Diageo sees Africa rising to 20% of its global sales, at it sinks $1 billion in the continent

,

The world’s largest spirits maker is leaning more on Africa as North America continues to struggle. Expands Ethiopia brewery.

DIAGEO Plc, the maker of Guinness beer and Johnnie Walker whisky, wants Africa to account for 20% of its sales after investing more than $1 billion in the continent over the past five years, Chief Executive Officer Ivan Menezes said.

The ambition to make the African operation “one of the pillars of the next decade” and boost Africa’s current sales share of13% will play out in growing nations such as Ethiopia, Menezes said at the opening of an expanded brewery in Africa’s second-most populous country. He declined to say when he expected to reach the goal. 

“Africa is hugely important for Diageo and Ethiopia is going to be one of the cornerstone markets for us in the future,” the CEO said in a Feb. 25 interview with Bloomberg Africa Television at the Meta Abo brewery in Sebeta. 

“I see Africa growing faster than the Diageo average both in beer and in spirits, and the two go hand in hand.” The world’s largest spirits maker is leaning more on Africa as North America, its biggest and most profitable market, continues to struggle. 

The London-based distiller manufactures in 16 African countries and sells its brands in 40 on a continent that is expected to have a fifth of the world’s population by 2030. Diageo has invested $119 million in Meta Abo since buying the brewery from Ethiopia’s government for $225 million three years ago. 

“This is a very exciting market,” Menezes said. “It’s got good demographics, very good economic growth and we’ve got good support from the government.” 

Ethiopia, one of Africa’s fastest-growing economies, is expected to grow an average of 8.1% annually through 2019, the International Monetary Fund said in October. The country’s estimated population of 94.1 million was increasing at 2.6% a year in 2013, according to the World Bank. 

Sales of Guinness in Nigeria, Africa’s largest economy, have rebounded after Diageo tried to “premiumize” its operation last year at a time when consumers were seeking cheaper drinks, Menezes said. 

The ill-timed price increase resulted in a 9% drop in Nigerian sales last year, and Diageo has since hired a new management team in response. 

In 2011, Nigeria overtook Ireland as the biggest market for Guinness, which can be sold at up to double the price of a normal beer in Africa. The Nigerian Guinness brewery in Ikeja, Lagos, which dates back to 1962, was the first one built outside the UK and Ireland.

Guinness was first exported to the continent in 1827, to Sierra Leone, but there are now 13 breweries making the black beer across Africa. The brew sold in Africa, branded Guinness Foreign Extra Stout, is sweeter, heavier and has almost twice the alcohol content than the same beer brewed in Ireland. 

The stronger formula was to preserve it on its long sea journey from Ireland to distant export markets, but even when the Ikeja brewery was up and running, local tastes and preferences remained.

“The corrections we made in Nigeria are working well and the last few months we see growing momentum in that business,” he said. Guinness accounts for 45% of Diageo’s beer sales on the continent.

The company’s investments in Ethiopia include the new bottling line at Meta Abo, which is 23 km southwest of the capital Addis Ababa. 

The addition will triple its annual production capacity to 1.7 million hectoliters. 

Other brewers are eager to slake Ethiopia’s growing thirst for beer. Heineken NV, the Dutch company that bought two Ethiopian government breweries in 2011 for $163 million, opened a 110 million-euro ($123 million) plant near Addis Ababa in January. 

BGI Ethiopia, a unit of French drinks maker Groupe Castel, produces St George beer—the nation’s top seller—from a 93-year-old brewery in the capital. “I see a market the size of Ethiopia having significant opportunities for all the players to grow,” Menezes said.


Related Content

Comments

blog comments powered by Disqus