The Extraordinary Success of Johnnie Walker Scotch Case study

Assignment Task

Abstract

This case study examines the factors underlying the success of Johnnie Walker Scotch Whisky in India. India provides a quixotic case in that it is the world’s largest whisky market, despite having a long tradition of abstinence and social stigma towards alcohol-drinking. The paper traces the history of Johnnie Walker and how it metamorphosed from a tradition-bound Scottish company into a global brand with its footprint in more than 180 countries. India has emerged as a very profitable market for Diageo, the parent company of Johnnie Walker. Detailed here are the distinctive characteristics of the Indian alcohol market as well as the novel tactics Diageo has implemented towards Johnnie Walker’s goal of capturing 56 per cent of the Scotch market in the country. The paper ends with managerial implications that are relevant for marketing professionals and brand practitioners even in disparate industries looking to penetrate and develop overseas markets.

Brief History Of The Johnnie Walker Brand

The origins of whisky in Scotland are said to go back to the 1400s and are reputedly shrouded in mystery.9 The word whisky is of Celtic origin and is said to mean the ‘water of life’. According to the connoisseurs of the drink, the most authentic Scotch whisky should be made wholly from the mash of malted barley. When it is diluted with a grain-based spirit, the whisky is said to be blended. While similar malted barley and grain-based spirits are produced in many countries around the world, Scotch whisky is famous for its distinctive bold taste and enjoys a cachet and following that few rivals can match. Today Scotch whisky is a major revenue generator for the UK, and its exports, amounting to £3.65bn, are forecast to grow even further as new and untapped markets like China are brought into the picture.

Among the leading Scotch whisky brands, Johnnie Walker enjoys a prized reputation owing to its rich and continuous history of more than 200 years, its legacy of sound management and its iconic marketing over time. This now-ubiquitous global brand had its roots in an unpretentious grocery shop that a certain John Walker founded in 1820 on King Street in Kilmarnock, Ayrshire. 10 In the early days, Walker’s sales were principally derived from his stock of teas and tea-blends, coffee and other household goods, alongside which he sold rum, brandy and a few whisky blends of his own. With the benefit of time and experimentation, he became an expert blender of the malt and grain whiskies to produce a superior tasting whisky of a mellow and consistent quality.

The popularity of his whisky blends grew steadily among Kilmarnock’s local buyers. In 1852, John Walker had to contend with a major adversity, when a flood in the town destroyed all his stock. 11 But he managed to recover, and the fortunes of his shop continued to thrive. After his premature death in 1857, his son Alexander took over the reins of the family concern, and the focus shifted to the sale of spirits. Alexander, a remarkable businessman at any time period, possessed all of the essential entrepreneurial qualities like vision, industry, tenacity and organisation skills. It was under his leadership that John Walker’s whisky business scaled new heights.

The decline of sherry and brandy consumption in Britain during the late 1800s provided an important fillip to the sales of whisky.12 Also, around this time Scotch whisky had supplanted Irish whisky, which had been preeminent earlier, owing to concerns about the latter’s quality. Scotch began to be seen as a drink that was more conducive to one’s physical health and began to be endorsed by physicians. It was even bruited about in high society that Queen Victoria’s royal physician had suggested that the Queen partake of Scotch whisky instead of her 7 usual brandy and claret. In the mid-1860s the first marketed brand of John Walker & Sons took shape in the form of Old Highland Scotch Whisky, which soon became a growth engine for Alexander Walker’s whisky business. He also instituted a number of significant branding moves that were to define the look and feel of the future Johnnie Walker brand. For his Old Highland Scotch Whisky, he opted for a square-shaped bottle to make it stand out better against the range of competing whiskies. To add to its effect, the bottle sported a label that was fixed at an oblique angle that made it readily identifiable by prospective buyers even from a distance.

Evolution of the global brand

The 1870s and 1880s saw Alexander Walker gradually acquiring business partners and trading agents, and the sales of his flagship whisky grew at a frenetic pace all through the period. This was the result of both the public acclamation of the whisky and the wider distribution facilitated by railroad access connecting remote parts of Scotland with London, the commercial stronghold. Consequently, John Walker & Sons began to make exports to the farthest reaches of a burgeoning empire. By 1881 Old Highland Scotch Whisky was being exported in bulk shipments (amounting to 126,000 gallons of whisky) to its agents in Sydney, Melbourne, Alexandria, Karachi, Bombay, Calcutta, Singapore, Honolulu and many other ports.13 The most significant highlight during Alexander Walker’s stewardship of the family business was when John Walker & Sons became an incorporated company after its stock was floated in 1887 with five nominated directors. When Alexander died in 1889, the company was being professionally managed even though a Walker family member would continue to head the board until 1940.

With the formation of a public company, a number of production, distribution, marketing and management practices were instituted. An important development occurred in 1893 when the Walker heirs acquired the Cardhu distillery in Scotland. The distillery is widely credited for imparting a smoky flavour to future Johnnie Walker whiskies.14 At the time the product line was extended to offer new blended whisky options beyond the traditional Old Highland Scotch Whisky. A Special Old Highland Scotch Whisky and an Extra Special Old Highland Scotch Whisky were added to the line-up. Soon, the first major branding move for the new company was to rebrand the three variants using the public’s own descriptors based on the colours of the blends. Thus, in 1906 the company launched the White Label (aged over 5 years), Red Label (aged over 9 years) and Black Label (aged 12 years) that were priced in graduated increments. This form of differentiation, based on ageing and price, was innovative for a spirit brand at that time, and the tactic has continued to this day. It not only facilitates differential buys by targeted 8 market segments but also avoids the possibility of cannibalisation between sister labels and offers novice consumers the chance to trade up as they graduate to stronger drinks.

The early 1900s were notable for other significant developments for the company. The British whisky - lovers had for some time been calling John Walker & Son’s whiskies Johnnie Walker or, more commonly, Johnny Walker. Yet the Walkers had resisted any urge to change the brand name out of fear of vulgarisation of a hallowed family legacy. In 1905, however, the company yielded to public choice and formally renamed the whisky brand as ‘Johnnie Walker’. 15 At the time it was a bold and risky move for a fiercely traditional company as there was a real possibility of brand dilution. But the rechristening did wonders for the new brand. It began to be seen by the public as a familiar and lovable Scotch whisky amid the plethora of obscure Scottish-sounding names. The final branding move was to provide a recognisable ‘face’ to the Johnnie Walker label. In 1908 artist Tom Browne, of the Paul E. Derrick advertising agency, designed the ‘Striding Man’ logo, featuring a well-dressed English gentleman on the move in a frockcoat, top hat, monocle and cane — the image was to soon become an iconic mascot and even a society meme.

Johnnie Walker Blended Scotch Whisky went from strength to strength all through the 20th century, surviving two world wars and the departure of the last member of the Walker family to exercise hands-on management.16 The company benefited from the stewardship of professional managers like James Stevenson. It must be noted, however, that not everything went smoothly for the directors as they had to contend with major challenges from time to time. In the early 1900s the Walkers had to deal with a risky and acrimonious regulatory debate centred on the question: ‘what is whisky?’ The challenge, mounted by Scotland’s old whisky establishment, comprising mainly single-malt producers, was aimed at debarring whisky blenders like Johnnie Walker from calling their blends ‘Scotch whisky’. The other threat arose after the end of World War I when the United States, which had become a major overseas market for Scotch whisky, instituted Prohibition. Johnnie Walker managed to overcome this hurdle as well from its diversification into other geographic markets. The biggest factor in its favour was the great affection and loyalty the drinking public nurtured for the brand. The company’s association with sports, especially golf and cricket, became celebrated and brought in younger consumers in Britain, Australia and elsewhere. A competitive threat arose from Chivas Regal, launched in the early 1900s and marketed as the ‘world’s first luxury Scotch whisky’ that was reportedly aged for 25 years. It benefited from effective advertising 9 and was to provide stiff competition to Johnnie Walker Black Label at the premium end of the market. In 1987 Johnnie Walker introduced its most luxurious offering, the Blue Label, as a blend of old and rare Scotch whiskies. By the 1980s and 1990s Scotch whisky was facing rising competition from wine and vodka, causing category sales to plummet by 20 per cent. 17 Younger buyers in the USA, then the world’s most profitable market, began to defect from Scotch whisky. In response, Johnnie Walker put its best marketing and advertising heads to work, who came up with a consistent campaign across geographic markets and the launch of the ‘Keep Walking’ slogan. It showed a regenerated Scotch brand that was aspirational and innovative and especially ‘in with the times’. The company did not look back after its launch.

Characteristics Of The Indian Alcohol Market

At a Diageo event at Bengaluru in 2017, CEO Ivan Menezes remarked: ‘Our business in India is stronger than ever and we see it as an important driver of growth’. 20 Menezes’ comment highlights India’s status as the world’s largest consumer of whisky and one of Diageo’s top three focus markets. But the point belies the contradictory nature of how alcohol is viewed in India. On the one hand, the great majority of Indians adhere to strict rules regarding religious abstinence and the forsaking of beef and alcohol above all else, but, on the other, the number of those who do not follow any such norms continues to increase. According to a 2014 World Health Organization report, 30 per cent of all Indians consume alcohol, 13 per cent of whom could be daily drinkers.21 Per 10 capita consumption of alcohol has increased by 38 per cent within a decade to 2.2l per annum in 2012. Figure 1 shows the predicted per capita consumption from 2010 to 2025, which is also indicative of a sharp increase. There is still a pronounced social stigma, however, towards alcohol consumption, so it may seem like a mystery how India has become the world’s largest consumer of a hard liquor like whisky. The answer may be found through a survey of India’s centuries-old history of alcohol consumption.

Product

As shown in Table 5, Johnnie Walker has broadly retained its colour-coded labels or product line extensions from its early years and added several more variants over time. These carefully planned brand extensions target distinct segments, Red Label being positioned as an entry-level whisky and Blue Label the most premier offering. In India, the enforced price hike caused by high tariffs means the entire product line of Johnnie Walker can be out of reach for many Indian purses. To counter this and also to strengthen the product portfolio, Diageo recently acquired United Spirits and thereby gained control over popular India-made whisky brands like McDowell’s No. 1. Nevertheless, Johnnie Walker retains its importance within Diageo’s stable of brands because of its flagship status and the high sales volume and profit margins it generates in emerging markets.

Pricing

Consistent with its positioning around the world and also to account for Indian tariffs, Johnnie Walker whiskies in India are priced higher than IMFL (India-made foreign liquor) whisky options. Whereas a 750 ml bottle of Royal Stag or Imperial Blue can cost only Rs.450 (less than £4.50), Red Label is priced around Rs.2,500 (£25), Black Label around Rs.5,000 (£50) and Blue Label close to Rs.30,000 (£300). 38 The stark price difference between imported Scotch and local variants often deters many middle-income Indian drinkers from buying foreign whisky 15 brands. It is, however, hoped that with the expected signing of the UK-India trade deal, some of these prices can be rationalised, providing Indian drinkers with greater access to brands like Johnnie Walker in the near future.

Promotion

Globally Johnnie Walker is positioned as an aspirational whisky brand that aggressively promotes its image and messaging content, while remaining relevant to the times. However, promotion of Scotch whisky is a tricky proposition in India, where overt advertising of alcohol is not permissible. Therefore, to circumvent the issue, Diageo has implemented a number of creative, nontraditional promotion campaigns for Johnnie Walker directed at desired consumer segments, especially millennials and women. In 2018 Johnnie Walker was shown to celebrate India’s successful Mission to Mars with a 20-minute film titled: ‘Mission Mars: Keep Walking India’, which was displayed over multiple channels, including TV, digital media, malls and airports.39 The campaign not only commended the achievement of Indian astronomers and scientists but also showed the Scotch brand as part of the wave of nationalistic pride that swept the country.

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