Diageo Plc, the world’s biggest distiller, is concentrating on novel variants of existing brands, such as Smirnoff lemon sorbet flavored vodka, as it seeks to bolster sales growth through new products.
Tweaked versions of established brands such as Johnnie Walker scotch and Guinness stout, along with new drinks, are “what delivers efficient growth,” Syl Saller, the London-based company’s global innovation director, said today in an interview.
Diageo and competitors are focusing on gaining business by targeting new products that appeal to specific groups, from women to consumers in the emerging middle classes. More than 50 percent of Diageo’s sales growth has come from new products each year for the last five years, Saller said, and the distiller is looking to continue that pace.
“We have the luxury of having such a broad range of brands that we start from looking at the consumer occasion and what’s missing, and work backwards,” Saller said. “We’ve got incredibly iconic brands. Why would you not use that as the first place to go?”
While new sways of old favorites are the main driver of Diageo’s innovation growth, the company says it’s very discerning about which products reach consumers. It developed Johnnie Walker Double Black, a “peatier” version of Johnnie Walker Black, and rolled it out first to airports before tempting national markets including the U.K.
The key is to target new customers and make sure the whisky appeals to current Johnnie Walker drinkers without harming sales, according to Saller. A 70 centiliter bottle of Double Black costs 33.85 pounds ($52.50) on thewhiskyexchange.com, while Black Label costs 24.75 pounds.
“We don’t worry about hurting our brands,” she said. “It’s the inverse -- what we think about is what will add to the brand.”
Innovation now delivers about 11 percent of Diageo’s revenue, according to a presentation by Saller. Last year, the maker of Smirnoff vodka had 10.7 billion pounds in sales.
The company solicits ideas for new drinks and shares them among regions, helping drive growth in emerging economies as well as the tougher developed markets of Europe and the U.S., she said. Diageo introduces about 100 new products a year and the North America is the largest market for innovation.
Diageo is also creating completely new products to appeal to changing consumer tastes, including Eva wine coolers, targeting Thai women, as well as Naked Turtle white rum in the U.S. and Shark Tooth rum in Russia. Research efforts include studying the structure of ice crystals for frozen alcoholic drinks.
Still, not every consumer is looking for something new, Saller said. “We don’t assume we have to have innovation on every brand. We don’t have a target, but I just want innovation to be embedded in the way Diageo operates.”