♪ francine: they are household names, some dating back centuries. the company that owns them has not reached the legal drinking age. 2018, diageo 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 on "leaders" we meet ivan menezes. thank you so much for joining

us. how has the drinks business changed? >> it is such an exciting time, the last two decades, the big shift have been 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 want 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 grew up in the consumer business. 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 johnnie walker, not a difficult decision because to be -- the great thing about this company is that johnnie 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 consumers drink more at home, they want a story that goes with the brands they drink? ivan: 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. right now, for example, 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? ivan: it is both. my key job 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 wear trends are going. to me, the magic of diageo is to get the best of both. francine: what does that mean? is it finding the 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. francine: that 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 trend-leading bars and bartenders and we track what is happening on social media.

-- media with 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 two out of the five most important spirit brands in the world, johnnie walker and smirnov. how do you do that? 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, johnnie 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. in brazil, we have a truck that moves around the country with johnnie walker and goes to communities, and we host events. we introduced people to the whiskey and tell them the story of all the single malts behind johnnie walker, black label, the youngest whiskey was distilled before the financial crisis. you tell them the story of -- it is amazing how much interest we get. when you bring a consumer into a brand through a mentoring experience, you get them for life. i always say the 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 americans turning 21 at a faster rate than europe. the profiles are changing. a huge interest in the cocktail culture.

mixology 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, tariffs, the spirits business in emerging markets. more with ivan menezes next. ♪

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

taste for spirits? ivan menezes is with me, the more developing patterns -- countries getting the same taste as the western ones? ivan: if you look at our 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. it is not a straight line, this is the nature of emerging markets. i was in south africa this week and i will be in nigeria 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.

you will have tough years, and we have gone through that. the growth prospects are exciting because we play in the space that is affordable indulgence, affordable luxury, and when people want to celebrate and our brands play wonderful role in that space. per capita as income rises, the trend for people drinking better continues to be strong. francine: how are you against a local spirit or a local drink? will people drink both? ivan: the key is having our brands resonate at a local level. francine: taste? ivan: the way you build the brand -- in brazil, johnnie walker is seen as an iconic brand, not 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 they view it as my brand. i tell our marketers around the world, you have to connect our brands at a local level. same is true in 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. at the end of the day, our

brands are affordable. if you step up to a bar in 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 specialness of our product but is also affordable and getting the price value equation right is important. francine: what about the bottles, you showed me a couple of years ago, smaller sized bottles for certain emerging markets, i do not know it it is because that is how they drink or affordability? ivan: it is a combination of both. occasions where small groups are going out or in a beer outlet, we have a program where people in vietnam or africa, largely drinking beer and on special occasions they may take a small bottle of johnnie walker and share it among friends around the table.

the small formats address affordability, but are also tied to the occasions and that is something we manage through our understanding of the markets. >> a special distilling process. 28 generations of knowledge. the best can only get better. here is to another 600 years. francine: talk to me about china. do you market differently to the chinese consumer than the american consumer? ivan: most of the value in alcohol consumption in china is with meals. the diageo 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 -- 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 occasion and the cultural understanding is important. this is what makes the business out. so fascinating, not one way to build a brand. we have to get deeply immersed in local culture and traditions and to stay contemporary, aspirational in the context. francine: i don't know if it is comparable, but 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. it is not so much drinking more, but it is a 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: if you look at china, india, latin america, where do you see the most potential longer-term? ivan: the big ones for us, india, china, africa, have seen a lot of growth with latin america very important for us. scotch whiskey will continue to grow. overall, 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.

the taste profiles are going there. people are drinking better and choosing better brands. we are well positioned to benefit from that trend. francine: if households become leveraged because of inflation or interest rates, or both, do they cut down on alcohol consumption before anything else? ivan: brands play in the affordable special occasion space in many of 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 per year. you would see those adjustments take place. what is important is that 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. francine: coming up, a drink into the future, whiskey created now, will not be ready to drink more than 40 years from now, but what will the drink industry look like then? the foresight in running a company like diageo. more with ivan menezes next. ♪

♪ francine: ivan menezes knows his business well. over two decades, he has had numerous management positions, serving as their coo, president of north america, and chairman of asia-pacific and latin america. his employees, more than 30,000

of them, are 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. i think approachable. focused on possibility, demanding, and 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 do 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 out 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 lie. you get the true understanding of how we perform in the market and meeting people. i get a lot of energy from being out. i do not enjoy being in headquarters. francine: do they know you are coming? ivan: i do both. i often go out on my own and decide which bars and shops and

restaurants i will take a look. i love to get time on my own when i am in a market and get a good feel for the street and the culture. i enjoy that. you learn a lot. francine: you focus a lot on drinking responsibly, 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 also realize alcohol causes harm in society when it is misused. everyone at diageo is passionate about making a difference in reducing alcohol harm in society, be it 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? where a lot of people have failed, you have succeeded. ivan: it starts with core values, inclusion and diversity are a part of diageo. i am proud of our track record, half the board, 40% of the executive committee, 30% of senior leaders are women. i see that improving. it is not just gender diversity. i see diversity in nationalities, 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 society, as a minority, i come from a catholic background. to me, the importance of everyone coming into work feeling including an valued is -- and 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

company. francine: ivan menezes, thank you so much. ivan: thank you. ♪

david: coming up on "bloomberg best," the stories that shaped the week in business around the world. turnover in washington. comings and goings shake up the trump white house. >> donald trump has obviously decided that skill set, notwithstanding, it is important to him to have people who agree with him. >> at the end of the day, the president makes his own decisions. and if he decides that you are not going along with his program, you are fired. david: goldman sachs sets the stage for a ceo succession. china plans new frameworks for financial regulations. broadcom's blockbuster bid for qualcomm gets blown up. >> you have to look at this as a chilling effect on m&a.