Sample Undergraduate 2:1 Business Case Study

Influence is Key - The Diddy Factor and Ciroc Vodka's Star Supremacy

Abstract

Sean 'P-Diddy' Combs' ventures have extended from hip-hip marketing pioneer to top-shelf liquor connoisseur, changing the fortunes of Ciroc Vodka, an innovative grape-distilled brand. Diddy's strategic partnership with Ciroc owner Diageo demonstrates the evolution of established norms for celebrity endorsement, paving the path for star power in the Spirits industry.

Sector Insight & Ciroc History

Between 2003 and 2008, the vodka industry grew by 20% to surpass £1.8bn in market value overtaking whisky as the number one consumed and preferred spirit (Campaign, 2009: n.p.). Favoured in particular for its versality and adoption as a night-life drink, vodka brands sought to capitalise on growing popularity and strategic development opportunities. Established in 2003, British-based beverage maker Diageo launched an innovative eau-de-vie vodka brand, manufactured with grapes from the regions of France (Ciroc, 2019). Competitive offerings at the time ranged from use of grain, potatoes, cognac and corn, distinguishing Ciroc as a unique contestant within an intensified vodka spirits segment (Reuters, 2019). Within industry, traditionally the vodka market was dominated by household names such as Absolut & Smirnoff within the premium-differentiated category, whilst Grey Goose established higher-margins within a niche ultra-premium category gap (Porter, 1989; Reuters, 2019). The booming market landscape therefore indicated that launch of a unique upmarket brand would help to drive competitive growth and fulfil a market gap. Diageo thus reasonably believed that its Ciroc label was poised for success.

However in practice, expectations for the brand fell short. Introduced to nightclubs and venues across the US, NFL players began to endorse the limited Ciroc range with little success. Empirical research points to Diageo's struggle, in barely selling 40,000 cases a year (AdWeek, 2014). Evaluating the landscape, it can be justified that the brand's shortcomings stemmed from its inability to gauge the evolution of vodka drinking culture. For instance, a Marketing Week (2013: n.p.) study defined vodka as a 'marketing enigma', emphasising that most customers could not differentiate the ingredients within their favourite brands. This suggested that Ciroc's unique market positioning as a product differentiator in its grape-distilled offering would have little value. Findings supported this view emphasising that expectations for vodka resided in its ability to remain 'odourless, tasteless and clear in colour' (Marketing Week, 2013: n.p.). Furthermore, The Spirits Business (2018: n.p.) uncovered that four in five consumers believed that vodka was mostly distilled from potatoes. This pointed to the premise that brand image, perception and positioning were more valuable within marketing to consumers than the presence of a artisanal difference, with no supportive brand centricity.

Diddy Strategic Alliance

In a historic move, deemed as risky by many, in 2007 Diageo called for music mogul Sean 'P-Diddy' Combs to become brand spokesman (AdWeek, 2014). The terms of the agreement were somewhat complex whereby Diddy stated explicit conditions for hands-on involvement, away from the typical, traditional fixed-fee endorsement deal. In turn, a press release outlined Diddy's role full-time as brand manager and chief marketing officer of the Ciroc brand in return for a 50% share of company profits annually (Marketing Week, 2013). Becoming more than an endorsement frontman, Diddy thus took on extensive roles developing the branding and positioning of the beverage. Though initially deemed as a desperate approach by critics (AdWeek, 2014), strategic alliance with Diddy provided Diageo with access to a depth of unique resources. This included having Blue Flame Agency, Diddy's personal marketing company at their direct disposal, providing accessibility to a forward-thinking skills-base (Marketing Week, 2013). Diddy's music and clothing ventures further provided Diageo with entry to a diverse African-American, Latino and Caucasian community, curating substantial opportunities for expansive reach across the US (FT, 2010).

Fundamentally, Diddy's goal was to reshape and transform existing associations of the brand, connecting the brand with a more aspirational lifestyle of diverse Millennial customers, pinpointed as a core vodka consumer. This differed from Diageo's previous strategic targeting of loyal premium vodka drinkers, which were evidently difficult to penetrate. In turn, Diddy's intervention exhibited immediate results relative to brand tracking and sales. For instance, in his first two years following his appointment, sales grew to 169,000 annually (FT, 2010). Moreover in 2014, Ciroc reported a record-breaking 2million in cases sold, developing the brand's value by an astonishing 65% (AdWeek, 2014). Under direction from Diddy, Ciroc has developed its market positioning immensely, now listed as the second-best selling premium vodka brand globally (Reuters, 2019). It is evident that in large part, Diddy's understanding of the weight of his personal reach and influence have helped to drive the rapid and ongoing success of the Ciroc brand; demonstrating the significance of entrepreneurial spirit and entertainment star power. Ciroc's success can be further attributed to Diddy's approach to influencer marketing, investing a considerable $3.4million into 1,700 sponsored brand partnership posts across social media with renowned stars such as DJ Khaled, French Montana and Italian fashion-house Moschino (The Drum, 2019).

Changing the Norms for Endorsement

Within contemporary application, celebrity endorsement is increasingly regarded as a powerful and relevant form of business growth providing access to otherwise unachievable areas of exposure and subsequent reach. Understanding the authority of celebrities is a practice often related to business and marketing strategy when targeting Millennial audiences (McCormick, 2016). Renowned theories in practice further concede the impact of models such as source credibility, source attractiveness, product match-up and meaning transfer in influencing how brands achieve congruence and stimulate buying behaviour within a profitable digital consumption environment (Min et al. 2019). This subsequently suggests that in today's landscape, endorsements can form a means of communication and competitive advantage in which celebrity endorsers are viewed to reflect a brand's promise by association, distinguishing an organisation's identity from that of a competitor. Given that celebrities are therefore deemed to carry brands of their own, endorsements offer the opportunity to inspire customer confidence when implemented in a manner that matches up the brand and endorser seamlessly (Spry et al. 2011). However, increasingly, research is beginning to indicate that the proliferation of paid endorsements present within social media erode its ongoing credibility (Forbes, 2019). In support a eMarketer (2017: n.p.) study found that 78% of US Millennials are developing progressively indifferent views to the practice of endorsement within buying behaviour. This outcome subsequently seems to reflect an evolving attitude to the role of celebrity endorsements within contemporary practice, giving businesses and brands food for thought.

Within the spirits industry, celebrity endorsement remains a enduring topic. In context, the success of the Ciroc-Combs marriage emphasises how a winning formula by means of a gap in the premium spirits category (for ultra-premium vodka) can be exploited by use of a celebrity who has an authentic connection to the organisation. The Ciroc-Combs case further emphasises the changing strata of the celebrity endorsement landscape. This includes a shift from a model of those who rent their names to a brand to those who directly invest both financially and emotionally; involved within decision-making across all stages of the value chain such as production, marketing and distribution. For instance, Diddy's detailed social intelligence in his awareness of the spirits market and entertainment industry can be viewed as a dynamic capability, a unique resource leveraged to achieve competitive growth (Winter, 2003). An example includes its 360-degree campaign which positioned the brand as the 'official vodka for New Year's Eve', building growth around the art of celebration and presenting Ciroc as a premium lifestyle companion suitable for adventure, fun and style (FT, 2010). Furthermore, a Ciroc Mix of Week featured a live-on-air playlist with surprise celebrity appearances, highlighting a cross-promotional effort of Ciroc entertainment factors with lifestyle integration (Ciroc, 2019). For many consumers the brand associations with Diddy are immediately apparent and thus deemed authentic, from a man renowned for his contribution to hip-hop music and stardom.

Furthermore, Diddy's instant involvement with new product development and diversification can be seen within Ciroc's ever-expanding flavour repertoire, ranging from flavours such as Apple, Red Berry, Pineapple and French Vanilla (Ciroc, 2019: n.p.). This further emphasises a driven awareness of market orientation and changing consumer expectations as the flavour revolution begins to take hold in competitive markets such as gin and brown spirits (Reuters, 2019; Slater & Narver, 1994). It can be viewed that Diddy's market-driven approach differed from the typical shareholder view of push marketing (Hillman & Keim, 2001) and instead focused on paying more attention to delivering a meaningful consumer experience and subsequent value exchange, in the advent of the premium vodka consumer.

Fundamentally, Diageo's collaboration can be viewed as a marketing masterstroke, perfectly timed to coincide with the global progression of social media and the consumer's growing interest in an authentic brand story (Pulizzi, 2012). With Combs' advent came a fan-base and subsequent penetration of the extremely difficult to target micro-ethnic groups within the US, comprising of Hispanics and African-Americans. Intrinsically, these groups are responsible for 75% of US growth in the legal-drinking population; amounting to 36% of legal drinkers up to 2020 (The Spirits Business, 2018: n.p.). This feeds into the premise of celebrity influence (McCormick, 2016) and the emphasis of authentic involvement, yielding impressive results in giving brands a powerful legitimacy and persuasiveness. Subsequently, the Ciroc-Combs case can be used to indicate the changing norms for endorsement, whereby Diageo have established a first-mover creative advantage by organically weaving Ciroc vodka within a premium storytelling narrative. In turn, Ciroc has become a powerful force within the spirits business, utilising Diddy's business savvy nature and exploiting a profitable and sustainable gap within the market landscape to develop a multi-million dollar brand.

References

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