Diageo’s – Capital Markets Day 2017 Wrap-up

Diageo held its Capital Markets Day (CMD) on 9th May 2017. The company’s Africa President, John O’Keeffe spoke with analysts on various issues covering the group’s business operations in Africa and Nigeria.

Beverage Industry News (NG) recaps some of the highlights of the day and the spirit firm’s strategy for Africa in 2017 and beyond.

Mr. O’Keeffe said the group wouldn’t rule out acquiring a local mainstream spirits firm in Africa to complement and strengthen its route-to-market. However, he notes that the company has strong brands it can develop “quite quickly” in each of the markets where it operates. He adds that its existing brands have not fully being deployed across the continent to start considering acquisitions.

On the current challenges facing Guinness Nigeria, its Nigerian subsidiary, O’Keeffe said that its strategy to full recovery is a broader portfolio product participation across beer and spirits and across an increased variety of formats. He notes that Guinness Nigeria of today is very much different from the one of 24 months ago. He adds that the company now has a stronger portfolio of drinks for a “very distressed consumer”.

While the company is still caught in the macroeconomic cycle, he stressed that it’s going to continue on its productivity agenda at quite an aggressive pace and will emerge from the cycle. The agenda includes broader product offering of its drinks portfolio and driving out costs in a number of areas that is beginning to be reflected on its financials. He said that Guinness Nigeria now has a balanced value beer portfolio of around 40%.

The maker of Johnnie Walker emphasized that it is moving towards local production of its alcoholic spirit brands in Africa, highlighting production of Scotch whisky locally as a way to offer the product at a more affordable price point.

O’Keeffe said that Diageo’s strategy to penetrate the informal alcohol market which is around 50% in some African countries is tied to the macro economic cycle. While acknowledging that its firm has a big role to play in formalizing the sector, it notes that its push into mainstream local spirits production would help in formalizing the sector. However, he stressed that the company has to be sensitive to packaging and price for consumers to make that choice. It would enable the firm to reach the lower, and middle class opportunity that exists in Africa.

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