“Over the last 10 years we have put the consumer and brands at the heart of our business and we have been very successful with that,” said sales director David Smith. “However, we are now shifting our strategy. Over the next 10 years we will be putting categories, customers and shoppers at the heart of what we do.”
The new terms include a set list price for all customers and channels. Discounts and investment in retailers will then be based around scale, efficiency and the level of in-store sales activity. While a large retailer will qualify for discounts based on scale alone, smaller customers will earn a discount if they commit to initiatives such as bringing spirits out from behind the counter or cross-merchandising them with mixers, fruit and ice.
The standardised terms would make the business simpler and more transparent, claimed Smith, adding that the sales team and customers would be able to spend less time negotiating over price and more time selling drinks. The move would also help the spirits category realise its £50m growth potential, he said.
This week Diageo announced a 2% increase in net profit to £1.5bn and a 7% increase in global sales to £8bn during the year to 30 June 2008. Growth was driven mainly by Scotch whisky in Latin America and beer sales in Africa, said the company. Performance in Europe had been “better than last year”, with net sales up 3% thanks to growth in Eastern Europe, Russia and the UK, it said.
Flagship brand Guinness outperformed the UK beer market, increasing 3% in volume, which the company attributed to its most expensive TV ad to date and a cool summer. Despite the good news, Smith warned that the economic slowdown could see the 9% growth forecast for next year fall to 7%.