...where distraction is the main attraction.

Tuesday, April 17, 2012

Diageo, Whisky Killer, Part 2: The death of Green & Gold Labels

Green Label has always been the odd one out amongst the Johnnie Walker blends.  Unlike the rest of the cast, Green is a Blended Malt rather than a Blended Whisky.  This means there's no grain whisky in it, just a mix of single malts.

Last year, in an interview for the Malt Whisky Yearbook, a Diageo representative -- the same exact rep who made the questionable statements I covered yesterday -- said the following about Green Label:
"Green Label was aimed at offering something for people who were comfortable with their favorite blend, but not sure how to get into single malts......Green Label is right in the middle of our Flavour Map.  It has very wide appeal."
Less than a year later, Diageo announced they are killing Green Label.

Then they announced they are killing the next blend up the list, Gold Label.

This same Diageo rep says in this same interview:
"If you want uber-flexibility you don't put on an age statement, but if you are pitching your blended malt against single malts, then an age statement helps, because single malts almost invariably carry age statements."
So, what does Diageo replace Green Label (15yr) with?  A non-age statement "Gold Label Reserve".

Gold Label Reserve is not Gold Label (18yr), since Gold Label will be getting the hatchet.  It's a completely different blended whisky (not a blended malt), without an age statement.  Since age statements are largely marketing tools, how exactly is Diageo going to try to sell Gold Label Reserve amongst the rest of their blends......which all have age statements......and still get folks to pay $60 for it?  How are they going to keep the not-Gold-Label Gold Label Reserve from getting confusing?  Are they hoping that customers will think that it's Gold Label and will get excited about paying $25 less for it?

Gold Label itself is getting replaced by Platinum Label (which does have an 18yr age statement) which will be peatier and at least $30 more expensive.

To clarify:
Green Label's price point --> Gold Label Reserve
Gold Label's price point + $30 --> Platinum Label (18yr)

So what was...
Red - $20
Black - $40
Green - $60
Gold - $80
Blue - $200

Is now...
Red - $20
Black - $40
Gold Reserve - $60
Platinum - $110
Blue - $200
...unless they raise the prices of the others, which is not out of the realm of possibility.

What is their reasoning behind this move?

In an interview with the major wine & spirits journal, Shanken News Daily, the same Diageo gentleman provides the following wisdom:
“As we reviewed the brand offering, we found that the range wasn’t meeting consumer needs and providing the best consumer journey through the range as far as taste profiles and price points.”
The revamp was meant to spread out the Johnnie Walker portfolio’s pricing in order to better motivate consumers to move up the brand ladder.
The truth falls outside these statements, since the decision likely had very little to do with "consumer needs".  I have no doubt that Diageo had legitimate financial reasons behind their decision.  But I don't think the above statements have anything to do with those reasons.

Firstly, how does removing your brand's one stepping-stone between blends and single malts meet consumers' needs?  How does adding a NAS (non-age statement) bottling meet consumers' needs?  How does removing the most critically lauded label in your brand meet consumers' needs?  How does removing Gold Label from one price point then adding a Gold Label Reserve at another price point meet consumers' needs?

It doesn't.  It meets your company's needs.

And "providing the best consumer journey through the range as far as taste profiles and price points"?  You're removing a semi-peated whisky (Green) for a non-peated whisky (Gold Reserve), then replacing a non-peated whisky (Gold) with a semi-peated whisky (Platinum).  +1 plus -1 equals 0.  Taste profile hasn't shifted.  You're just charging $50 more for your peated whisky.  And $30 more for your 18-year whisky.

I'm sorry, you said something about "consumers needs?"

And as my MBA buddy said, "I don't recall the chapter in my MBA where higher prices gets customers to buy more. Maybe I skipped that day."

This is about profitability.  To try to hide that in statements about the buyer's desires isn't even creative PR nonsense.

Blended malt sales are dipping while single malt sales are rising.  But since Diaego claims they're not in the single malt business, where's all that malt whisky going to go?

Blended malts require 100% single malt whisky.  Large blends have between 30% and 40% single malts, the rest is filled out with cheaper quicker grain whisky.  I've had some cheap Diageo blends, and they're barely hitting the 30% malt mark.

Let's do some quick math.  According to the Yearbook, Diageo released 220,000 cases of Green Label in 2009.  That's 1,980,000 liters of malt whisky.  That same quantity of malt whisky could be spread out to 550,000 cases of grain-light or 733,000 cases of grain-heavy blended whisky.

Thus Diageo wants to keep their malt whisky and spread it around.  And they're trying to create more for the emerging markets (read: China).  Diageo just built the enormous Roseisle distillery; they're considering building another; they're ramping up production to squeeze another 10 million liters/year out of their existing distilleries.

So they clearly need more malt whisky for their blends.  Unless they want to try to sell single grain whisky to the Chinese.  (Diageo, you can have that idea for free.)

And as I'd mentioned before, they're aiming for revenue growth by having customers pay $50 more for peated whisky and $30 more for 18-year old whisky.  Simultaneously, in the Green-now-Gold-Reserve price point, consumers will be paying the same amount of money for something with a completely different flavor profile that has less depth due to a 60% to 70% reduction in single malt content.

Wow.  Thank you for considering our needs.

Well, not my needs.  After this label phase-out commences in the summer of 2013, I am done with purchasing Diageo products.

Green and Gold Label are my favorites amongst the Walker blends.  I feel a BLEND of disgust and disappointment with their removal.  It's an emotional revolt I cannot objectively qualify with words.

But I'm also sick of the lazy way Diageo handles their single malts, as illustrated in yesterday's post.

I'm also frustrated by the way they handled their closed distilleries, destroying brands rather than selling them off to a smaller company that couldn't even compete with them.

The cultural and socio-economic thumping that was dealt to Kilmarnock upon the closing of the Johnnie Walker bottling plant did not win Diageo any points on my behalf.

And finally these odd, ham-handed, dishonest attempts to mask their business is insulting to me as one of their consumers.

My dollar is my voice.  I will support the smaller whiskymakers.  They may not always be 100% honest in their marketing material, but at least they work hard at developing their single malt product.  They succeed and evolve more with less at hand as they try to wrestle shelf space away from the Diageo brands.

Johnnie will have to keep walking without me.