Magazine article Marketing

Mark Ritson on Branding: Banal at Home, Extraordinary Abroad

Magazine article Marketing

Mark Ritson on Branding: Banal at Home, Extraordinary Abroad

Article excerpt

Paul Walsh is still doing a splendid job as Diageo's chief executive, as last week's preliminary results for 2006 revealed.

Sales are up 6%, shareholder dividends rose 5%, and the company made more than pounds 2bn in profit for the first time in four years. Most of Diageo's eight global priority brands had stellar years, with brands including Smirnoff, Captain Morgan, Tanqueray and Cuervo all enjoying very impressive global sales growth.

Even better, Walsh links Diageo's success directly to 'brand-building marketing campaigns' and 'superior relationships with our customers'. He may have begun life as a finance jock, but he has matured into a chief executive who understands the power of marketing and truly appreciates the power of the brands that he controls.

But there was one grey cloud in these otherwise perfect results. One of Diageo's key brands stood out for all the wrong reasons: Guinness, which dropped 1% in global sales. More alarming still, the stout's worst-performing market was its original one - Ireland. Sales of Guinness in its home country dropped 8% in the year to June, continuing an enduring slump that has seen Irish sales fall by more than a quarter in the past eight years.

The news sparked widespread debate about the long-term future of Guinness as part of Diageo. Many commentators have noted the acquisitory behaviour of the big beer groups and the glut of money in private equity funds, and suggested that Diageo might offload Guinness for the right price. The logic seems to stem from the assumption that when a brand such as Guinness performs poorly in its domestic market, it augers badly for its future performance all over the world.

In fact, nothing could be further from the truth. Many global brands succeed overseas while under-performing significantly in their original markets. Take BMW - a brand renowned worldwide for performance, luxury and perhaps a dash of ostentation. Except in Germany, where it is widely perceived as a relatively standard, low-image brand, even by its own senior management. Foster's may have proclaimed itself to be 'Australian for beer' but down under, where sales of the lager are tiny, the name is far more associated with the wine trade, in which its parent, Foster's Group, has a major interest - not least the Penfolds and Wolf Blass brands.

The UK has its own example in Burberry. …

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