St Patrick’s Day 2020 was a watershed moment for Diageo GB boss Dayalan Nayager, as the Guinness maker saw seven figures fly out of the company coffers in a matter of hours instead of the customary sale of what the British Beer and Pub Association estimates is around 14m on-trade pints.
"On St Patrick's Day, we first said we need to do something to support the trade, because that was around when the lockdown was announced and the Government announced some support for the trade,” he tells The Morning Advertiser (MA) roughly a year later.
“To think that the £1m we pledged to support the independent free trade was taken up within a few hours was a big surprise for me,” Nayager reflects. “I knew we'd spend the money, but I didn't expect it to be that quick, which made me realise very early on in the pandemic that this is serious.”
Less than a week later, in the region of 40,000 British pubs “closed on a dime”, according to Nayager, as Prime Minister Boris Johnson told the nation to stay at home.
What's more, in August, the beverage behemoth revealed a 4% drop in net GB sales as the company saw its global operating profit cut by 47.1% in the first half of 2020.
“Speaking to customers and some my counterparts in the on-trade, the view was that a lot of these independent outlets don't actually know how to access these packages and funds from the Government,” he recalls.
“What Diageo Global then did was create a $100m fund called Raise the Bar. We split it across countries around the world, and key cities, to support the on-trade.
“The UK was allocated £30m of that, and what we've done is support 25,000 pubs, bars and outlets so far. The demand and take up was massive."
Proud to be leading
Before heading up Diageo GB, Nayager’s career started in his hometown – Durban, South Africa – where he joined Mars’ graduate training programme before moving to Johannesburg-based Heinz.
After cutting his drinks industry teeth as an account director at a now defunct joint venture between Diageo and Heineken called Brand House, Nayager moved to the UK in 2015 as Diageo’s regional director of travel and retail before stepping up as managing director.
He tells The MA that having family and friends in South Africa during the pandemic has kept him grounded during Diageo’s efforts to cater for the locked down on-trade.
"From a personal perspective there have been loads of moments in which, probably you get a bit complacent and start to relax and you forget about how serious things are,” he explains.
“But having family in South Africa, there were a number of times when you see the cases rising there, or that there's another strain of the virus. At moments like that it hits home quite hard – you feel a bit helpless because there's nothing you can do being so far away from home."
In the year since an initial £1m worth of on-trade funding flew out the door on St Patrick’s Day, two aspects of Diageo’s response have made Nayager particularly proud.
"Firstly, when we pledged 8m bottles of hand sanitiser to frontline health workers and distributed a further 55,000 bottles across the market in Scotland,” he says. “It was something we were proud to be leading in.
"The other one was the work we've done around Guinness. Quality to Guinness is paramount and when the trade shut, we took back 250,000 kegs from the trade – stock which would have expired – and we replaced that with fresh stock for the reopening.
“I was really proud of the decision we made to do that because it supports the trade, but it also makes sure that once pubs and bars reopen, they do so with the best possible pint of Guinness.”
Regaining on-trade standing
Had we not “met” during a global pandemic, it’s more likely that an actual bar would have offered the backdrop to Nayager’s thoughts on the past year rather than the Zoom-provided on-trade still that flickers when he reaches for water from an on-brand Guinness pint glass.
And while Nayager admits he can’t wait for the on-trade to reopen, he hopes it does so in a “safe and sustainable” way.
“If we go back to what happened in summer last year when the trade reopened, we saw a good return of customers,” he says. “I am cautiously optimistic that once the trade does reopen, and if we follow the process that the data tells us is safe and it opens in a sustainable way, customers will return."
For Diageo – whose more than 200-strong collection of beer and spirit brands spans more than 180 countries – the return to the on-trade, and Nayager’s optimism, are built on strong foundations.
Reports in The Guardian in January stated that off-trade drinking was up by more than 30% in the UK, with spirits proving particularly resilient, rising by 15%.
But does Nayager expect this to spill over into the on-trade?
"Our focus is around emerging stronger from the crisis and regaining our strong standing in the on-trade as it reopens,” he says.
“All of the research we've been doing says that once the trade reopens people will return to bars, restaurants, music festivals, so that's actually quite promising, and we have a strong portfolio that is benefiting from current trends.
“Premiumisation is something which we've been talking about and focused on for a number of years where we said we want people to drink better, not more,” Nayager continues. “If you look at what is happening in the off trade now, even on e-commerce, premium products are growing ahead of the category.
“It's going to be critical and vital that the first customer experience in the on-trade is something that makes consumers want to come back – the quality, the experience, the serves, need to be something quite exciting."
The 'tomato juice moment'
Nayager’s claims of clamour for unique on-trade experiences which, despite the drinks giant’s off-trade efforts, can’t be replicated at home, are backed up findings from the likes of global Intelligence platform Streebees, whose research claims that 41% of Brits are looking to return to the on-trade as soon as sites reopen.
What’s more, their data claims that just over one-in-four (27%) Brits have already had a loved one contact them about a pub visit or night out post lockdown.
“I used to run our global travel business in Diageo,” Nayager says. “When you're on an airplane, there's something unique about being there – do you ever drink tomato juice at home? But when you're on a plane, how many people do you see drinking tomato juice?
“What I referred to in travel retail is the 'tomato juice moment' because when someone is on an airplane, the environment tends to lead them to drink tomato juice because it's something different, something that you don't do at home,” he continues. “I think the on-trade is similar in that way.
“You can have a gin and tonic at home but when you're in the on-trade the drink that you buy off a menu is sometimes more elaborate. You can get a cocktail, a drink you've never had before – you have bartenders who are skilled, you have mixologists creating brilliant drinks and experiences.
“So, I think what's going to make the difference is that brilliant experience that the consumer and customers are going to get when they are in an outlet that you cannot create fully at home - and it's even the choice that you get in a bar, pub or restaurant, that you don't actually make at home."
In preparation, Nayager adds that his team has been scouring the globe for post-lockdown category trends, working with customers and sharing best practices, in the hope of “copy and pasting” successful aspects of pandemic trading elsewhere into the UK on-trade.
"What we've seen in New York is that the city was similar to the UK where outdoor drinking was not allowed but through the pandemic consumption of alcohol outside was permitted – but that's now become permanent, you can consume alcohol outside,” he explains.
“That's a trend we've been sharing with local Governments, with bars and pubs, with hospitality to say we've seen this work in some places across the UK, can we make it permanent? Could this be something we continue because we know that while not every site has a pub garden, could outdoor consumption help in some way?”
More knowledgeable consumers
Closer to home, however, Nayager and his team have been working hard to translate what he calls the “at home” occasion into pints poured and cocktails mixed in UK pubs.
“In the 'at home' occasion there are many different types of occasion – you're having a drink by yourself, a drink with your partner – and we looked at what types of products would work well in these occasions and focused our innovation on that, to make sure that what we've innovated plays into that space,” he says.
“We've launched products like the new Gordon's flavours – the orange, peach, lemon – we've launched Captain Morgan Tiki, Gordon's Zero, we've launched draught cocktails in a can, so loads of products that have played into that space.
“'Cocktails' has been one of the most searched items on Google through the pandemic and the sales of cocktail shakers have exponentially increased,” Nayager continues.
“We know that consumers are not just drinking mixed drinks, plain, at home, they're actually being creative. I think the trend of going back into the on-trade and looking for the perfect cocktail will be there – that's an area I think will transfer.”
As such, Nayager believes that consumers will return to the on-trade more knowledgeable of brands, types of drinks and of serves than when first locked down.
"If you look at trends like home cooking, people have been cooking more at home – it's the same with making cocktails, people have been researching cocktails, researching ingredients they can use from their home to make great drinks.
“What we've been doing with our on-trade partners is helping them with what items to put on their menus, what do they reopen with?
“At Diageo we've launched cocktails on tap which I think will do phenomenally well on reopening because it allows a bar or a pub to serve a perfectly made cocktail in significantly less time than it would take for a bartender to make a cocktail."
Since the realities of the pandemic for the UK on-trade first dawned on Nayager on St Patrick’s Day 2020, he believes that Diageo’s efforts will see it emerge from lockdown with its typically solid on-trade footing intact.
"If I look at all the work we have done through the last nine months in terms of the Raise the Bar initiative, supporting customers, staff, communities and the great work the teams have done on innovation and looking at what potential consumer trends are going to be, I think we are well positioned to emerge stronger from the crisis as a business,” he says.
“We continue to support the recovery of the on-trade and helping them to be ready for a restart post-Covid.
“We want a safe and sustainable reopening and once the data proves that it is safe and that it would be sustainable to reopen, we as Diageo are ready to support the trade.
“I think everything we've done so far is what gives me confidence that we're well positioned to emerge stronger once the trade reopens."