Diageo’s Moat ⚔

The most obvious competitive advantage for Diageo is of course  the reputation of its brands . Many of Diageo’s brands hold local meanings and drinking is a ritual. The whole point of a brand is to attach some sacred social or imaginative value to an object, and Diageo can serve up some of the best brands in the world at this. Famous brands also help combat the low switching costs of retailers who can easily choose to stock a different drink.

Trade secrets are big, too. New technologies and brewing capabilities will always leapfrog you, but traditional recipes and other  trade secrets are advantages  for as long as they kept secret.

There’s also the obvious size of Diageo. They’ve got considerable  economies of scale and scope, microbreweries therefore facing an unassailable wall of entry costs. Diageo’s size also gives them bargaining power against both buyers and suppliers, which is pretty neat. 

Diageo is in a position to serve its markets faster and more efficiently than competitors, as well. By recently revamping its supply chain strategy for select products segments, the company has drastically reduced the risk of disruption to its Asian business.



 

Chris Morrissey

Chris started in financial advisory, assembling client portfolios with pension companies and investment banks. Following that, he worked at an agricultural commodities trader in London and now various "fintech" start-ups. He's also studying business full-time at Lancaster University. Feel bewildered by the stock market? Chris will help you get things under control.

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