Diageo Plc · LSE:DGE
Diageo — Investor Day (May 2019)
62 slides from Diageo's investor day presentation, May 2019
Slide 1: Delivering Consistent Performance
DELIVERING CONSISTENT PERFORMANCE IVAN MENEZES MAY 2019 No script 1
Slide 2: Cautionary Statement Regarding Forward-Looking Statements
Cautionary Statement Regarding Forward-Looking Statements This document contains forward-looking statements that involve risk and uncertainty. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking
Slide 3: Delivering Consistent Performance
DELIVERING CONSISTENT PERFORMANCE IVAN MENEZES MAY 2019 No script 3
Slide 4: Our Performance Ambition
OUR PERFORMANCE AMBITION To be one of the best performing, most trusted and respected consumer products companies in the world 4 Good morning everyone and welcome to our capital markets day Our ambition is for Diageo to become one of the best performing, most trusted and respected consumer product c
Slide 5: Focus on sustainable business for the long term
Second, our focus not just on delivering this year’s results but a truly sustainable business for the very long-term – we are making investment decisions now that will ensure many more of our brands enjoy 200-year anniversaries, as JW will do in 2020. Finally, we are committed to having a positive i
Slide 6: Diageo's Strategy Is Clear
DIAGEO’S STRATEGY IS CLEAR To be one of the best performing, most trusted and respected consumer products companies in the world Delivering through our six priorities with clear goals defined by our performance ambition Four measures of our progress • credibility & trust • motivated people • efficie
Slide 7: Value creation and progress on priorities
value creation. Let me now bring to life some of the significant progress we have made in the first two of these. 5
Slide 8: Most Trusted and Respected Is Integral to Diageo
MOST TRUSTED AND RESPECTED IS INTEGRAL TO DIAGEO IN EVERYTHING WE DO Source: Diageo Your Voice Survey data, 2019 6 Our reputation, the trust and respect we earn, is not just an outcome of our commercial performance. It is a direct source of competitive advantage and strengthens our business. We are
Slide 9: Britain's Most Admired Company 2018
I was very proud that Diageo was named ‘Britain’s Most Admired Company 2018’, in Management Today’s long running awards, voted for by peers from across all industry sectors. In addition to winning the overall Most Admired Company award Diageo also ranked #1 in the Beverage/Drinks Sector, #1 for Qual
Slide 10: We Are Being Recognised Both Externally and Internally
WE ARE BEING RECOGNISED BOTH EXTERNALLY AND INTERNALLY Your Voice Employee I am proud to work for Diageo 89% engagement I am extremely satisfied with Diageo as a place to work 77% Business priorities Where I work people have a clear understanding of Diageo’s priorities 85% and performance In our tea
Slide 11: Attracting and retaining the best staff
All of this helps us to attract and retain the best staff which will ultimately improve our performance. 7
Slide 12: We Are Delivering Consistent Efficient Growth and Value Creation
WE ARE DELIVERING CONSISTENT EFFICIENT GROWTH AND VALUE CREATION PRODUCTIVITY PROGRAMME, SUSTAINABLE ORGANIC FUELING INCREASED INVESTMENT STRONG FREE CASH FLOW TOPLINE PERFORMANCE % AND DRIVING £bn MARGIN IMPROVEMENT 7.5 2.7 2.5 2.1 Organic +115 +152 2.0 5.0 Mid-single operating bps bps 4.3 margin d
Slide 13: Portfolio Management and Shareholder Returns
WE ARE DELIVERING CONSISTENT EFFICIENT GROWTH AND VALUE CREATION PORTFOLIO MANAGEMENT SHAREHOLDER RETURNS: TOTAL SHAREHOLDER RETURN AND M&A DIVIDENDS % ACQUISITIONS 23 65.3 62.2 59.2 56.4 51.7 17 Z Z 12 DISPOSALS Wines 2 2 Bushmills Non core beer Gleneagles F14 F15 F16 F17 F18 F14 F15 F16 F17 F18 Po
Slide 14: We Are Consistently Outperforming Consumer Peer Group
WE ARE CONSISTENTLY OUTPERFORMING CONSUMER PEER GROUP HISTORIC ORGANIC SALES GROWTH % (Diageo vs CPG Peers) 5.0 4.3 3.6 3.2 3.1 2.8 Other CPG Diageo 2016 2017 2018 Source: Company filings, Factset as of 4 January 2019. Diageo historicals based on organic CPG peer group (ABI, Brown-Forman, Carlsberg,
Slide 15: We Compete in an Attractive Industry Experiencing Top Line Growth
Alternative slide to before – last year’s WE COMPETE IN AN ATTRACTIVE INDUSTRY THAT strategy ASC IS EXPERIENCING TOP LINE GROWTH GLOBAL VOLUME SHARE % INTERNATIONAL SPIRITS BY TBA CATEGORY RETAIL SALES VALUE (1960-2017) (Growth % 2016-17) 60% 9.0 Spirits 6.2 40% Beer 4.0 20% 2.9 Wine Message - our C
Slide 16: Underpinned by Robust Consumer Fundamentals
UNDERPINNED BY ROBUST CONSUMER FUNDAMENTALS Population Income growth Penetration 550m new LPA+ 750m new Spirits per capita consumers by 2030 consumers able to consumption in US afford international is significantly style by 2030 higher than in emerging markets Source: Euromonitor 2019, internal anal
Slide 17: Leading Position in Markets Driving Future Growth
WE HAVE THE LEADING POSITION IN MARKETS DRIVING FUTURE GROWTH SPIRITS RETAIL SALES VALUE GROWTH Incremental Retail Sales (forecast 2017 – 2022, International Spirits, 2017 constant currencies) Diageo #1 £bn 78% North Europe India LAC SE Asia Developed Greater Africa Global Total America Asia China T
Slide 18: Leading Position Across Key Spirits Categories
AS WELL AS THE LEADING POSITION ACROSS KEY SPIRITS CATEGORIES £bn SPIRITS RETAIL SALES VALUE GROWTH Incremental Retail Sales (forecast 2017 – 2022, International Spirits, 2017 constant currencies) Diageo #1 £bn US Gin Scotch Other Indian Vodka Tequila Cognac / Rum Canadian Liqueur Other Total Whiske
Slide 19: Leading Position Across Key Price Points
AS WELL AS THE LEADING POSITION ACROSS KEY PRICE POINTS SPIRITS RETAIL SALES VALUE GROWTH Incremental Retail Sales (forecast 2017 – 2022, International Spirits, 2017 constant currencies) Diageo #1 £bn Mainstream Standard Premium Super/Ultra Prem Total Diageo 2017 Retail Sales Value Market Share (%)
Slide 20: Broad and Evolving Portfolio
BROAD AND EVOLVING PORTFOLIO DEVELOPED / EMERGING MARKETS PRICE POINTS (Total NSV%) (Total NSV%) 11 18 39% 42% 24 32 61% 62 40 58% 3 10 F12 F18 F12 F18 EM DD Super Premium Standard Premium Value 16 We have the leading position in our industry, but we are not complacent. Over the past six years we ha
Slide 21: Increased Levels of Disruption Is the 'New Normal'
INCREASED LEVELS OF DISRUPTION IS THE ‘NEW NORMAL’ Consumer trends Macro Environment Competitive Landscape Channels & Customers Regulations Technology 17 We are seeing increased levels of disruption across a number of areas Consumers are changing how, when and where they socialize and are increasing
Slide 22: Self Sustaining Model: Keep It Going
SELF SUSTAINING MODEL : KEEP IT GOING SMART REINVESTMENT BEST PERFORMING NSV Growth QUALITY GROWTH Margin Expansion Strong cash Delivery EVERYDAY EFFICIENCY 18 To be best performing requires strong top line growth, steady margin expansion and reliable cash flows year after year – the key is consiste
Slide 23: Sustaining the Diageo growth model
Investing in maturing stock to support sustained profitable growth Acquiring and supporting brands for future long-term growth Sustaining this Diageo growth model is key to our long-term success 18
Slide 24: Our Performance Ambition Will Be Delivered Through Six Priorities
OUR PERFORMANCE AMBITION WILL BE DELIVERED THROUGH OUR SIX PRIORITIES 1 Keep premium core vibrant 2 Continue to win in reserve 3 Drive innovation at scale 4 Increase participation in mainstream spirits 5 Build advantaged routes to consumer 6 Embed productivity in our culture to drive out costs to in
Slide 25: Our Performance Ambition Will Be Delivered Through Six Priorities
OUR PERFORMANCE AMBITION WILL BE DELIVERED THROUGH OUR SIX PRIORITIES 1 Keep premium core vibrant 2 Continue to win in reserve 3 Drive innovation at scale 4 Increase participation in mainstream spirits 5 Build advantaged routes to consumer 6 Embed productivity in our culture to drive out costs to in
Slide 26: Premium Core Is Showing More Consistent Performance
PREMIUM CORE IS SHOWING MORE CONSISTENT PERFORMANCE GLOBAL GIANTS ORGANIC NET SALES GROWTH 21 (%) 15 10 9 6 6 6 6 5 5 5 4 4 4 3 2 2 0 0 -2 -4 Tanqueray Johnnie Guinness Smirnoff Baileys Captain Total Walker Morgan F17 F18 F19H1 Source: All numbers are organic 21 We often use Global Giants as an indi
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Slide 28: A Resurgence in the Gin Category Spread from Spain
A RESURGENCE IN THE GIN CATEGORY SPREAD FROM SPAIN RETAIL SALES VALUE CAGR% 19 19 12 10 9 6 6 7 2005-09 3 3 2009-13 1 2013-17 0 Spain UK Rest of Europe Rest of World Source IWSR Retail Value 22 In Spain, where the revival began, the category has grown double digit for almost a decade against the bac
Slide 29: Growth in Gin Is Benefitting the Established Brands
GROWTH IN GIN IS BENEFITTING THE ESTABLISHED BRANDS GIN GLOBAL GROWTH (Retail Sales Value $bn) 20% 14% 66% Diageo Growth Gin 2009 Top 10 Brands 10 Largest 250+ Other Gin 2017 (2009) New Arrivals Brands Next biggest 10 growth drivers All Other Top 10 23 Source: IWSR 2017 data, (excludes value gin) As
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Slide 31: At the Heart of This Lies Our Brand Building Capabilities
AT THE HEART OF THIS LIES OUR BRAND BUILDING CAPABILITIES 24 As Cristina will bring to life in more detail later, Gordon’s was losing share and struggling to fully compete with the influx of premium gins entering the market. In response to this, we developed a new consumer insight which we used to d
Slide 32: Delivering Industry Leading Performance
DELIVERING INDUSTRY LEADING PERFORMANCE GIN ORGANIC NET SALES VALUE (Growth %) 28 16 8 F17 F18 F19H1 Total Gin 25 Gin is a good example of our ability to spot consumer trends and then use our core skills of consumer insight, strong creative, optimised investment as well as great in- market execution
Slide 33: Our Performance Ambition Will Be Delivered Through Six Priorities
OUR PERFORMANCE AMBITION WILL BE DELIVERED THROUGH OUR SIX PRIORITIES 1 Keep premium core vibrant 2 Continue to win in reserve 3 Drive innovation at scale 4 Increase participation in mainstream spirits 5 Build advantaged routes to consumer 6 Embed productivity in our culture to drive out costs to in
Slide 34: The Best-Selling Spirits Collection in the World's Best Bars
“THE BEST-SELLING SPIRITS COLLECTION IN THE WORLD’S BEST BARS” #1 Rye #2 Malts #1 #2 #1 #2 #2 Portfolio Scotch Vodka Rum Gin Tequila SUPER PREMIUM+ RANKING * Source: * IWSR, and Drinks International Brand Report 27 Market or category – check This attractive category accounts for 15% of global intern
Slide 35: Tanqueray and Don Julio bar rankings
top trending vodka. Tanqueray has been successfully crowned the bartender’s choice of gin for the seventh year in a row Don Julio as the number one best-selling tequila for the fourth year in a row and one of the top trending tequilas in these bars 27
Slide 36: Stronger Brands and Capabilities
STRONGER BRANDS AND CAPABILITIES MASS LUXURY CORE LUXURY PRESTIGE BRANDS $25+ $100-250 $250+ 28 We are continuing to strengthen our reserve portfolio, through stronger brand building capabilities, innovation and selective acquisitions such as Casamigos, We think about luxury spirits as three separat
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Slide 38: Delivering Strong Performance
DELIVERING STRONG PERFORMANCE RESERVE* ORGANIC NET SALES GROWTH (%) 14 11 7 F17 F18 H1 F19 *includes Chinese White Spirits 29 We have a solid blue print and strategy for our reserve business We have a clear model and way of working that builds our brands in market We are agile enough to respond to t
Slide 39: Our Performance Ambition Will Be Delivered Through Six Priorities
OUR PERFORMANCE AMBITION WILL BE DELIVERED THROUGH OUR SIX PRIORITIES 1 Keep premium core vibrant 2 Continue to win in reserve 3 Drive innovation at scale 4 Increase participation in mainstream spirits 5 Build advantaged routes to consumer 6 Embed productivity in our culture to drive out costs to in
Slide 40: Innovation Strategy Grounded in Leading Consumer Insights
INNOVATION STRATEGY GROUNDED IN LEADING CONSUMER INSIGHTS RE-RECRUIT RECRUIT DISRUPT 31 Driving sustainable growth, led by consumer trends and insights, lies at the heart of our innovation strategy. A clear consumer insight serves as the core purpose of each launch, to which we apply a structured pr
Slide 41: Leadership in US innovation
attitudes or behaviors such as Pure Brew non alc beer. I am very pleased with the results of this strategy. In the US we are the clear leaders in innovation, with seven of the top ten spots in the last 52 weeks, over 3 times our market share. Deirdre will talk more about this later. 31
Slide 42: Increased Focus on Recruiting Consumers Is Driving More Stable Financial Performance
INCREASED FOCUS ON RECRUITING CONSUMERS IS DRIVING MORE STABLE FINANCIAL PERFORMANCE INNOVATION NSV AND NSV CONTRIBUTION BY # OF LAUNCHES INNOVATION CATEGORY # 250 200 150 100 50 0 F14 F15 F16 F17 F18 F16 F17 F18 New Launch Number of launches Established Innovation Bn NSV Previous Year Launch 32 Our
Slide 43: Additional Growth Through Distill Ventures
ADDITIONAL GROWTH THROUGH DISTILL VENTURES 33 We are passionate about nurturing the global drinks giants of the future, about helping founders develop their brands and are constantly searching for the disruptions and discontinuities in the market. Distill Ventures is our Diageo-backed and funded inc
Slide 44: Our Performance Ambition Will Be Delivered Through Six Priorities
OUR PERFORMANCE AMBITION WILL BE DELIVERED THROUGH OUR SIX PRIORITIES 1 Keep premium core vibrant 2 Continue to win in reserve 3 Drive innovation at scale 4 Increase participation in mainstream spirits 5 Build advantaged routes to consumer 6 Embed productivity in our culture to drive out costs to in
Slide 45: The Rise of the Emerging Middle Class Continues
THE RISE OF THE EMERGING MIDDLE CLASS CONTINUES EM TOTAL POPULATION EMERGING MARKET POPULATION GROWTH By income group (2018 and 2030) (M People 2018 and 2030) 5.2 5.9 193 17% 21% 12% 64 15% 17% 46 18% 259 17% 18% 37% 29% 2018 2030 2018 India LAC Africa Other 2030 Globally Affluent Lower EMC Upper EM
Slide 46: Large Portfolio of Brands Across Key Price Points
LARGE PORTFOLIO OF BRANDS ACROSS KEY PRICE POINTS EMERGING POPULATION (by income group %) 17% Globally Affluent 12% Upper EMC 17% Middle EMC Lower 17% EMC 2018 Source: Euromonitor 2019 36 Recruiting the emerging middle class to international style spirits, through our mainstream spirits portfolio, a
Slide 47: Delivering Strong Growth and Strengthening Margins
WE ARE DELIVERING STRONG GROWTH AND STRENGTHENING MARGINS MSS INCREMENTAL CAAP MARGIN MSS NET SALES VALUE GROWTH (BPS) (%) 336 10 8 175 5 116 F17 F18 F19H1 F17 F18 F19 H1 37 We are choiceful in where and how we compete in mainstream spirts and apply the same expectations on improving margin accretio
Slide 48: Our Performance Ambition Will Be Delivered Through Six Priorities
OUR PERFORMANCE AMBITION WILL BE DELIVERED THROUGH OUR SIX PRIORITIES 1 Keep premium core vibrant 2 Continue to win in reserve 3 Drive innovation at scale 4 Increase participation in mainstream spirits 5 Build advantaged routes to consumer 6 Embed productivity in our culture to drive out costs to in
Slide 49: Significant Progress on Journey to Strengthen Route to Consumer
SIGNIFICANT PROGRESS ON JOURNEY TO STRENGTHEN ROUTE TO CONSUMER Phase 1 F14 – F16 Phase 2 F16-F18 Route to Consumer Strengthening More of the right places Detailed customer plans Codified best practice Outlet execution standards Upskilled and strengthened More fully aligned incentives ‘Everyone sell
Slide 50: Route to consumer scorecards and incentives
and measured performance against it We aligned our internal incentive schemes to those which drive sell out And finally, each market developed a scorecard for their route to consumer objectives which was reviewed by the executive team. All of these changes made significant improvement to the effecti
Slide 51: Leveraging Advances in Technology for the Next Phase
LEVERAGING ADVANCES IN TECHNOLOGY FOR THE NEXT PHASE Phase 3 F19 Advances in Technology and Data All channels and customers Micro targeted approach Balance data, insights & relationships Disruptive technology and advanced analytics 40 The world around us continues to rapidly change, the shopper land
Slide 52: Digitizing the customer journey
Digitizing the customer journey to ensure that everyone who engages with an outlet, including the owner, has the data and insights needed to deliver the best and most relevant execution in every outlet (e.g. right products, right price, right activation). We are also building advanced analytics capa
Slide 53: Our Performance Ambition Will Be Delivered Through Six Priorities
OUR PERFORMANCE AMBITION WILL BE DELIVERED THROUGH OUR SIX PRIORITIES 1 Keep premium core vibrant 2 Continue to win in reserve 3 Drive innovation at scale 4 Increase participation in mainstream spirits 5 Build advantaged routes to consumer 6 Embed productivity in our culture to drive out costs to in
Slide 54: Productivity Has Delivered Strong Results and Embedded Everyday Efficiency
PRODUCTIVITY HAS DELIVERED STRONG RESULTS AND EMBEDDED A CULTURE OF EVERYDAY EFFICIENCY £700m productivity by F19 2/3 reinvested 175bps Operating margin improvement NET REVENUE GLOBAL ORGANISATION MARKETING INDIRECTS CASH MGMT SUPPLY EFFECTIVENESS AGILITY & REINVEST FOR SUSTAINABILITY SIMPLIFICATION
Slide 55: Medium-term growth expectations
Over the medium term we expect to drive consistent mid-single digit organic net sales growth and sustainably grow organic operating profit ahead of net sales, within a range of 5 to 7% 43 Through the delivery of our performance ambition and the cultural shifts made we are committed to deliver effici
Slide 56: Conclusions
CONCLUSIONS We operate in an attractive growing industry in which we have the best assets and footprint We have a clear strategy and execution priorities that will deliver our performance ambition We have created a self sustaining model driving quality growth, every day efficiency and smart reinvest
Slide 57: Rest of the day's speakers
John O’Keeffe and Mark Sandys will update you on the changing dynamics of the beer market and why we are well set up to win with our unique beer model and strong brand portfolio. And finally, Kathy will bring everything together and talk about how we will deliver strong and sustainable value creatio
Slide 58: Introducing the Agenda for the Day
INTRODUCING THE AGENDA FOR THE DAY Our strategy and performance Marketing Scotch India US spirits Beer Financials 45 45 • This leads me to the rest of the agenda for today • Ed Piklington, NA Chief Marketing & Innovation Officer, and Cristina Diezhandino our Scotch Category Director and Managing Dir
Slide 59: Q&A and introduction of next speakers
• And finally Kathy will bring everything together and talk about how we will deliver strong and sustainable value creation • We have built time for Q&A into each session, in addition we will once again close the day with a plenary Q&A • We have a lot of exciting things to share with you so without
Slide 60: By Gareth Edwards 46 No script
By Gareth Edwards46 No script 46
Slide 61: Cautionary statement concerning forward-looking statements
Cautionary statement concerning forward-looking statements This presentation and its notes (together, this “Presentation”) contain ‘forward-looking’ statements. These statements can be identified by the fact that they do not relate only to historical or current facts. In particular, forward-looking
Slide 62: Principal risks and forward-looking statements
•movements in the value of the assets and liabilities related to Diageo’s pension plans; •Diageo’s ability to renew supply, distribution, manufacturing or licence agreements (or related rights) and licences on favourable terms, or at all, when they expire; or •any failure by Diageo to protect its in