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Inspired Innovation: As Consumers Again Embrace Premiums, Diageo Answers the Call With A New Wave of Luxury Goods

Posted on  | December 29, 2011   Bookmark and Share
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With consumers ready and willing to trade up again, Diageo has ramped up attention to the premium and super premium arenas, says Olivia McNeal, the company’s Vice President of Technical Innovation. “Diageo continues to be very focused on delivering premium brands to consumers,” she explains, adding that while the economy is far from perfect, “people are still willing to pay a premium for unique drinking experiences.”

“Premiumization is alive and kicking and occurring at all levels of price positioning,” says Andrea Segara, Global Brand Director, Tequila Don Julio. “The super-premium segment is the fastest growing segment in the North American market.” Consumers are again moving up the price ladders, Segara observes, but adds that it can be very “category specific.”

Which is why identifying the growth areas is the critical first-step for Diageo’s innovation strategy, says McNeal: “We want to find pockets of consumer opportunity and then develop products that are truly special.” Scotch is an example of one of these growth categories, and Johnnie Walker continues to take advantage of consumer appetite for new expressions, most recently with Johnnie Walker Double Black.

Don Julio is another example. The brand recently rolled out the Don Julio 70, the industry’s first and only clear añejo tequila. “It celebrates the history of this iconic brand and is something completely unique with an entirely different taste profile,”
says McNeal.

Bullseye Approach

“We want to identify exactly who our consumer is for each innovation we bring to market, and figure out exactly how to speak to them,” says McNeal. Take Qream, an ultra-premium liqueur launched over the summer. Created in collaboration with musician Pharrell Williams, Qream—available in strawberry and peach flavors—is aimed at a very specific market. “We had the female consumer in mind from the moment we began creating this product,” says McNeal. “The beautiful bottle with French detail is very similar to a fragrance bottle; it possesses all the quality cues that encourage people to pay more.”

Flavors in general are a huge growth driver, and an area where industry-wide innovation will be coming from in future years. “The flavor world is booming and there is no limit to the possibilities, particularly in the premium category,” says McNeal. “Our Cîroc Peach posted impressive numbers right out of the gate. Flavors are going to be with us for a very long time.”

The Trade-Up Trend

When it comes to consumer behavior, McNeal is optimistic: “We see people returning to the on-premise and returning to the clubs, and premium spirits brands represent an affordable celebration.” Is there a price ceiling? Not necessarily, she believes; it depends entirely on the target consumer and the individual product (consider Jose Cuervo’s latest $2,250 offering). “We see many opportunities across the price spectrum.”

Even in this economy, spirits are still viewed as affordable luxuries and consumers are willing to trade up depending on the brand, the experience and the occasion. “Diageo works hard at identifying the opportunities that will unlock new occasions for premium-seeking consumers,” says McNeal. Indeed, opting for a luxury beverage can bring immediate reward to a consumer with relatively little investment compared with, say, trading up when purchasing a car, electronics or even clothing.

Plus, going luxe brings consumers added benefits in terms of status in social situations, whether that involves impressing colleagues having a drink after work, a date, or perhaps a gift recipient. In nightclubs, for instance, full-bottle sales are a fertile territory for high-end spirits; ordering the bottle lets peers see what you are drinking and sharing, whereas a single drink using a high-end spirit will look just like a regular rail drink. Smart bars know that visibility for luxury brands can spur sales. For Diageo, each of the offerings detailed here does a good job of declaring its luxury status visually, encouraging impulse orders.

Dollars & Sense

Where appropriate, Diageo is “premiumizing and innovating against current brands by providing a more unique sensory experience,” says McNeal. “This can be in the form of a new liquid like Johnnie Walker Double Black which is priced slightly above the Johnnie Walker Black Label. This liquid amplifies the signature style of Black Label, including its hallmark smoky flavor, to produce a bold blend of extraordinary depth, richness and character.”

McNeal adds that  “packaging also enhances a premium experience. This can be seen in the elegant design of the Qream bottle inspired by royalty which complements the decadent liquid inside.” She notes, too, that celebratory occasions represent a time when consumers are willing to pay more and trade up: “This can be a celebration in a club or a gathering at home and Cîroc Peach, for example, fits perfectly into this space.”

Riding The Flavor Wave: Cîroc Peach

Black Amped Up: Johnnie Walker Double Black


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