♪ francine: they are household names, some dating back centuries. the company that owns them has not reached the legal drinking age. dashio turns 21. it is the biggest single producer of spirits in the world , driving the business forward is a man who has been with the company since inception. today come on leaders would like walk, we meet -- on leaders with lacqua, we meet italian.

how has the drinks business changed? >> such an exciting time, the last two decades, the big shift interest in premium brands, quality in cocktails. the business has grown terrifically around the world with the emerging markets coming through stronger. and the developed world is in good growth. the dynamic is that people around the world one great experiences and those who choose to drink want to drink better. that is a good thing. francine: what attracted you to the drinks business? do you remember the day you walked into the door? >> i do. i am a brand person. i have always loved brands. when i got the call from

guinness at the time, two of my favorite brands in the company, guinness and johnny walker, not a difficult decision because to be -- the great thing about this company is that johnny walker is 198 years old and guinness started in 1759. our job is to make the great brands even greater. that is what attracted me to the company. francine: do consumer strength more at home -- drink more at home, they want a story that goes with the brands they drink. >> at home and going out, depending on the country and the culture and how socializing takes place. our brands participate in moments of celebration, relaxation, being out with friends. they are built into the fabric of culture. whiskey has a renaissance around the world.

young people are interested, how it is made and where it comes from and the stories behind it. that is what we love, telling the stories and getting the connection with consumers. francine: how much does scale matter? do you need to be bigger to demand better premiums and where your product gets placed? >> it is both. is to keep a big company small and scale matters and we have a wonderful portfolio with market leading brands across all of the major categories. at the same time, you need to be entrepreneurial and connected to where friends are going. is to getof diageo the best of both. francine: finding the local brent that you acquire -- local brand that you acquire and also rebranding and giving people the story about the more global brands? ivan: that and spotting the

trends. i came back from johannesburg this week and what is interesting is how the gin craze is in south africa. we have a brand that is doing well in the last few months. for a company like us, when trends like this develop, you have to ride them quickly. always look for our teams on the ground to see where culture is shifting and what habits are shifting and building our brands quickly in that context. ivan: seen -- francine: seems like a nightmare, how do you keep up with the trend, go to the bar and see what people are drinking? ivan: we have a variety of ways, we stay connected, our teams do, to understanding what the conversation and culture are about. we look at translating bars and bartenders -- trend that leading bars and bartenders and we track what is happening on social

media. what adults are talking about. that is what our marketing teams around the world need to be good at. it is the exciting part of the job. francine: you own to out of the five most important spirit brands in the world, johnny walker andat. smirnov. ivan: our job is to make sure brands like these, built over hundreds of years, are highly aspirational and relevant to the next generation of consumers coming through. the 20 something-year-old in brazil, johnny walker needs to be and stay relevant, cool, aspirational. that consumer needs to be willing to pay a premium for this wonderful whiskey. that is how we define our job. these brands have to stay connected to culture because things change. how young people socialize is changing and we have to make sure our brands fit in with the

trend. that is the day job. francine: is that through marketing and does that change? do you replace billboards with bloggers or celebrities, product placement? ivan: it is a combination come in brazil, we have this -- combination, in brazil, we have a truck that moves around the country with johnny walker and goes to communities and we host events. to theoduced people whiskey and tell them the story of all the single malts behind johnny walker, black label, the youngest whiskey was distilled before the financial crisis. -- itll them the story of is amazing how much interest we get. when you bring a consumer into a brand through a mentoring experience, you get them for life. ,he thing about our business is

what you drink or what to serve says a lot about you. our brands need to live up to that expectation. francine: talk to me about the u.s., your largest market, do you expect it to be so in five or 10 years? ivan: the u.s. is a fantastic market, north america is about half the profits of diageo and one third of our sales. what is attractive is a few things, demographics, i refer to it as our biggest developing market. you have the growth of the multicultural population that is very strong, latino, african-american, asian, all of which bodes well for premium brands. the young population with a growth of american 21 at a faster rate than europe. the profiles are changing. a huge interest in the cocktail culture. mix ologies is hot and young

people are drinking more spirits and want to know how to entertain at home. francine: coming up, running a global empire, traders, terrace, the spirits business in emerging markets. more with italian next. ♪

francine: ivan menezes sits on the advisory board of the china britain business council and the u.k.-india -- his roles demand a deeper understanding of the challenges at opportunities of international business and the eternal hunt. 2017, more than a third of diageo's $15 billion of revenue came from north america and 20% from asia, 13% from africa. our emerging markets getting a

taste for spirits? francine: ivan menezes is with me, the more developing patterns -- countries getting the same taste as the western ones? ivan: penetration of spirits is low in africa, latin america, asia. but people's aspirations for great brands is very high. with the growth of the emerging middle class in the emerging markets, we see 500 million coming into legal drinking age, there is exciting opportunity for us. not a straight line, this is the nature of emerging markets. i was in south africa this week and be in nigeria at next week, there is ups and downs. you need to be consistent in building your brands and categories for the long haul.

there will be a zigzag. we have gone through that. the growth prospects are exciting. spacee we play in the that is unaffordable indulgence, affordable luxury -- affordable indulgence, affordable luxury, people want to celebrate and our brands play wonderful role in that space. the trend for people drinking better continues to be strong. francine: how are you go against a local spirit or a local drink? will people during both? ivan: the key is having our brands resonate at a local level. francine: taste? ivan: in brazil, johnnie walker , noten as an iconic brand an international brand. that is how we build the brand.

we have a campaign of keep walking brazil where we connected with the consumer and the see it as my brand. ike taylor marketers around the world, you have to keep -- i tell our market is around the world, you have to connect our brands at a local level. india india, the biggest whiskey market in the world with most of the local whiskey and we own a lot of that . the aspiration to move into scotch-whiskey is very high even though the price points are high. we are keeping scotch relevant in the local places. francine: is pricing a headache, you need to get it right so it is aspirational but not too expensive that they will go for another brand? ivan: price is an important factor in the brand value equation. for our premium brands, the price premium they carry to local authorities is something we watch closely.

our brands are affordable at the end of the day. if you step up to a bar and hanoi and order johnnie walker blue label, you are not betting the farm -- buying a fancy watch but it is a great occasion. we keep the specialist of our affordable is also and getting the price value equation right is important. francine: what about the models, you showed me a couple of years ago, smaller sized bottles for certain emerging markets, do not know it it is because that is how they drink or affordability? ivan: a combination of both. occasions where small groups are going out or in a beer outlet, people a program where in vietnam or africa, largely drinking beer and on special

occasions a may take a small bottle of johnnie walker people in like label and share it among friends around the table. the small bottles are affordable but tied to the occasions and that is something we manage through our understanding of the markets. >> the special distilling process. 28 generations of knowledge. the best can only get better. here is to another 600 years. francine: china, different to the chinese consumer than the american consumer? ivan: most of the value and alcohol consumption in china is with meals. market is profitable and so ingrained in culture and

into entertaining and how it is consumed with friends or business colleagues with food. as we have a brand which is doing really well with 75% -- it grew 75% this year, highly aspirational but connected to the food culture. in the u.s., most spirit consumption is before dinner or after dinner, cocktails, going out. the cultural understanding is important. this is what makes the business so fascinating, not one way to build a brand. we have to get deeply immersed in local country -- culture and traditions and to stay contemporary, aspirational in the context. ivan: -- francine: do people drink more if they drink with food than before or after dinner or lunch? ivan: the main difference is the ritual of celebration and

toasting that happens in the case of china. not so much drinking more but more social occasion and there is more ritual around celebrating each other, toasting each other. that is where the brand plays a magical role in china in terms of how it is consumed. francine: china, india, latin america, where do you see the most potential longer-term? ivan: the big ones for us, seen, china, africa, have a lot of growth with latin america very important for us. scotch whiskey will continue to grow. the emerging markets still represent a lot of opportunity for growth. we are early in development of our category premium spirits brand. as economic growth and gdp growth happens, we see a lot of

opportunities as the demographics are in our favor. people are drinking better and choosing better brands. we are well-positioned. francine: if households become leveraged because of inflation or interest rates or both, do they cut down on our call consumption before anything else -- alcohol consumption before anything else? ivan: brands play in the affordable special occasion these markets. you would see a bit of slowdown on premium brands where consumers may choose a johnnie walker red label instead of a johnnie walker black label, when their pocketbook is under pressure. or they may celebrate four times per year instead of six times for your. you see those adjustments take place. when that happens, it is important to support your brands

because when economic growth comes back, you want to brands to have that connection with consumers so they will step up their consumption or number of occasions they enjoy you when things get better. up, a drinkming diet into the future, whiskey created now will not be ready to drink more than 40 years of now but what will the drink industry look like then? the foresight and running a company like diageo. more with ivan menezes next. ♪

francine: ivan menezes knows this business will come over two decades he has sell numerous management positions, serving as president of north america, and chairman of asia-pacific and latin america.

them are 30,000 of valued as much as the company's customers. diageo has more women in senior roles than any other firms and will soon have gender parity on its board. ivan menezes is with me on leaders. how your employees would describe you, that says a lot about how a chief executive is perceived by the people who work under him, what would they say about you? ivan: my gosh. approachable. focused on possibility, i call it high low, big picture strategic level, but love the execution. i enjoy brands and customers. i enjoy picking up the phone to a brand manager in ethiopia and asking how is the brand doing.

i hope that is what they would say. francine: how much do you travel and you enjoy traveling, when you have such a mobile business, the only way to be in touch with the local person and how local markets are doing? ivan: totally, i believe in being in the markets. it is important because it gives me the best read of how the business is performing and the opportunity to contribute to the local team. whether meeting with local governments, customers, i go out to the trade and say bars and shops do not live. you get the -- do not lie. to get an understanding of how we perform in the market and meeting people. i do not enjoy being in headquarters. ivan: do that -- francine: do they know you are coming? francine: i do both -- ivan: i do both.

i decide which bars and shops and restaurants i will take a look. ownve to get time on my when i m&a market and walk the street -- when i am in a market and good a good feel for the street and the country. i enjoy that. you learn a lot. francine: you focus a lot on responsibility, does that come from you? is it pressure that makes you do that? or something from within? ivan: it is in the core value of diageo and something i am proud of. we are in a category which has been around for centuries. we take the view that, for people who choose to drink, we want them to drink in moderation and believe it is perfectly normal and part of a balanced lifestyle. however, we realized alcohol

causes harm in society when it is misused. is passionateageo about making a difference in reducing alcohol harm in society, via excessive drinking, underage drinking, drink driving, some of the areas we have ambition and programs to make a difference. francine: with government or schools? ivan: we work with governments, schools, local communities, very integrated into -- in mexico city for example, we work with local police on a drink-driving program with success in reducing the level of drink-driving, which in emerging markets is still an issue. we have teams on the ground and we do it with a real pride and real commitment. our employees believe passionately in the work we do in this field.

francine: talk about diversity, why have you achieved gender parity on the boards where no one else has? people failed to succeeded. ivan: it starts with core values, inclusion and diversity are a part of diageo. , am proud of our track record happy board, 40% of the xavier committee, 30% of senior women -- senior leaders are women. i see that improving. not just gender diversity. diversity in nationality's, diversity in ethnicities, sexual orientation, and diversity in style. i have been in business over 30 years and having diversity in the team, including thinking styles, is huge. i see the benefit. i am pleased where diageo we are

on the journey and can take it further. francine: why do other companies fail? ivan: i think you need the conviction and belief. i grew up in india. i grew up in a multicultural minority, i come from a catholic background. the importance of everyone coming into work feeling including an valued is how you get the full potential of people. what we put at the fabric of diageo is creating an environment where you can truly be yourself, no matter what your background and where you come from. one of our core values is valuing each other. that is at the heart of the company and i am proud of the culture that all our employees have created. that is when you see good things happen. we have seen this enormous

progress in a much more diverse leadership group across the country. francine: ivan menezes, thank you so much. ivan: thank you. ♪ retail.

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