In Focus: Apurvi Sheth, Diageo

Diageo’s Managing Director of Emerging Markets and Joint Ventures in Southeast Asia shares with Vipanchi, the company’s Sustainability and Responsibility Strategy as well as its other goals for the next five years.

By Vipanchi Dinavahi

 
You have had a long career in the beverage industry. Share some insights on how it has transformed over the years. What transformation do you see in consumers’ expectations?
 
We are seeing consumers place increasing emphasis on corporate responsibility at the company and brand level, both in our industry and more generally. Corporate transparency and sustainability issues — such as sharing value and optimising the impact of business on communities — are here for good, and I support that fully. Growth for businesses cannot come at the expense of societal or environmental wellbeing, and we will increasingly see consumers acting on these concerns through their purchase decisions.
 
Millennial consumers today are also expecting enhanced experiences from brands — whether they are buying or consuming, online or offline, mainstream or luxury. At every stage and touchpoint, they’re expecting an enhanced experience.
 
Digital channels and technology are becoming increasingly critical as a means of consumer communication, and provide brands with the very platform to meaningfully engage and create those enhanced experiences. We’re seeing this particularly in emerging markets, where consumers are only just developing their online presence. While brands moving online will not replace the need for physical presence, the digital world will definitely be an integral part of winning consumers’ hearts and minds.
 
Diageo is one of the largest producers of luxury products. What trends do you see in the emerging markets’ luxury sector?
 
Economic growth leading to increasing wealth is still a key driver of our luxury business. The Southeast Asia luxury market is expected to grow CAGR 15–20% over the next five years, while Southeast Asia’s middle class population is forecast to exceed 150 million by 2020, which are very exciting demographics for consumer goods companies like us.
 
With this, we are also seeing the ‘democratisation of luxury’, where a new category of luxury goods at affordable prices are now available to more consumers. Previously, we saw a trend for conspicuous consumption, but with changing tastes, this has been replaced with an emphasis on quality, authenticity and uniqueness. Increasingly, consumers are demanding a more meaningful, experiential and personalised return on their investment.
 
However, the top 1% of luxury consumers are looking for exclusivity, customisation, and bespoke products and experiences, which have led to an increased focus on heritage, craftsmanship and authenticity as part of a brand’s story.
 
Our ‘Living Luxury’ strategy is a perfect example of how we’ve embraced these exciting changes and innovated by making our brands relevant and accessible in the daily lives of luxury consumers across all tiers. The embodiment of this is the Johnnie Walker House, which acts as an ‘embassy’ for whisky culture. With four in Asia, each House is designed with the local culture in mind, and is intended to build the Johnnie Walker brand into a lifestyle concept that brings to life 180 years of blending history, provenance, and the pioneering spirit of Johnnie Walker, but in a fresh and modern way that today’s discerning consumer can relate to and appreciate.
 
These houses are the first of their kind outside Scotland, and allow us to reach consumers directly through immersive luxury whisky experiences, from beautiful limited-edition products — such as our Johnnie Walker Blue Label SG50 — which are available to many yet offer a level of exclusivity, to luxury bespoke services where customers can work with our master blender to create their own signature blends.
 
Digital channels and technology are becoming increasingly critical as a means of consumer communication, and provide brands with the very platform to meaningfully engage and create those enhanced experiences. We’re seeing this particularly in emerging markets, where consumers are only just developing their online presence.
 
With many successful labels under Diageo’s belt, what challenges do you see in today’s economic climate?
 
Diageo constantly innovates to adapt to changing consumer tastes and patterns, as well as to ensure we keep our brands relevant to the market. We’re a Total Beverage Alcohol player, and our brand portfolio operates across a range of price points, so we are ideally positioned to cater to consumers in both the affordable and luxury spaces.
 
The liberalisation of economies is already causing unprecedented change across Asia, as countries become increasingly open to trade and investment. However, bureaucracy, unpredictable and tightening regulatory environments, and increasingly protectionist policies are still prevalent in Southeast Asia, which increases costs and acts as a disincentive for foreign investment.
 
This underscores the importance of companies working closer as an industry to engage governments and understand their concerns, as well as actively creating dialogue platforms to share global industry best practices and industry perspectives, as part of governments’ policy-making process.
 
You have an impressive Sustainability and Responsibility strategy. Your 2015 target has just expired. Please share some of the learnings you have had in the last five years.
 
We understand that our distilleries and breweries are at the heart of the communities in which we work, and that we have a responsibility to create shared values for our shareholders, our people who work so hard to make our business successful, and for the wider society that enables our business to flourish and grow.
 
Our targets are focused on three pillars: leadership in alcohol in society, building thriving communities, and reducing our environmental impact. Overall, we are proud of the progress made since we set our 2015 targets back in 2007. We have significantly reduced our overall impact on the environment over a period of time when we have also grown our business, with increased production volumes and through significant acquisitions. Over the last eight years, we have incorporated several new acquisitions into our environmental programme, which often makes it more challenging to maintain our originally desired progress towards our targets.
 
As a result, our operating standards now have greater reach, increasing the potential scale of their impact in the long term. We have also recognised the need for broader partnerships to help scale up our community programmes, which we’ll continue to develop to increase the impact we have already delivered.
 
Our ongoing investment in our business, our supply network, and the communities where we work continue to improve our environmental and social performance, and will support our progress towards these 2020 targets and beyond.
 
What goals does Diageo have for the next five years?
 
2015 has been a year of significant progress in Diageo’s approach to sustainability and responsibility. With our 2015 targets expiring this year, we evaluated the strengths and weaknesses of our strategy against our track record of performance and, in December 2014, we launched new and ambitious targets for 2020 for our most material issues.
 
Creating a positive position for alcohol in society is a priority, because it creates a more confident role for our business and industry as a whole. Across Asia, we currently support more than 60 programmes to promote moderation and to help tackle irresponsible and underage drinking, collaborating with local authorities on programmes that tackle key issues such as drunk driving.
 
In developing more sustainable supply chains and raw materials sourcing, we support the building of self-sufficient, thriving communities, and thus plan to source 80% of our raw materials in Asia and Africa by 2020.
 
We have also committed to reducing our environmental impact through better managing water stewardship and carbon emissions across our whole supply chain. By 2020, our target is to reduce our water usage through a 50% improvement in water efficiency.
 
All these are an essential part of our ambition to create one of the best performing, most trusted and respected consumer goods companies in the world. We need to understand the impact we have as a company, with the aim of ensuring that, overall, our contribution is a positive one.
 
We have already begun this work with our new integrated water strategy, our Water Blueprint, which was launched in April 2015. This has given us a deeper understanding of the total impact of our water use, and helped us to prioritise what we need to do to improve our stewardship of water.
 
Creating a positive position for alcohol in society is a priority, because it creates a more confident role for our business and industry as a whole. Across Asia, we currently support more than 60 programmes to promote moderation and to help tackle irresponsible and underage drinking, collaborating with local authorities on programmes that tackle key issues such as drunk driving.
 
What advice do you have for companies that are trying to implement sustainable and responsible initiatives?
 
My advice would be to communicate initiatives — both internally and externally — and make sure the initiatives are relevant to your business. Employees are a company’s best ambassadors!
 
At Diageo, we include some of our initiatives as non-financial performance indicators — such as carbon emissions, responsible drinking programmes, and water efficiency — which are a source of great pride to employees as well.
 
This helps stakeholders benchmark our performance, ensuring that we are “walking the talk.” We only earn trust and respect through our actions, so we work hard to ensure that Diageo delivers on its promises.
 
How have these initiatives inspired you personally?
 
I am actively involved in gender issues, both within and outside the business through Plan W, Diageo’s initiative that aims to empower women across all socio-economic profiles, and provide opportunities to learn and develop skills. This initiative is part of Diageo’s 2020 targets.
 
I also play a role in developing female leadership within Diageo. During my time as Managing Director of Innovation in Asia Pacific, I led what we call a ‘lean-in’ group, where female employees to come together each month to share inspirational leadership stories, and challenges that have been overcome in the workplace, as well as insecurities.
 
I also join public speaking forums on gender and diversity as I believe that it is important to be part of the dialogue, to share my personal experiences with young professionals.
 
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