Diageo looks to luxury to drive growth 

Tuesday 22 April 2025 9:26 am

The previous three years have been difficult for the worldwide alcohol big Diageo. The group booked a windfall in the course of the pandemic years as stuck-at-home shoppers splashed out on high-end alcohol to drown their sorrows, however this explosive progress quickly evaporated. 

Diageo, finest recognized for its Guinness and Johnnie Walker scotch whisky manufacturers, struggled in opposition to the headwinds buffeting the entire luxurious beverage sector because the pandemic years moved into the rear view mirror. Freed from the restrictions introduced in in the course of the pandemic, shoppers stopped consuming as a lot at residence, whereas skyrocketing inflation additionally pushed them to tighten their spending habits.

One other pattern has emerged that’s fairly distinctive to the drinks business. Youthful generations are consuming lower than their older counterparts, a regarding demographic shift for the world’s largest spirits producer. 

Nevertheless, whereas shoppers are consuming much less, they’re spending extra on every drink. The market is shifting away from low-quality quantity to high-quality luxurious, and Diageo is trying to capitalise on this pattern.

Luxurious launch 

In November final 12 months, the FTSE 100 firm formally introduced the creation of the Diageo Luxurious Group, bringing collectively a few of its most unique manufacturers and experiences underneath one division and management group. 

The division is residence to Diageo’s premium Johnnie Walker expressions, Don Julio, Casamigos, tequila manufacturers, Cîroc vodka, and others. It additionally contains Diageo’s experiences, such because the Johnnie Walker Princes Avenue expertise in Edinburgh and the reopened Brora/Port Ellen distillery. The superb wine service provider Justerini & Brooks additionally sits underneath this umbrella.

The premium and tremendous premium segments of the drinks market are rising twice as quick as the remainder of the business. Within the final 10 years globally, premium and above spirits grew from 26 per cent of the spirits class worth to virtually 35 per cent. 

Whereas Diageo is already the most important participant within the luxurious market in lots of areas, there’s nonetheless loads of room for progress. The chance is clear within the UK. “Within the UK particularly, our share of premium plus sits at round 20 per cent, whereas our share of ordinary spirits sits at over 50 per cent. So you possibly can simply see that chance,” Laura Pearce, Advertising and marketing Director for the Diageo Luxurious Firm, tells Metropolis AM. 

Within the UK, the premium and tremendous premium segments of the market are outlined as something over £30 a bottle or £100 a bottle, and essentially the most profitable alternatives lie within the latter group.

Tequila has been a specific winner for the corporate within the UK. Diageo is specializing in youthful adults with this beverage, advertising and marketing by way of experiences and providing smaller bottles at larger value factors. It’s additionally leveraging its place within the commerce to get the product to shoppers. Don Julio & Casamigos are #1 & #2 bartender suggestions, and Casamigos leads super-premium in grocery in accordance with Nielsen, Kantar, BGS and CGA information. In Nice Britain, tequila is attracting essentially the most new drinkers with a 31 per cent penetration progress final 12 months within the 25 to 34 age bracket. 

“Firstly, you’ve received to have the standard and the heritage… However the factor that we actually suppose is evolving and altering is you’ve received to then be expertise and culture-led…” explains Pearce when requested how Diageo is driving progress in these luxurious channels. “It’s possible you’ll select to exit and have one drink that night, however we would like that drink to be a bloody nice drink and for it to be a tremendous expertise,” she provides when requested how the group is attempting to develop whereas responding to altering client tastes. 

Diageo experiences and partnerships

Experiences and partnerships are a key pillar of this progress technique. In October final 12 months, Diageo launched its new ‘Johnnie Walker Blue Label Ice Chalet’, with an unique house at Selfridges together with luxurious skiwear and way of life model, Excellent Second. It additionally launched a partnership with Netflix across the launch of season two of Squid Video games with a restricted version bottle design of Black Label. Earlier this 12 months, Don Julio and The Savoy – the Official Lodge to the EE BAFTA Movie Awards – created a limited-edition, celebratory cocktail in collaboration with BAFTA.

Diageo has additionally picked up a shift in spending patterns amongst youthful drinkers. “We’re seeing the expansion in premium and tremendous premium actually coming from Gen Z and millennials,” explains Pearce. Youthful drinkers additionally are typically extra prepared to strive one thing totally different and department out into totally different drinks, comparable to whisky. “We’re seeing 18-plus individuals coming into whiskey… We’re seeing extra ladies truly come into whiskey as nicely, which felt actually thrilling,” notes Pearce. 

Bettering accessibility for these drinkers can be a precedence for the Diageo Luxurious Group. “It’s making luxurious extra accessible… giving totally different entry factors and making it extra accessible to extra individuals,” says Pearce. Within the UK market, the corporate has opened new markets by introducing extra accessible codecs of premium merchandise, comparable to £4 Cîroc cans and £20 Don Julio minis. 

These are nonetheless priced as a premium product, however are way more accessible to youthful shoppers, who could not be capable of afford or wish to spend £150 on a bottle of Don Julio tequila. “I believe the fantastic thing about luxurious drinks is definitely it’s a deal with which you can have that isn’t fully going to interrupt the financial institution… In harder instances, I believe individuals want these experiences…” says Pearce.