the small format address affordability, but they also tie very much to the occasions. that is something we managed to through our understanding of the market and the consumer. >> a special distilling process, 28 generations of knowledge. the best can only get better. here is to another 600 years. francine: talk to me about china. do you sell differently to the chinese consumer than you do to the american consumer? ivan: the big thing about china is most of the value in alcohol consumption happens with meals. the market is enormous and very profitable in china, and it is so ingrained in culture and
ingrained into entertaining and how it is consumed with friends or business colleagues with food. we have a brand that is doing really well right now, in gross 25% is sheer. it is highly aspirational, but year.grew 25% this 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 really important. actually, this is what makes the business so fascinating. we don't have one way to build a brand. we have to get deeply immersed in local culture and tradition and find a way to stay contemporary and aspirational in the context. francine: i don't know if it is comparable, but do people drink more if they drink with food , then if they drink before dinner or after lunch? ivan: the main difference i would say is the ritual of celebration and toasting that
happens in the case of china. it is not so much drinking more, but it is a more social occasion. there is more ritual around celebrating each other, toasting each other, and that's where the brand plays a magical role in china. in terms of how the drink is consumed. francine if you look at china : and india, and maybe latin america, where do you see the most potential longer-term? ivan: i would say the big ones for us, i see india, china, africa having a lot of growth. latin america is a very important business for us. great in scotch whiskey, and 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 our category, premium spirit brands. as economic and gdp growth
happens there, we see a lot of opportunity. the demographics are in our favor. the taste profiles are going there. people large ranking better and choosing better rants. brands. we are well positioned to benefit from that trend. francine: if households become less rich, do they cut down on alcohol consumption before anything else? ivan: typically, again come our brands lay in the affordable, special occasion space in many of these markets. and, you would definitely 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 me before times a year instead of six times a year. you definitely see those adjustments taking place and get the what is important is that when that happens, it is really important to support your
brands, because when economic growth comes back from you what the brand to still have that connection to consumers that they will step up the 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? we talk about the foresight required to lead a company like diageo. more with ivan menezes next. ♪
them are valued as much as the company's customers. diageo has 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." ivan, when you look at how your employees would describe you, that usually says quite a lot about how a executive is received at the people worked under him. what do you think it would say about you? ivan: oh my gosh. i think approachable, focused on possibility, demanding, and i call it high-low, stay at the big picture strategic level, but love the execution. i enjoy brands, i enjoyed customers. i enjoy picking up the phone to her brand manager in if you via
and asking them how the brand is doing. so 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, would you have such a global business, with the local person and how the markets are doing? ivan: totally. i really believe in being out in the markets. 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. whether that is meeting with the local government or the local customers. i always go out and say bars and shops don't lie. you get a true understanding of how we are performing in the market. also, meeting our people. i get a lot of energy from being out. i actually don't enjoy being in headquarters. i would much rather be out. [laughter] francine: do you go incognito? or do they know you are coming? ivan: i do both. i often go out on my own and decide which shops and which bars and restaurants i will go
in and take a look, so i love to get time on my own when i am in a market and just walk the streets and get a good feel of the culture. i enjoy that. as i said, you learn a lot. francine: you also focus quite a lot on drinking responsibly. does that come from you, from pressure around you that makes 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 millennia. 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 that alcohol causes harm to 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, underage driving, -- under age thinking, drink driving -- underage during king, drink driving or others. these are some of the areas in which we have significant ambition and programs to make a difference. francine: is that government or schools? ivan: we work with governments, we work with schools, we work with ngos, we work with local communities. we are very integrated for example in mexico city, where we work 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 and it is a source of, we do it with real pride and real commitment, and our employees really believe passionately in
the work that we do in this field. francine: talk to me about diversity. why have you achieved gender parity on the board where no one else really has? a lot of people have failed, and you have succeeded. ivan: it started from our core values. we have always put inclusion and diversity at the heart of diageo. i am very proud of our track record here. as you say, half the board, 40% of the executive committee, 30% of senior leaders are women. i see that improving. but it is not just gender diversity. i think diversity and nationalities, diversity and ethnic city, actual orientation and diversity in style. to me, -- i have been in business for over 30 years -- the power of having diversity in the team, including thinking styles, i think is huge, and i see the benefit in spades. i am really pleased with where diageo is on this journey 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 very multicultural society as a minority. i come from a catholic background. -- i come from a goan catholic background. to me, the importance of everyone coming to work feeling included, valued, is how you get the full potential of people, and what we put at the fabric of diageo is not so much targets , it is creating an environment ,here you can truly be yourself no matter what your background and read come from. one of our core values is valuing each other, that is the heart of the company. i am really proud of the culture that all of our employees have created and that is when you see good things happen. that is why we have seen this enormous progress in much more
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