Why East African Breweries owner, Diageo, is upbeat about Africa performance

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FINANCIAL TIMES – Diageo is eyeing annual sales growth of more than 13 per cent in Africa, backed by rising investment and a new-look Guinness bottle, the creamy stout that sells more in Nigeria than in its native Ireland.

The world’s largest drinks group by sales told investors on Tuesday that sales to Africa now accounted for 13 per cent of the total – or £1.5bn – up from 9 per cent seven years ago.

Over the last decade, the UK group’s sales to the region have grown 13 per cent on a compound annual basis. Diageo expects a further acceleration, having invested £1.2bn in capital expenditure and acquisitions over the past decade.

Nicholas Blazquez, Diageo president for Africa, Turkey, Russia and eastern Europe said: “Do I think Africa will accelerate faster than Asia? Yes, I do.”

The continent has become a magnet for consumer goods companies hoping to cash in on its favourable demographics and plethora of fast-growing economies.

“The last two decades were about the Brics – now it’s about Africa,” said Andy Fennell, Diageo’s chief operating officer for Africa, citing the 65m extra drinking age consumers – equivalent to the UK population – expected over the next decade.

Pernod Ricard, the world’s second-largest spirits group, has increased investment in African countries over the past two years, creating five new affiliates in sub-Saharan Africa in the last year in Nigeria, Ghana, Angola, Kenya and Namibia.

The French group’s sales to Africa are in the low single-digits but its push is aimed at boosting market share and sales, especially of whisky.

L’Oréal, the Paris-based cosmetics group, acquired Interconsumer Products, a Kenyan beauty business earlier this year, saying it: “demonstrates our confidence in this region and its market potential driven by a rising middle class, growing income and long tradition of beauty practices.”

Diageo’s investor conference had been due to take place in Nairobi, Kenya but was switched to London following last month’s attack on the Westgate shopping centre, where at least 67 people died.

“We had people hiding in Westgate and everyone in our business knows someone who was killed,” Mr Blazquez said.

But the group said that despite such atrocities, Africa’s development had been sustained. “We can increase our growth rate but it won’t come without bumps in the road,” Mr Fennell said.

Diageo, whose brands include Johnnie Walker whisky and Bailey’s liqueur, sells to 40 countries on the continent with Nigeria, Kenya and South Africa accounting for 70 per cent of sales.
Its biggest brand is Guinness, which accounts for one-quarter of sales.

Guinness Foreign Extra Stout is to be relaunched later this month with a gold foil top and redesigned label aimed at reinforcing its premium price to other beers.

Mr Fennell said Diageo’s growing size in Africa brought scale benefits, including piggybacking spirits sales on the beer distribution network.

“Spirits require a healthy beer platform in Africa. When we sell spirits on the back of beer distribution, we get faster growth,” Mr Fennell said.

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