The Johnnie Walker and Guinness owner cut marketing spend by 2% in the first half of the year, as the new CFO puts the emphasis on “rigour” and returns.
Diageo’s new chief financial officer has said the company will be “a lot more focused on returns” across advertising, commercial execution and promotional activity.
Addressing investors today (4 February) during the announcement of the company’s results for the six months ending 31 December 2024, Nik Jhangiani – who has been in post since September 2024 – emphasised a desire to drive greater returns across the business.
“Whilst I remain fully committed to investing for both the short and long term with [advertising and promotional] spend, we will be adding more rigour on measuring the effectiveness of this spend,” he said.
Much of this work to make ad spend more efficient is already in play. Diageo’s marketing teams have been “restructured” to align them with what the business terms “agile brand communities”. These have the aim of helping teams produce relevant content for different markets quickly.
CEO Debra Crew also highlighted the potential to reduce non-working media spend (i.e. money spent on the production of content) given technological advances, as well as effectiveness tools like CreativeX.
Diageo’s effectiveness boss on why brand-building is a ‘total business mentality’
Diageo reduced its advertising and promotional spend by $37m (£30m), or by 2% year-on-year in the six months to the end of December. This cut came as the company marginally grew its organic sales by 1% to $10.9bn (£8.77bn) and its operating profit reduced by 1% to $3.32bn (£2.67bn).
The decision to cut marketing spend in the first half of Diageo’s 2025 fiscal year comes after the budget remained “flat” for the year ending 30 June 2024. Cutting marketing spend is a notable departure from subsequent years when the business uplifted investment significantly.
For example, in its 2023 financial year Diageo upped marketing spend by 6% compared to the year before. In 2022, marketing spending was increased by 24.7%.
While advertising and promotional spending was cut in the first half of the year, Jhangiani said the business is still “ensuring that [it invests] as and where appropriate”. He cited increases behind Don Julio in the US and Guinness in Europe as examples of where Diageo had upweighted investment in the half to meet growth opportunities.
The CFO’s emphasis on rigour and returns doesn’t just apply to media and creative spend. He also stressed opportunities in how Diageo’s products show up on shelves in terms of physical availability and promotional activity.
“This is a real opportunity to do more,” Jhangiani said. He highlighted increased brand activation at point of sale as one opportunity, as well as increasing presence in the on-trade such as on cocktail menus.
“Here too, we will look at spend to drive more rigour on returns and maximising value for each dollar invested,” he said.
Another area where Diageo sees a “big opportunity” is in its spending on promotional activity. The company will ask itself if it is getting the best returns on investment here and look to drive short-term growth where it can, Jhangiani said.
