Diageo Boosts Marketing Spend to Lift Flat Guinness Markets
March 16 2017 - 11:58AM
Dow Jones News
By Saabira Chaudhuri
LONDON--Although drinkers around the world will toast St.
Patrick on Friday with about 14 million pints of Guinness--enough
to fill 32 Olympic-size swimming pools--the big day masks a tough
global picture for the Irish stout and its owner, Diageo PLC
(DGE.LN).
In the six months through December, the first half of
Diageo's fiscal 2017, Guinness sales revenue was flat as volumes
fell 3%.
Beer volumes have slackened as consumers flock to cocktails and
wine in developed countries, while big markets like India retain
a strong preference for whiskey over beer. Beer volume growth
globally dropped to just 0.94% last year from 4.4% in 2007,
according to industry tracker GlobalData PLC.
Now, Diageo is increasing marketing investment in major
Guinness markets, said John O'Keefe, the drinks giant's Africa
president, in a Thursday conference call with investors.
"Guinness is the cornerstone of Diageo's Africa business," he
said.
Mr. O'Keefe said he expects Diageo's beer sales there to
improve in the second half but warned that a 43% in excise duty on
bottled beer in Kenya that took effect in December 2015 would
continue to hold back Guinness sales there.
Diageo has been working to cut costs in Nigeria, where it is
battling input inflation on imports as well as local inflation, Mr.
O'Keefe said. The company has cut staff at its breweries,
improved its bottling efficiency by 10% and is reaching out to more
suppliers in a bid to get the most competitive prices, he
said.
Nigeria has been one of Guinness's biggest markets for years,
but sales have dwindled there recently. A chronic shortage of
foreign currency, combined with high demand for dollars, has caused
the naira to lose as much as 45% of its value on the black market,
making it one of the world's fastest-falling currencies.
Diageo in October pedaled back from plans to raise its stake in
Guinness Nigeria, which houses brands such as Guinness, Harp and
Malt. Raising its stake as planned to 70% from 54.3% would have
given Diageo more control over its business in Africa's most
populous nation.
Diageo's biggest beer markets now include Nigeria, Ghana,
Cameroon, Ethiopia, East Africa, Ireland and Indonesia, with beer
making up more than 60% of Diageo's sales in those markets. By
contrast, in the U.S., Britain, Canada and South Korea, beer
makes up 5% to 20% of net sales.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
March 16, 2017 11:43 ET (15:43 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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