Diageo eyes ‘amazing opportunities’ in confectionery flavored spirits

By Ben BOUCKLEY contact

- Last updated on GMT

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Diageo eyes ‘amazing opportunities’ in confectionery flavored spirits
Diageo technical director Luca Lupini believes confectionery flavored spirits are an ‘amazing opportunity’ for the firm, and insists the sub-category brings out the best in its R&D team.

Lupini, who is technical innovation director at Diageo, was speaking during an investor presentation last Thursday, where the firm noted an increasing trend towards dessert-style liquids.

Diageo launched Smirnoff Whipped Cream and Fluffed Marshmallow in late 2011.

A year later it expanded its range with Iced Cake, Kissed Caramel, and launched ‘Smirnoff Sorbets’ (picture) for women attracted to a ‘light and low’ product with 78 calories per serve, in February.

Lupini told analysts during a Q&A session: “We’ve got the chance to play in a space where there are a multitude of levels of different characters within the products,” ​he said.

“If you just take the confectionery/cake angle, you’ve got the topping (which are the icing), giving you those real top notes, down to the juiciness of the doughs and the cake all the way through.”

‘Pretty smart’ to follow Pinnacle Brands, other rivals

Syl Saller, global innovation director, added that Diageo had been “pretty smart”​ to fast follow in US confectionery vodka, watching the movements of Beam Inc’s Pinnacle Vodka (over 30 flavor options include Cake, Chocolate Whipped, Marshmallow) and other rivals before launching its own products.

Conversely, Saller said that Diageo company both leads and follows, with non-age declared Scotch whiskey one example of the former approach.

“So Buchanan’s Master, Johnnie Walker Double Black, Johnnie Walker Gold Reserve – those are plays where we chose to lead,”​ Saller said.

“Confectionery vodka in the US is an area where we chose to follow,”​ she added. “We watched very carefully the movements of Pinnacle and other competitors, and the reactions of consumers, before we came in and launched our own brands, and I think that’s pretty smart.

“Let someone else take the risk of ‘is this going to get consumer appeal, is it going to get traction?’ And when we come in, we come in with a number of advantages that I think are compelling.”

These were the strength of Diageo’s brands, its distribution power, and its development capabilities, Saller said.

Complexity in Europe smothers innovation?

Although Diageo spends less than 1% as a percentage of sales on innovation, Saller said it had accounted for 50%+ of group growth for each of the last five years, and 11% of current net sales.

If Diageo’s innovation platform were counted as a standalone business it would generate around £1.4bn ($2.13bn) in revenue, she added.

Deutsche Bank analyst Jamie Isenwater said Diageo seemed to drive “significantly less innovation in Europe than other regions”​ and asked if this was driven by firms, consumers or retailers.

(North America accounts for 42% of Diageo’s innovation spend in the tens of millions of pounds, Asia Pacific 21%, Africa, Eastern Europe & Turkey 18%, Latin America and The Caribbean 10% and Western Europe 9%.)

Saller replied that Diageo was able roll-out products across European markets, “but there is more complexity than in North America, for example” ​in terms of taxes, regulations, routes to market, different channel leads.

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