Diageo looks to increase ad spend

Diageo cut its global advertising budget by 5% in the half-year to December 31, taking advantage of price deflation in the advertising market to get more for its money.

Chief executive Paul Walsh said the company had maintained or increased its marketing presence for less money, and would shift more of its spend into digital media.

“It’s allowed us to reduce the marketing pot while building share of voice,” said Walsh.

“In the second half of the year we expect marketing spend to grow as a percentage of net sales.”

He said any increase would be “modest and carefully targeted”. One major move will be turning the Arthur’s Day global party promotion into an annual event.

It was instigated last year to mark the 250th anniversary of Guinness, with events in major cities around the world featuring artists such as Dizzee Rascal, Jamie Cullum, Kelly Rowland, Kasabian and Tom Jones.

“It was a fantastic event which we believe will have real longevity,” Walsh said.

He was speaking as the spirits producer reported a 2% fall in organic net sales in the half-year, to £5.2 billion, with operating profit at £1.5 billion, down 3%.

“These are an impressive set of results, against a backdrop of economic turmoil on an unprecedented scale,” Walsh said. “In the UK, we’ve grown our share of spirits, beer and wine on the back of strong Christmas trading.”

UK volumes were up 6% and net sales 5%. Diageo generated cash of almost £1 billion in the half-year, but Walsh said the company would be in no rush to spend it through acquisitions.