Due to regulations, we can't raise prices even after double-digit inflation: Hina Nagarajan of Diageo India

The alcohol industry, just like all others, also faced unprecedented challenges during the Covid-19 pandemic phase but it made a swift recovery. Diageo India, in particular, has re-emerged stronger and with a new resolve, despite the challenges, as per its MD and CEO Hina Nagarajan.

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According to Nagarajan, it was the organisation's approach to challenges that helped them in such situations. “We had put up a mantra for ourselves that we emerge stronger from the crisis,” she said while speaking at the ISA Global CEO Conference 2022. 

Speaking about the kind of challenges the pandemic bought to the table, Nagarajan said, “We use a very simple framework for our consumers based on income levels, aspirations and motivations.” 

“What we are finding is that there is a slowdown in consumption among mass consumers. People are buying smaller packs, and changing the frequency of their drinking because of pressures at home. On the other hand, there is no change in consumption when it comes to mainstream consumers. People are experiencing things, there is a lot of travel etc,” she added. 

As per Nagarajan, to deal with this Diageo India divided itself into two verticals. While one vertical is focusing solely on mass consumers, the other is hoping to enhance the experiences for competent mainstream consumers. 

According to Nagarajan, another challenge that the industry faces is the regulation of prices and inflation. “We are facing tremendous inflation on extra neutral alcohol, glasses, packaging material, international logistics, and imports. Unlike most other industries we are regulated on price increases. So, while there is double-digit inflation, we are unable to increase our prices. Therefore we are focusing on what is within our control and we are launching more innovative products, and really juicing the productivity,” she said. 

Nagarajan further stated that they focussed on building premium brands during this period. “We told our teams that we will play on offence and not cut marketing spending. We will in turn actually invest in the premiumisation of our brands and leverage the period.” 

Meanwhile, she said that to cope with the changing consumption patterns, the brand noticed Gin really taking off and hence activated their gin brands to gain traction. She said that within nine months, they have managed to become the market leaders in the Gin category. 

She further spoke about how they focused on keeping the teams motivated to face the crisis and said, “My mantra is to play bold which actually is the mantra of RCB. It is one of the top three sporting teams in the world when it comes to social engagement, after Barcelona and Real Madrid.” 

“Playing bold for us means having a bold, established strategy that mobilises and rallies the organisation. The second is embedding mindsets within the organisation. The third is embedding the behaviours of risk-taking. The fourth is not losing the focus on the long-run.” 

Nagarajan said while they wanted to be the top-performing brand and focus on their strategic pillars, they also focused on giving back to their communities and stakeholders. “We wanted to be an organisation of the future as things are changing too fast. We are focusing on what we want to be ten years from now and also enhancing our roles in people’s lives. We wanted to create a positive impact on our communities. We found that giving back to our communities and stakeholders is actually adding to everything that we are doing. Our team is focusing not on the short-term challenges but each one is thinking of creating a meaningful impact,” she explained. 

Challenges with advertising 

BestMediaInfo.com further caught up with Nagarajan to understand the industry’s challenges when it comes to advertising. Upon being asked if the regulations affect the growth of the sector and brand she said, “We've been regulated for advertising and marketing for the longest time. It has not really impacted the brands. We advertise on digital and other media in a very compliant way.” 

She also said Diageo is actively working with bodies like ASCI. Asked about how advertising towards women for the brand has evolved, she said, “I don't think the consumption of drinks is different for men and women and we are always promoting responsibility. I don't think we do it differently for women and different for men, we do overall messages in moderation.”

However, she further said that they are now actively working towards catering to women. “We collaborated with Kiera Knightly for Black Dog. We are normalising women with brands that are whiskeys. We also recently launched a brand called Royal Challenge American Pride which is a lighter whiskey that you can mix with cola and other mixes. We find that women are really appreciating it as it caters to their taste buds. Also, we are using women innovators in our company and designing products.”

Speaking about an initiative taken by Diageo India post-pandemic, “When bars and restaurants closed during Covid, we actually helped the bars and restaurants come back to business, creating safe environments post the pandemic phase. That campaign was called ‘Raise the Bar’. We never associated any sales to this or asked for anything in return. However, it has an indirect impact as the partners feel that we have really supported them.”

She further spoke about their marketing strategy and said, they are focusing on purposeful advertising. “We are working on purposeful, meaningful initiatives to grow our brands, and our brands in return get the halo effect,” she concluded. 

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