Research in Focus - Diageo's Johnnie Walker Just Keeps On Walking
In a way it must be a bit galling for the undoubtedly talented number crunchers at the International Wine and Spirit Record (IWSR) that their carefully devised methodology for calculating the world's top performing spirit brand produces probably the same outcome as the intuitive guess of most industry professionals, once they have left brand affiliations to one side.
At the same time, the fact that Johnnie Walker sits atop the rankings could be considered a total vindication for the Performance Brands methodology.
The IWSR/just-drinks World’s Top-Performing Spirits Brands ranking, now in its second year, is much more than a simple case-counting exercise. Indeed, brands that simply sell a lot of boxes - but all at the standard end in a single market - are excluded.
An international presence is the fundamental qualification for inclusion. To qualify a brand must sell 20,000 cases or more in at least three different regions, with duty free counting as one region.
The ranking seems a little peculiar at first in that it is not a "top 100" or "top 50", but the number of brands listed simply reflects the brands meeting the criterion. So, the ranking this year comprises 124 brands. The selection will continue on this basis going forward, so the rankings will continue to comprise a variable number of entrants.
Interestingly, the report's authors point out that this number is in itself revealing. "The number of brands making the list will continue to be variable and tend to reflect the degree of internationalisation within the industry, or other factors such as macro-economic developments," the report states.
The brands are then scored against the following criteria: overall market volume, per-case average and five-year (2006-2011) growth. The top score in any of those three categories could yield a maximum of 122 points and a minimum of one point, so the highest potential aggregate score is 366 and the lowest is 3.
In that context, Johnnie Walker's aggregate score of 341 is impressive. To top these charts, a brand has to have a combination of prodigious features. And, on the face of it, Johnnie Walker, which topped the rankings last year as well, does appear to have the lot.
"The brand witnessed spectacular success in 2011 across a broad range of markets," the report says. "Brand volumes (domestic and travel retail) climbed by 7.6% to 16.68m cases, in 2011 over 2010. This equates to volume growth of an incredible 1.18m cases."
Moreover, this volume growth was achieved at time when average per case value increased by US$8 to US$373. The combination of growing volume growth and a higher per-case average led to significant growth in retail value, which rose from US$5.65bn to US$6.2bn. This is a continuation of a long-term trend, the report states. Johnnie Walker's retail value stood at US$4.82bn in 2007, and US$2.95bn in 2002.
"These favourable developments stem from a combination of geographic expansion and premiumisation," the report continues. Johnnie Walker sells more than 1m cases in three markets – the US, Brazil and Thailand. It also sells more than 500,000 cases in another two markets – Mexico and Australia.
The brand's international status is confirmed by its strong presence in travel retail. The report points out that the brand is "far-and-away" the largest brand in travel retail at 1.92m cases, and "seems certain" to become the first brand to break the 2m case mark in the channel.
The suggestion that Johnnie Walker would have been the intuitive choice of industry professionals is confirmed by the just-drink reader’s survey, the results of which are published with the rankings. Johnnie Walker was the highest rated brand in the survey in terms of ‘Brand Strength’ with an average rating of 4.65 out of a potential high score of 5.00.
There is also the suggestion in the report that Diageo is not resting on its laurels, and this is another aspect that appears to be recognised by industry peers.
Product innovation, notably at the luxury end of the market, has been a key facet of the brand's progress, which is reflected in the rise in average per case value.
The brand's record on innovation is also recognised by industry professionals. In the just-drinks survey, Johnnie Walker was ranked as the most innovative Scotch brand with a rating of 4.27, compared with Chivas Regal at 3.58 and Ballantine’s at 2.69.
Johnnie Walker's success also speaks to Diageo's leadership of the spirits market, and once again this can be seen in the Performance Brands rankings.
Diageo has the largest number of brands on the list with 21, followed by Pernod Ricard with 18, Beam and Bacardi with 10 each, William Grant & Sons with six, Rémy Cointreau with five and Brown-Forman, Campari and Edrington all with four.
So, if the IWSR/just-drinks rankings can be likened to the pop charts, Diageo has both the top-selling single and the number one album.
Reports today claiming that Diageo's public offer to up its stake in United Spirits is doomed to failure should be taken in some sort of context....
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