The undercover boss

“It’s an ever changing market,” says Nuno Teles, Diageo’s managing director for Great Britain, “so being a bartender, being behind the counter, serving pints, it’s understanding what consumers are asking. It’s very different from being in a room, in a meeting with powerpoints - it helps to feel the reality, you want that connection.”

And understanding the consumer wants and needs is key to success when it comes to the hospitality market, never more so than now.

Teles is not new to the UK pub and bar scene, or the international brewing market, having worked for Scottish & Newcastle and subsequently Heineken, across the UK, US and South America, before moving to take on a role as president of the Diageo Beer Company in the US. A broader background in the fast moving consumer goods (FMCG) world means he’s always had a firm handle on consumer trends.

But his return to the UK market in July 2022 gave him the chance to grab his bar blade and get back behind the sticks to see what made the UK consumers tick in a post pandemic world.

And what were his observations? “People aren’t going out for the sake of going out anymore, and they want their beer very well served, in the right glassware at the very best quality. We’re seeing premium beers and premium spirits growing ahead of the overall market. And the underlying reason is that consumers are much more demanding, they’re not accepting the standard experience.”

He also points to what he calls the “cocktail revolution” which has seen an explosion in demand: “Around 20 percent of consumers are drinking cocktails, it’s a seven hundred million pound industry now, so how can we continue to expand cocktails?”

One of the ways the company is targeting this opportunity is through draught cocktails. Cocktails are complicated, he says, something he experienced during his undercover bar adventures. “It takes a lot of time to prepare a cocktail - when people want an espresso martini, it takes time. So the fact we deliver a solution in six seconds, and you’re able to provide a high quality, consistent espresso martini, passionfruit martini, it’s amazing.”

That said, it’s not been a clear run with the draught cocktail offer, with a number of teething issues hampering the roll out, but Teles remains confident. “It’s a continuous process. When we started with Guinness nitrogenated, we had some challenges. We were the first ones with nitrogen, everybody else was using CO2, so it took us a couple of years to really establish and you see where are now? Things are never easy, it's how resilient we are and I think we’re in a good place. Customers are happy, the proposition is working, and working effectively and we’ll keep monitoring and keep improving.”

Training is also a big part of the Diageo mix. With recruitment a challenge, he’s proud of the work they’ve done with the Diageo Bar Academy and it’s Learning for Life initiatives, which have seen 5,500 unemployed people trained in the UK. “It’s an amazing opportunity to have a positive impact in our communities. I like that we partner with bar owners, pub owners to find them more qualified people. It’s a good programme and it’s something I’m very proud of.

Another area he is keen to focus on is on the consumer trend toward moderation. “It’s quite essential for us and for our future. We need to understand that consumers have different needs in different occasions, and different motivations.”

He says moderation is a major driver, not just total abstinence, and points to the fact that Guinness 0.0 is huge at Twickenham, as people moderate their drinking by alternating between alcohol free and standard Guinness. “There’s consumer demand here, people are more and more into active lifestyles - so if I’m running tomorrow morning, or I have a busy week and I want to be at my best, but I don’t want to compromise and miss my Guinness - that tends to be the motivation of a lot of consumers. It’s helping them with their strategies to drink responsibly.”

And that strategy is paying off, he adds, pointing to growth for Guinness 0.0 which he claims is three times faster than the overall beer sector. “Obviously the base is lower, so it’s easy to grow,” he acknowledges, “but it’s doing incredibly well and it’s the number one SKU in the market.”

When it comes to alcohol free spirits, he admits movement is a little slower: “I think it requires a bit more education, I think beer is one step ahead, maybe one year to two years ahead of spirits.” 

Duty is an issue that he sees as a challenge to the sector, a barrier to growing trade: “75% of what consumers are paying now is duty, alcohol duty plus VAT, so a bottle of spirits £20, £15 is duty, and it’s going up 10% in August. I don’t see why the chancellor is doing that.

We have been very vocal in that if we want a buoyant industry growth, I wouldn’t raise duty by 10%. That keeps me potentially awake as it's out of my control.”

He says there are other ways, and by increasing the size of the market, the government will increase as well. “Growth is the way to do it, the bigger the market, the more the government will benefit.”

But of course, the brand that is synonymous with Diageo is the unstoppable force that is Guinness, a brand that Teles describes as “unique”.

But while Guinness is currently riding high, that’s not always been the case and a few short years back, the brand was under pressure with the once “must stock” brand being taken off some bars.

The reversal of that position in recent years has been astonishing, seeing the brand rise back to the number one most popular pint in the UK, and one that Teles puts down to the company “doubling down” on Guinness. He points to the fact the brand has expanded its consumer base: “One thing that I’m very happy about and we celebrate a lot is the fact we see more women drinking Guinness than we saw in the past, and we see younger adults drinking Guinness, which means we’re expanding the footprint of the brand gender wise and age wise as well.”

He said there’s been no silver bullet behind the regeneration of the Guinness brand and says it’s been a team effort. “It takes a village to make it happen, right? It’s a combination of good marketing, good consumer understanding and expanding to new consumers - better execution, better quality. Also an important thing is to be more present - present in the summer, present with rugby, present with St Patrick’s Day and Christmas, always being on.

“It’s a combination of all those aspects that has brought Guinness this great momentum.”

And he recognises the responsibility of not dropping the ball on such an iconic and historic brand. “We sit on the shoulders of giants, right? Arthur Guinness. You have to feel passion for it, it's a huge sense of pride, but also a sense of being humble and taking it to the next phase. And always thinking about our founders, as a source of inspiration.”

And he points back to his experiences undercover, and seeing that obsession and passion in delivering the best Guinness experience. “Every time I was pouring a Guinness, I was making sure it was perfect, every single time, check the quality, ensure the two step process is right, that attention to detail and to top quality - I think that’s what guides our team to deliver every single day.”

Of course Guinness is not a cheap beer, and Diageo are well known for being bullish on charging a premium, but Teles defends the company’s stance. “We need to be respectful of what consumers are going through, the cost of living crisis. We have increased less than inflation. So what you could actually say is that Guinness is cheaper compared to inflation. 

“That said, you know, we are running a business. And we need obviously, to run it in a way that is also respectful for our investors. It's having that balancing act, how can we be more efficient? price is just one part of the equation, right? So if we can drive efficiencies, we can drive synergies, we can deliver the business results with less cost involved, and that is always our preferred route.”

And with the opening of the Old Brewer’s Yard in Covent Garden on the horizon, Teles is looking forward to spreading his wings even further. “We’ll be able to innovate with the Old Brewer’s Yard, and it’s an opportunity to brew Guinness in London, which is amazing. I can’t wait, because not only am I going to be an undercover bartender, now I’m going to be the undercover brewer!”