Learning from the best – Analysis
Guess what, Diageo even has a Chief Customer Officer, a post created two years ago. Ron Anderson, who was appointed to the job, is supposed to focus on take-home sales rather than on-premise consumption, reflecting the global trend toward drinking at home rather than in bars and clubs.
Mr Anderson’s brief is similar to other chief customer officers’ in the food and household goods sectors, but he is the first of a kind in the drinks industry.
That Diageo saw the need for creating such a position is because the company decided not to benchmark itself against other beverage companies, but against fast moving consumer goods companies such as Proctor & Gamble – yet without ever falling into the trap of calling itself a FMCG company.
Still, the role of a drinks supplier has changed in the last few years, which means that Diageo has had to adapt its strategy.
In the past, Diageo delivered the goods a customer ordered on time and in full. Now however, Diageo is much more involved in the supply chain and in the in-store presentation of its brands. Retailers are keeping inventories low even at the risk of being “out of stock”. Diageo reckons that its brands are currently missing from grocery shelves between 5 percent and 7 percent of the time. Diageo thinks that this is a lot of business lost through inefficiency.
In a recent interview with U.S. media Mr Anderson said that he didn’t expect Diageo’s retail and distribution customers to build their stock levels up to the levels they held in 2008.
A tightening of inventories by Diageo’s off-trade clients already hit the group’s sales last year, while a failure by distributors to stock up ahead of the key Christmas period this year led the company to post a 6 percent drop in first quarter sales (July – September 2009) at the end of October 2009.
That’s why Diageo believes that its off-trade customers want them to manage the supply chain with them.
Some of the methods used by Diageo appear deceptively simple – making sure mixers are displayed alongside spirits or blocking whiskies together and vodkas together on supermarket shelves. By taking responsibility for this directly however, rather than leaving it to the retailer, Diageo believes it can ensure higher sales for the spirits category and even higher sales for Diageo’s brands.
So far, Diageo is the only drinks producer managing categories for retailers at such a scale. The scope of Diageo’s portfolio and its global scale give the company a distinct advantage over its competitors – for as long as Diageo’s drinks and beer competitors do not follow suit and act likewise.
