It may be some surprise, therefore, to learn that almost a quarter of the company's net sales derive from our beer business, equating to over £2 billion per year. And it is a business that is growing. In our last financial year, Diageo posted a 5% increase in beer net sales, ahead of its other alcohol categories, and over the last five years the growth rate has been a steady 6%.
So are beer and spirits good bedfellows? Nick Blazquez, Managing Director, Diageo Africa, believes it creates great opportunities. "Having such a great breadth of brands across all categories enables us to gather consumer insights which in turn inform the way we look at the best ways to get our products to the end consumer. Plus it makes it more compelling for our customers, while providing us with greater scale by being able to cover more outlets."
In South Africa, where Diageo has a business venture with Heineken and Namibian Breweries to distribute a combined brand range, brandhouse, this has translated into market share gains. According to recent Nielsen figures, brandhouse's value share of the total beverage alcohol market in South Africa is now over 17% and growing ahead of the industry. Diageo will look at more of these innovative routes to market opportunities in Africa where it makes strategic sense and where its brands will flourish.
At the core of Diageo's beer business is Guinness. Arguably one of only a few truly global beer brands, Guinness sells over 2 billion pints every year in over 150 countries. As the world's leading stout, it defines the category.
"Guinness has a special place in the collective consumer conscience, and the key to this is its great heritage and consistency in quality, wherever it's sold," says Brian Duffy, Global Brand Director, Guinness. These attributes have provided the brand with resilience in difficult beer markets, especially in the UK and Ireland, where it grew market share in the last year. While mature beer markets have become more difficult during the financial crisis, there remain pockets of growth for those who can build on their brand equities.
Duffy sees this as potential for Guinness. "In the US, for example, we often index highly in terms of consumer perception and brand equity. The key now is to bridge the gap between the passion consumers hold for Guinness and sales volume. There are lots of opportunities in the US and elsewhere, and we are working to translate detailed consumer insights into sales strategies."
Recently the brand celebrated the 250th anniversary of the signing of the lease at the famous St James' Gate site, ultimately hosting a worldwide party on 24 September, which featured global music icons such as Tom Jones, Calvin Harris and The Black Eyed Peas. The result was a brand driven event with global media impressions akin to the likes of Live Aid "There are not many brands in any industry that can create such an event in every continent in the world, but Guinness can," says Duffy.
In Africa, the brand, which is predominantly sold in bottles as Foreign Extra Stout, is doing extremely well. In its principal markets of Nigeria, Cameroon and Ghana, Guinness uses football as its sponsorship platform to activate promotions around the brand. With these 'Guinness markets' qualifying for the World Cup Finals in South Africa next year, coupled with the fact that the brand 'travels' well, campaigns promoting its Greatness campaign will enhance its position on a pan-regional basis.
Guinness' 250 anniversary celebrations generated sales spikes in many markets, but sustainability is about meaningful engagement with existing and new Guinness drinkers. To tap into this, Guinness is testing its 'Pour Your Own Pint' concept – a table-top device in which pub-goers get to become the bartender. "Guinness is the only beer brand where there is a ceremony around the pour. This innovation takes the consumer beyond the drinking experience," says Duffy.
While expansion in Diageo's beer range is driven, in part, by innovations in liquid development, tracking changing consumer taste profiles are a focus for Diageo. Building on its solid platform in Jamaica, Red Stripe Breweries recently launched Red Stripe Bold, fermented twice to give a distinctive flavour. The brand also recently launched a 'light' version to appeal to the huge market in the US for 'light' beers.
So where now for Diageo's beer business? There remains large scope for the company in emerging markets. While West and East Africa remain strongholds for Diageo, there is plenty of room for expansion in the rest of the African market. Diageo has invested in a new brewing facility with Heineken in South Africa to secure cost benefits, and there remain new market opportunities on the continent. The company [yesterday] announced the launch of its Guinness brand in Angola in partnership with Portuguese brewer, Unicer.
Asia too presents growth opportunities, especially in markets such as Malaysia and Indonesia where the likes of Guinness appeals to consumer taste profiles. Last year, the company acquired the global distribution rights to Windhoek, a beer native to Namibia, with an ambition to roll it out through its global network where there is consumer appetite. It is by selectively seizing these opportunities that make Diageo a heady prospect for the future.