Guinness continues its launch of Smooth Stout across African markets
To demonstrate its strategic quest to position and reposition its smooth variant, President of Diageo Africa, John O’keeffe, has declared that Guinness has a special place in many African hearts.
He made the remark following several launches of Guinness Smooth in Ghana, Nigeria, Cameroon and recently Kenya the fourth African country where the newly unveiled brand was introduced.
Speaking at the formal launch of the product, the Diageo boss said though the iconic brand had a few of its special variants existing in markets across the continent, the Smooth stout was the latest and smoothest brand addition to the Guinness stable.
He said further that the Guinness Smooth which debuted initially in Ghana, Nigeria, Cameroun and Kenya would soon be launched in other strategic African markets.
He disclosed that, Diageo, the world’s largest spirits maker with big footprints in Africa in both beer and spirits segment had a strong positive outlook for its business on the continent.
Giving further insights on a wide range of issues pertaining to the group’s activities and strategy on the continent, he explained that Africa represented 12% of Diageo’s group sales, with 60% of that coming from beer, 30% from spirits and the remaining 10% being made up of Ready-to-drink (RTD) mixed drinks.
O’Keeffe noted that the group’s strategy in Africa was to “grow our beers fast and our spirits faster”, adding that the existence of a mutually beneficial relationship between the two segments was something the group was uniquely positioned to take advantage off.
“Over five years ending fiscal-2016 (to end of June), we delivered more than double the growth rate of spirits in our markets with an established beer platform, compared to those with a majority spirits business. And the operation synergies are significant,” he said.
In essence, beer provides the platform upon which the group can push its other category of products in Africa. While beer will continue to bring significant contribution to the company’s overall growth on the continent, spirits will eventually become the main driver of faster growth.
O’Keeffe pointed out that consumers were increasingly including spirits in their range of drinks and felt comfortable moving between beer and spirits.
In Diageo’s first-half results released in January, the company said that mainstream spirits segment rose 20% across the continent, driven by Smirnoff 1818 and Kenya Cane, both taking market share from local competitors.
However, its premium spirits grew 13%, helped by Johnnie Walker Black Label in Africa regional markets and Nigeria.
Diageo’s Africa president noted that International Premium Spirits (IPS) were “out of reach for most Africans” at the moment. However, it still remains part of the group’s strategy in the region to participate in all price points.
In Nigeria, one of the group’s biggest markets on the continent, O’Keeffe pointed out that the country’s GDP had slowed down considerably in the last 2 and a half years.
“In Nigeria, currently, scarcity and devaluation are driving a high inflationary environment, making affordability even more important to consumers.”
O’Keeffe added that the group had continued to accelerate its locally sourced raw materials, currently at 70%, but with a target of 80%.
The company is investing at the mainstream end of the market – in both beer and spirits as demand rises.
“Historically, our beer business has centred on premium beer. In recent years, we’ve seen consumers migrate to value beers in a number of countries. Nigeria is good illustration of this, where over the last 2 and a half years, the value beer segment has increased volume share from 26% to almost 50%,” said O’Keeffe.
The group’s Africa president pointed out several cost saving initiatives the company had implemented in Nigeria, including cutting the brewery workforce, improving efficiency and reducing waste, energy and water usage.
With these different initiatives and strategy in place, the group sees Nigeria playing a major role in its margin expansion on the continent. Guinness Nigeria, the company’s Nigerian unit is in the midst of a rights issue to shore up its balance sheet. Diageo said it would participate in the rights issue and would invest on expanding it mainstream spirits in the country.
Elsewhere on the continent, Diageo said its first-half results were negatively impacted in Kenya by a 43% hike in excise duty on bottled beer at the end of 2015. The increase added 20% markup to the retail price of mainstream lager in the country.
Despite the challenges, O’Keeffe still sees a light at the end of the tunnel. He pointed out that only 40% of the adult population in Kenya drinks alcohol.
“As I look at our business in Kenya, while we have a very large share, the penetration of alcohol is only 40%; six out of ten consumers in Kenya do not drink formal alcohol today for either religious reasons, lifestyle reasons, or usually affordability reasons,” he said.
“The opportunity in Kenya is very much about increasing the size of the pie and getting after the illicit sector, which is around 50%.
O’Keeffe drew attention to the group’s recent innovations. In 2016 alone, Guinness Nigeria launched Malta Guinness Herbs Lite, a low sugar malt drink. Similarly, Dubic Malt, a value malt drink was also unveiled. The group also launched Orijin Bitters in 5cl sachets for the Nigeria and Ghana market. In the spirit segment, Smirnoff X1 and McDowell’s No. 1 are now being produced in the country at Guinness Nigeria’s Benin City plant, and a new flavor of Gordon’s Gin was also launched.
In other parts of Africa, the group launched Meta beer and Lager Azmera in Ethiopia; Ngule value beer and Black Bell, a “rich and flavourful beer targeting millennials in Uganda. Also sparkling, palm wine-inspired Tappers palms was rolled out in Ghana, while Kenya Cane Coconut flavor was unveiled in Kenya to “re-energise the Kenya Cane franchise.”
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