Diageo sets eyes on Africa for growth

By Kenneth Kwama

British drinks group Diageo is planning a major assault on the African spirits market.

Diageo, which owns majority stake in East African Breweries Ltd (EABL), is expanding aggressively in emerging markets, and is expected to utilise the brewer’s vast distributorship network in the region to reach more customers in East Africa.

“Africa is not our biggest market, but we are seeing signs of phenomenal growth there,” says Ben Itty, Diageo’s director of consumer planning, global whiskies category.  

“We believe that in future, growth will come from the continent because people there are looking for more authentic products,”

Diageo has been looking for key acquisitions in emerging markets like Africa and India, given its CEO Paul Walsh’s desire for 50 per cent of the company’s sales to come from emerging markets by 2015.

In 2010, the company known for famous brands such as Johnnie Walker whisky and Smirnoff vodka added a majority stake in Serengeti Breweries to its existing portfolio in Tanzania, bringing its share of the country’s branded beer sector to 28 per cent.

According to Itty, the new acquisitions will enable Diageo to grow market share where they have existing businesses.

Analysts say Diageo will gain a significant foothold in Africa’s lucrative local spirits market.

“The biggest problem with popular drinks like Scotch whiskies in emerging markets is that the tax regime is too punitive,” says Itty.

“For example, Johnnie Walker Black label sells for $90 (Sh7,560), so not any people can afford it. The accelerated expense is due to tax.”

To illustrate the effect of taxes on pricing, Itty says the same drink goes for half that price in Russia.

Diageo has spent Sh135 billion over the past five years in capital expenditure and acquisitions in Africa says it will play on price points to draw more customers to its brands in the continent.

“We own the best brands in the world. Our spirits are targeted at various classes of consumers and we are confident that we offer the best quality for every segment of the market,” says Ewan Gunn, Diageo’s Global Scotch whisky ambassador and category training manager.