Diageo embraces flexibility in Africa

8 March 2013

LAGOS: Diageo, the spirits group, is tapping the strong growth potential observable in Africa by adopting a flexible business model in each market, building its brands and embracing digital media.

Nicholas Blazquez, who heads Diageo's African arm, told analysts its portfolio is "doing well everywhere" it trades in the region, a group of countries ranging from Ghana and Kenya to Nigeria and South Africa.

Blazquez also quoted figures from McKinsey, the consultancy, which suggested that African consumer spending will hit $1.4tr in 2020, versus $860bn in 2008.

He said: "Opportunities for consumer goods companies with broad brand portfolios like Diageo will accelerate with population growth, urbanization and the adoption of new technologies. This supports premiumisation across the consumer spectrum."

Diageo adapts its model in each nation, for example by separating its marketing and sales teams for beer and spirits in Nigeria, but integrating these functions in South Africa. In Kenya, it also has stand alone sales units for its low-cost Keg and Jebel brands.

"We have local teams which establish fit-for-purpose organisations that seek to grow beer faster than the market and grow spirits even faster," said Blazquez.

Such a model is combined with leveraging Diageo's international expertise and transferring best practice strategies and techniques between markets, thus combining the best of global and local.

"Learning best practices is something that we do as a matter of course," Blazquez said."We have long had a sort of mechanism in place to enable that."

Diageo has emphasised strengthening its production and route to market in Africa. The firm is also taking direct control of marketing and distribution instead of using third parties, a move yielding strong results.

"We've achieved this through investing and refreshing our brands, innovating to capture emerging trends or seizing upon new opportunities and developing operational capacity," said Blazquez.

When discussing infrastructure, roads are improving greatly in many areas, slowly bringing down the cost of logistics and distribution. "You see that quite broadly across the continent," Blazquez argued.

Similar processes are at work in the media space, with the rising uptake of digital satellite TV and mobile phones aiding its marketing efforts, alongside "ourselves driving awareness", he continued.

"I think that the mobile telephony has leapfrogged fixed-line technology in the so-called developed markets and, likewise, I think the opportunity for us to lead and leapfrog in terms of digital marketing in Africa is very significant," Blazquez added. "It's something that's very much on our radar."

Data sourced from Seeking Alpha; additional content by Warc staff