Diageo, owner of Guinness, Johnnie Walker and Baileys, published results for the year ended June 30 on August 6: organic net sales down 2%, organic operating profit up 2%. Chief among the lines lifting that profit is the marketing budget — the company’s own regional table shows marketing spend down 13.1% organically, with Europe at 17.2%, Asia Pacific at 16.3%, and its largest market, North America, at 13.6%. Diageo describes the reduction as accelerated savings and deliberate prioritisation, and says its commitment to investing in its brands is unchanged. On the same day, newly appointed CEO Dave Lewis announced a further $1bn savings programme over three years, carrying a one-off restructuring cost of $1.2bn.
This is the most seductive sentence a P&L can produce: we spent 13% less on marketing and profit rose 2%. That the sentence is true for this year conceals that it isn’t true for the years after, because the bill for a cut never arrives in the period the cut is made. So the issue isn’t a budget argument but an accounting asymmetry: savings are measurable within the quarter, erosion is not. This is precisely where Deming pointed decades ago — the figures management most needs are not among the figures the system produces. Diageo’s decision needn’t be a bad one. But every decision that trims the visible line while spending the invisible one is a deferred judgement wearing numbers as a costume. And this table is the far end of the agency holding companies’ shrinking revenue lines: what one side calls a client loss is written on the other side as a savings initiative.