We catch up with Andrew who is working from home outside London, rather than traveling around the world which is what he normally would be doing to better understand different hospitality and drinks cultures. Over the past year, the alcohol sector has seen profound changes in consumer behaviour as most governmental restrictions to fight COVID-19 reduce social contact. Closed restaurants and bars have been normal in many countries while in others the acceleration of existing trends such as premiumization and ecommerce has made the category dynamic.
Andrew comments that conditions have not been uniform. “In South Africa for instance, alcohol sales were prohibited for periods whereas markets like Australia, New Zealand, and China restricted travel in and out of the country but kept domestic hospitality open. Duty-free sales have also been impacted with less travel abroad. In contrast, we have also observed new social occasions in regions such as Southern Europe and parts of Asia where people have been enjoying alcohol with family more often at home”.
As people are spending less on vacations and dining out, trends such as premiumization have accelerated in regions like North America so that rather than drinking more, consumers are drinking better, treating themselves to a premium tequila or whisky. Shopping has also seen a huge drive to convenience. Previously, alcohol was not a leading e-commerce category but e-sales have increased dramatically. Shoppers also go to large out-of-town hypermarkets to avoid queuing, and cut time in the store by writing lists and buying for a week rather than shopping spontaneously with frequent shopping trips.
Tastes stay similar
Andrew comments “Whilst we see some change in the nature of drinking occasions, taste and the repertoire of things that people choose remains very similar. We are using behavioural economics to look at which behaviours will stick in the future, whether they are as satisfying as before, and the new shape of socializing when restrictions are eased. We don’t expect things to stay exactly the same but we also don’t think that people will choose dramatically different things to satisfy their motivations.
“The alcohol category normally grows year on year through premiumization. Whilst this has been an unusual period, we can see from longitudinal data that the category tends to return to previous levels after disruptions, so we can be confident that drinking and hospitality will recover because there is such a pent-up demand for socializing and social experiences.”
At the start of the pandemic, Andrew’s team found their inboxes were overwhelmed with hundreds of well-intended consumer sentiment studies but which ultimately offered little by way of insight. In place of this avalanche of information, they developed a framework to support thinking about the forces that would likely shape consumer behaviour and considered what data they would need to make sense of the changing context. They identified a range of key events they thought might play out and predicted how they would impact peoples’ ability to connect socially. Using as fresh data as possible, they sought the least amount of the most powerful data to help stakeholders navigate the status of the different scenarios they had predicted.
Andrew notes that “The other challenge was the intensity of the first three months as people were scared of getting sick, and working from home so we had to consider how to create the conditions for our people to work effectively and feel they were supported. We had to remember that our experiences would be very different from people in other countries and socio-economic groups.”
Methodologies change
Diageo has scale-businesses throughout Africa, South America, Asia, Europe, and North America. The consumer planning team ran online panels, identified trends via digital research and accelerated mobile surveys, this being the de facto way of doing things in many African markets, particularly in rural areas. The team revved up automation using a codified set of tools, enabling them to reduce design time and standardize processes. With less face-to-face, ethnographic and qualitative research they used research specific zoom-like platforms. New tech tools can also do simultaneous translation and edit videos, removing a lot of labour-intensive work for research providers to make the information more immediate. However, despite being able to talk with consumers online, they still missed the context gained in talking directly with people and experiencing their everyday lives.
Many core business measures have been unpredictable, so there has been more emphasis on market share as a measure of success and brand strength as a measure of competitiveness. Diageo uses data analytics so the emphasis is on synthesizing different information, merging continuous with ad hoc data, plus data from social media and other sources and delivering this to the decision makers when they need it, replacing the formal debrief at the end of ad hoc project. Andrew believes that this trend of delivering intelligence directly to decision makers has accelerated, is more efficient and is here to stay.
“It’s been a period of great innovation. We asked our teams across the world to write a one-page case study on innovative approaches they had trialed and received over 70 different examples so people have been really creative. Insights, which replaced mass observation and quantitative as a way of evaluating 20 years ago, has become more like intelligence.
“In periods of significant disruption, people focus on the now and what’s next, rather than the longer-term future which is harder to make sense of. But we don’t want insights to only inspire tactical short-term action, so getting the balance between long, short, and medium term is important. Having insights and intelligence at the fingertips will be a long-term shift but when possible, we will certainly do ethnographic and spend time with consumers because digital cannot generate the same level of connection.”
Innovating the offer
The company has seen a big rise in e-commerce where previously people were not used to buying alcohol online as purchases would depend on the occasion such as a meal with some friends and would be made at a convenience store during routine shopping. However, habits are changing so people are buying direct from alcohol providers or through last-mile retailers like Drizly in the US which buy from a local retailer and deliver to consumers.
With an agile innovation machine to respond to at-home consumer motivations, innovation has been a main driver. Diageo has introduced new products for e-commerce, sometimes tweaked for convenience with premixed cocktails in cans for large retailers. The company also introduced cocktail kits as people are looking for new experiences at home. Initially, starting with very elaborate mixes, they found people also like simpler drinks such as gin and tonics where they are more likely to have the ingredients to hand.
The suite of what people do has changed with new social occasions, routines and rituals to satisfy the full range of motivations. Some are seeking to recreate the fine dining experience and consumers in some countries have moved their out-of-home dining experience more easily into the home whereas in highly populated cities in parts of Asia, people have limited space so it’s less usual to invite guests home to eat and people might not even cook their own food every day. People have experimented with new ways to socialize, such as zoom drinks and cocktails, and the digitization of living has accelerated with new subscription services and entertainment at home.
Leadership
Andrew notes that whilst vaccination is critical to consumer confidence, it is being rolled out in different ways by governments that are also much more cautious about travel than last year as there is potential for variants to spread internationally. Businesses will have to adapt to a period where COVID-19 remains, albeit with a smaller impact so research is vital to understand how things evolve.
“Research and insights are having a moment because we live in a world where businesses need to act at pace on the opportunities caused by disruption. The need for businesses to understand consumers, markets and culture and translate that into long and short-term opportunities has never been greater. I hope consumer specialists recognize they have a unique role to play in helping their businesses make sense of the opportunities that are presented to them. It’s about having the courage to step up and shape the narrative about what’s going on, where the opportunities for growth are and what the business needs to do. Playing that role is critical because insight specialists have access to vital information. We must keep it simple and guide action with confidence.
“We need to understand the business to identify which opportunities are strategically valuable, because with so much change, you must be selective about the things that are important. I suspect there are few businesses that will say they need fewer superior insights to enable them to pivot and emerge stronger from this crisis.”
