Diageo announces new trade terms

Published: 30 August, 2008

Diageo GB is introducing new standard trade terms from September, which it says aim to use customer investment more effectively to support growth within the alcohol beverage category.

Diageo GB is introducing new standard trade terms from September, which it says aim to use customer investment more effectively to support growth within the alcohol beverage category.

Diageo says the new terms are a crucial way of unlocking significant additional value and mark part of a strategy focused on long-term category growth. Going forward, all investment Diageo makes with the trade will be structured and measured in a way that requires all customers to deliver a variety of proven sales drivers. Payment will only be made when activity has been implemented and that implementation evaluated.

David Smith, sales director for Diageo GB, said: "As a company, we are increasingly focused on how we can better deliver growth within the total category, and in particular spirits, versus solely concentrating on promoting our individual brands. We're applying this across all aspects of our business: category development, marketing and of course the significant area of trade investment.

"This will provide a more transparent way of working with our customers by setting out consistent and clear terms. The focus is very much to maximise the value and effectiveness of our trade investment, which in turn will promote category growth and provide mutual benefit to both our customers and Diageo.

"We believe there is a potential £500 million of incremental value for the industry by concentrating on key development areas. These include encouraging consumers to buy more premium brands, using seasonal peaks to attract consumer interest, giving consumers confidence to mix great spirit drinks and promoting spirits as relevant for everyday occasions. We believe this will increase category value for our customers, and ultimately our brands will benefit as well."

The terms will include a standard list price for all customers and channels, with investment chiefly structured around three areas: scale discounts, efficiency discounts and sales drivers. These will sit alongside existing promotional investment. The different areas of investment will be tracked against anticipated levels of growth, so that future investment can be aligned to the areas that will deliver the greatest value, says Diageo.

Smith added: "Many other global FMCG companies have found standardised trade terms to be a highly effective way to drive both brand and category growth. It is also a way of growing the category without being exclusively focused on price."

The new terms will be rolled out from September 2008.

Printer friendly version