Diageo to grow spirits faster than beer in Africa

Diageo has outlined an ambition to grow its “portfolio in beer fast but spirits faster” in Africa, which the group describes as the “most exciting growth region in the world”.

Diageo believes its renewed focus on mainstream spirits in Africa is “sustainable”

According to John O’Keeffe, president of Diageo Africa, the continent will be the fastest growing total beverage alcohol (TBA) region in the world over the next five years.

Currently, Africa accounts for approximately 13% of Diageo’s global net sales, which have more than doubled in the region over the last 10 years due to an emerging middle class consumer base.

However, O’Keeffe said Diageo is in a “unique position” to take advantage of further growth opportunities in Africa, particularly since its market prevalence in beer has the ability to boost the group’s spirits portfolio.

The executive said that Diageo is able to use the same logistics to deliver its beer and spirits to the same network of distributors and wholesalers.

“Over the past five years, we have delivered almost double the growth rate of spirits in our markets with a beer platform compared to those with spirits alone,” he said.

“In an operating environment such as Africa, there are clear operational, commercial, and talent benefits to putting spirits through a beer network.”

He added: “Our strategic intent is to grow our portfolio in beer fast, and spirits faster, focusing on our key markets. We will achieve this by participating at all price points across the TBA categories.”

Announcing its H1 2015/16 financial results, Diageo unveiled a renewed focus on driving mainstream spirits to wade off the effects of economic headwinds around the world.

In Africa, Diageo’s total organic net sales increased 3% despite “significant declines” for premixed brand Orijin and Scotch whisky in South Africa and Angola due to “adverse economic conditions”.

“[T]he pace of this growth is more difficult to predict given the volatility in the macroeconomic and political environment in Africa,” said O’Keeffe. “Therefore I believe that in addition to capturing the benefits of premiumisation, we will sustain our growth in the volatile environment through equal focus on mainstream spirits and value beer.

“We will ensure that we are proving our ability to provide products that consumers can afford all the way through the economic cycle.”

O’Keeffe added that while “affordability is a key consideration” in Africa, Diageo’s “step change” focus on mainstream spirits will both offer “short-term growth” and provide opportunities to build a “sustainable” future in the category.

“Mainstream spirits are made locally, and increasing local production will also help us mitigate the impacts from further economic and FX volatility,” he said.

Additionally, O’Keeffe revealed plans to install a new spirits blending and packaging facilities in Nigeria and Ghana, allowing Diageo to “compete at scale” and “reduce cost”.

The facility will develop brands such as Orijin and also “leverage” the portfolio of Diageo’s Indian subsidiary, United Spirits.