Diageo Innovations

Why do large companies suck at new products?

I get this question all the time and the answers are really quite simple. At the top of the list, it’s easier to buy than build. Why invest the time and effort and divert attention from the existing portfolio just to dig a dry hole?

More important is the simple arithmetic throughout the food chain. “How am I going to make my bonus/meet management’s expectations/reach my sales quota – you fill in the rest – if I divert my attention to a start up brand?”

So, if you’re a major player, you have a number of options when it comes to new products and brands.

First, you can bite the bullet and say, as I did at the outset of this posting, why bother? Let someone else build it, I’ll make an offer they can’t refuse. Mainly Diageo, but also others, fit this mode.

If you’re aggressive and smart, chances are, you’re also attuned to the marketplace (consumers and trade) and know how to create demand or capitalize on an opportunity. Just look at White Rock, Proximo, Beam, Campari and others.

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It definitely is not the advertising

I found Megan’s article on Constellation Brands in yesterday’s issue of Wine and Spirits Daily to be particularly interesting.

Here’s an excerpt:

Constellation may be one of the world’s largest wine companies, but its spirits brands had a phenomenal year.  Total spirits organic net sales grew 19% for the year, led by a 38% gain for its star Svedka vodka.  Svedka also recently launched it’s first-ever television advertising campaign “which marks an exciting milestone and serves as another example of how Svedka is setting itself apart in its quest to bring future fun to vodka lovers everywhere.”

The quote is from Constellation Chief Rob Sands who, in my opinion, is among the best executives in the business. Smart, knowledgeable and effective. But, obviously not an advertising maven.

Maybe it’s just me that thinks the ad campaign is ridiculous. It features a well-endowed, sexy, female robot (fembot) supposedly symbolizing the brand’s future achievements. If the marketing folks are looking to be more than a price driven brand and want to add image — keep looking.

Oh, and check out the TV campaign. I’m the guy who was there when Seagram and the industry decided to end the voluntary ban on broadcast advertising. This ad makes me think we made a mistake.

Svedka is a great brand built on hard work and smart marketing…excellent imported Vodka with high quality at a very competitive price. I’ve even been known to buy a 1.75L every now and then.

But its growth is not a function of the advertising. Its growth continues in spite of it.

Maybe mainstream advertising is not as important for brand building as it once was.

Just sayin’…

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