Diageo GT is “talking increasingly” about hybrid retail-F&B activations, Managing Director Andrew Cowan has told TRunblocked. In this, the second part of an exclusive interview with Kristiane Sherry, he also discusses sustainability gains and the potential of the no-and low-alcohol category. It’s another cracking interview.
Amid the backdrop of wider company declines, Diageo Global Travel (GT) is having a stellar Fiscal 2024. According to Managing Director Andrew Cowan, sales for the first half have already surpassed the entire year previous. While the wider business saw reported sales slip 1.4% off the back of weakness in Latin America and the Caribbean, GT is flying.
When TRunblocked spoke with Cowan in early March, he was clearly delighted by the performance. But there was also an urgency to press for more. In part one of the interview:
https://www.trunblocked.com/low-gtr-penetration-isnt-the-consumers-fault-andrew-cowan-md-diageo-global-travel-interviewed/ he discussed product innovation and the channel’s persistently low penetration rates. Here he looks at what comes next.
A topic at the forefront of all travel retail discussion right now is the potential of hybridisation. Could a strategic merging of retail and F&B concepts prove profitable? The likes of Avolta (formery Dufry) think so. The company has made it a central tenet of its Destination 2027 plan. As the world’s largest spirits company, surely Diageo GT would have a role to play in the development of such concepts?
“We’ve touched on it a little,” Cowan says. “Obviously you’ve got those customers that are managing to vertically integrate their F&B and retail offer and are interested in making the sum of the parts bigger. We’ve not done a lot yet, it’s embryonic.”
The potential here, he notes, is the ability to offer sampling in a new way. You could taste a product at a Heathrow fixture, for example, he says. But, no matter the talent of a brand ambassador, there are still limitations. He contrasts it with going into a bar environment for a Paloma, with your Don Julio and grapefruit soda ready to go. “The opportunity to do that I think is really apparent. We haven’t done lots of it yet, but customers are talking increasingly, particularly those vertically integrated customers, of bringing those two things together.”
Might we see more of this sort of activity this year? “I think so. I mean, the important thing is that we are able to be the best possible partner to our customers that we can. So our customers have got two assets in an airport around the F&B environment and the retail fixture, and you know who they are. “We’re really passionate about working hard with them to create exponential benefits from that. So that we’re in discussions like, yeah, I expect you will see activations that straddle that whole environment.”
Another opportunity that feels relatively fledgling is the no- and low-alcohol category. Diageo has a number of products in this segment, most notably Guinness 0.0 (a personal favourite of Cowan’s), Seedlip (a real pioneer in this space), Tanqueray 0.0, and the recently launched Captain Morgan Spiced Gold 0.0. And with “positive drinking” baked into the Diageo 2030 strategy, it’s set to be a key focus in the channel too.
“What we’ve tried to do with the positive drinking platform is triangulate three key pillars,” Cowan details. “The first one is to educate. So we’ve got a drink IQ initiative, which we’re taking to the point of purchase in global travel. It’s a digital piece of software that people can learn about units of alcohol and safe, responsible drinking, essentially as an education piece.
“The second is an inspiration piece, which is our ‘Holiday to Remember’ campaign. What we don’t do to get people to drink responsibly is to wag our finger off when you don’t drink responsibly. In actual fact, there’s evidence to say that they won’t just reject that but they’ll defy it, and potentially drink more. What we do try to do is to sing the virtues of a really positive relationship with alcohol which eliminates any alcohol abuse.”
The third pillar is offering solutions – hence the increasing 0.0% portfolio. “It’s a category play, so we bring competitor zero brands into that,” he says. He admits that it isn’t necessarily an easy win. “It’s a slower burn, but we’re going to stick with it.”
An interesting and often overlooked part of the no- and low-alcohol game is that it’s really for everyone. “The people that drink 0.0 are not teetotallers, the moderators,” he says. Whether it’s about balancing consumption in the week while feeling like a treat or not going overboard on holiday, it’s about encouraging moderation.
“One of the reasons our strategy is so wonderfully logical is because if people drink less, when they do drink, they want to drink a really high quality product,” he says. “And so offering real treats and really premium products, that’s also price premium, is a key part of people’s mindset of drinking less, but drinking better.” It also feels like an antithesis to the downtrading seen in some domestic markets. “I think the thing hangs together, we just need to stick with it and make it work in Global Travel the way the touchpaper has been lit in the domestic markets.”
Of course, Diageo’s Spirit of Progress 2030 strategy also centres on sustainability. Here, Diageo GT has started to make real progress. It’s cut secondary packaging across almost every Johnnie Walker SKU in the channel, accounting for 180 million boxes so far. The secondary packaging that does remain is under constant review, be it from taking out magnets to making recycling frictionless. A recent partnership with retailer Heinemann and logistics partner Fiege sees hydrotreated vegetable oil being used as a trial instead of conventional diesel. The switch will save 85 tonnes of CO2e a year. According to the US Environmental Protection Agency, that’s the equivalent of a car driving 217,902 miles.
Other steps forward include a move to modular, reusable trade stands, and a dramatic reduction in the amount of new plastic used. “We use 80%, less virgin plastic now than we used to.” Cowan puts this down to decision making processes at every stage of design. “In Europe alone, we saved over 10,000kg of CO2 with the way we produce our packaging versus the way we used to.”
Then there’s a partnership between Skye distillery Talisker and ocean clean-up organisation Parley, which has seen the maker move from cosmetic glass to flint glass.
“Conventional wisdom says that the glass has to be beautifully clear and absolutely pristine. And that’s what makes it attractive. Actually, what we’re trying to do is to make recycled glass attractive. How do you make ugly the new sexy, I guess is the stereotyped language I would use.” In a channel where gifting is key, it’s about challenging preconceptions about what makes something desirable, or luxurious – a debate seen around secondary packaging, too.
This is all well and good, but as the science tells us, change isn’t happening fast enough. What’s the next area of focus? “There’s still lots to be done in those spaces,” he admits. “We haven’t got out of all of our boxes. So at the right time, we will continue to eliminate the use of secondary packaging boxes. And when we do use them, we will continue to get that as close to zero.” Route-to-market is another area, with intra-team collaboration reducing freight miles.
There’s also a new aluminium bottle for Bailey’s, reducing the need for glass altogether. Cardboard bottles and carbon-neutral packaging are all being explored, too.
“There’s lots of stuff in the pipeline that is yet to come to market. But we’re not going to rush at doing stuff for the sake of demonstrating that we’re greener. That’s called greenwashing,” he states.
“We kind of want to earn our way to our green credentials rather than promise our way,” he stresses. “We want real fact-based evidence so that we’re never accused of our green agenda being anything other than authentic.”
The climate crisis is arguably the most critical mid-to-long term challenge we all face. But honing into GTR and drinks, what’s keeping Cowan up at night? He’s relatively sanguine in general, but does strike a note of caution around the shifting regulatory environment. He advocates for a “healthy paranoia” and to make sure that the industry is well represented at all levels.
“The risk isn’t that we’re not going to get something harmful done to us because our heads are below the parapet,” he notes. “The risk is, by us being lower profile as a sector than education, defence or health, the risk is we get forgotten by not being vocal.” The case for “tax-friendly global travel environments” needs to be made clear.”
It’s also about simply being a “relevant part of the consumers’ and travellers’ annual spend”. “The industry is still normalising from COVID. So navigating that in a way that, as an industry not just Diageo, we reapply the right levels of resource both people and investment.”
In a year where half the world’s population will head to the polls in major elections, he’s not worried about any associated instability. But he does feel that aviation more broadly needs to step up in terms of sustainability – otherwise travel itself could end up taxed.
“The industry has to do something around our carbon footprint,” he stresses. “Whether it’s packaging, or the big ticket items around biofuel and all that sort of stuff. I think, to be visibly attending to that, mitigates the risk of governments doing something to the aviation industry that is harmful from an accessibility perspective for consumers.”
In 2024 it feels like travel retail as a whole is walking a tightrope between vast potential and huge challenges. But those challenges are surmountable with momentum, intention and budget. It’s a path that Diageo GT is striving to follow – and one that, as the leader in its field, it has the responsibility to tread.
To subscribe free, please enter your email address:
