The New Year will usher in a change at the top for Diageo Global Travel as its much-respected Managing Director Dayalan Nayager assumes the key domestic market role of Managing Director for GB, Ireland and France. He is being replaced by Eduardo Barp, formerly the drinks giant’s General Manager Caribbean & Central America. Just before the changes were announced, Nayager and Diageo Global Travel Marketing and Innovation Director Anna MacDonald told Martin Moodie about the exciting pipeline of innovation that has driven the operation’s strong performance of recent times.When he steps into his new role on 1 January, Diageo Global Travel’s new Managing Director Eduardo Barp will inherit an organisation in good shape and bursting with innovation. In particular, the spirits giant’s travel retail division is buzzing with the success of its October 2018 launch, White Walker, the limited-edition Johnnie Walker expression inspired by smash hit HBO series Game of Thrones. And big plans are in store for the company’s star-studded single malt whisky portfolio.
White Walker, a blended Scotch named after some of the series’ most feared characters, the White Walkers, has been greeted extremely positively, says outgoing Managing Director Dayalan Nayager. Buoyed by intensive promotional activity, it has generated great demand at European airports (and online with Amazon), where it was first launched.
“We’ve had a universally positive reaction,’’ comments Diageo Global Travel Marketing and Innovation Director Anna MacDonald. “It has been all over social media and everyone is asking, ‘Where can I get it?’ It’s going to be hugely collectible and giftable. It also helps to unlock a future way of thinking for future innovation. The goal with this is to bring new people into this category and create a reason to purchase. We’re trying to appeal both to whisky drinkers and non-whisky drinkers.’’
Innovation, including a strong focus on travel retail exclusives, has been a consistent theme of the Diageo approach in duty free in recent years. But each and every line has to have a genuine proposition behind it, Nayager and MacDonald insist, rather than token newness.
“I think there’s a balance,” says MacDonald. “We’ve got to create propositions that, one, are highly desirable for the consumer, and, two, create value for the customers and us. And if the right way to answer that brief is through a travel retail exclusive, then that angle comes into play. I think White Walker is a great example of it and I don’t think it matters that it’s not a travel retail exclusive.’’
“Ultimately, no matter what we do, our end game is to build the brands,” adds Nayager, commenting on what drives the company’s thinking on what should constitute a channel-exclusive product. “We’re not here just to sell product, but to build a brand. If you put travel retail exclusives on any product, you might not be able to build brands.
“I don’t believe travel retail in airports is the place where we can build new brands, necessarily. Because people travel on average one to three times a year. You’re not going to get repeat purchases. So, if you travel through an airport and you buy a product which doesn’t exist anywhere downtown, how do we get repeat [sales] and how do we get saliency? It’s very hard. But with a brand like Johnnie Walker, which is a big brand with lots of equity already, and if you see a travel retail exclusive [tag] on it, there’s something there.’’
“That’s exactly the trap that we need to avoid,” adds MacDonald. “If it’s differentiation for differentiation’s sake, then ultimately you’re not offering anything of value to the consumer and then you end up with product on a shelf that doesn’t sell.’’
Craft a boon, not a threat
Both believe that White Walker will bring new consumers into the Scotch Whisky category. That is a key Diageo focus, Nayager says, and, he believes that craft spirits – such a burgeoning element of the global and travel retail drinks scene in recent years – have a key role to play in delivering the goal.
“I think craft is great for the categories,” he says. “If you look at Diageo in travel retail, we’ve got around 40% share of the spirits category. Being that size, I want the category to grow. So, I always say the aim of Diageo is not to take share, but to grow the category. And when you’ve got 12% conversion in the airports, there’s lots of opportunity to grow.
“Great craft brands feed into the category. They help it to grow and bring back vibrancy to the category. Those craft brands also bring in people. You can then execute with global giants, the likes of Gordon’s and the likes of Tanqueray, which are craft in their own nature. We have Tanqueray Gin growing at 100%-plus in Changi Airport, it’s massive.’’
“What’s lovely about craft is that it’s premiumising,” adds MacDonald. “If I take gin as an example, average pricing in the category has gone up and that’s good news for everyone.’’
She adds: “About 75% of gin sales are in what we’ve termed gin for enjoyment. We segmented gin for enjoyment and gin for discovery and discovery is probably the fastest-growing motivation, but it’s the smaller one.
“Gordon’s Pink is absolutely flying. We think in the UK domestic business, for example, that it may actually outpace Gordon’s London Dry. Gordon’s Pink in our UK domestic business is bigger than Hendrick’s Gin, But, what’s brilliant about it is, it’s also growing London Dry.’’
But she also strikes a note of caution. “We just need to be mindful that with the craft and the complexity and the fragmentation of range comes potential for consumer confusion.’’ Craft to supply new category, established brands to deliver a sustained and solid growth platform, not one over the other, is the message.
Tripling single malt sales
One category that has seen a tremendous proliferation of entries in travel retail over recent years has been single malt whisky, a sector in which Diageo holds strong growth ambitions. The action is being led by The Singleton, which posted a +14.1% CAGR in travel retail between 2012 and 2017 according to IWSR to 63,000 cases. But Diageo also has plenty of other outstanding single malts in the locker, including Caol Ila, Cardhu, Clynelish, Cragganmore, Dalwhinnie, Glen Elgin, Glenkinchie, Lagavulin, Mortlach, Oban, Royal Lochnagar and Talisker, that enjoy considerable popularity around the globe.
Underpinned by the power and diversity of that portfolio, Diageo Global Travel is targeting a doubling of its single malt business in the channel over the next three years.
MacDonald says: “it sounds a little bit scary, but we’re really confident. To double, we’ll be looking at over +20% CAGR [compound annual growth rate] and the category is growing by double-digits already. Unlocking more allocation for the travel retail market is one part of that.’’
As Nayager prepares for his next big career challenge, he is upbeat about the travel retail channel. “We’re very positive about the potential in travel retail. From an organisational perspective, we’ve made changes over the last two years, including moving from Singapore to London [in 2016]. And then, we reorganised our commercial organisation. I think we now have the most effective and efficient organisation for the business. We’ve got the structure in place and now we’ll be focusing on implementing the strategy.’’
Nayager now faces challenges of a very different kind, particularly in the supermarket- and on-trade driven UK market. He leaves behind him a market leader in good health, with a pipeline full of new innovation. Now it is over to the new man at the top, Eduardo Barp.