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Diageo currently employs over 6,300 people in Africa. Up until June 2013, the company’s net sales value was over £1.5 billion. In early September 2011, the company acquired Meta Abo Brewery, a company established in 1967, for USD 225 million. In late September high level executives of Diageo’s African Regional Market held a meeting in Addis Ababa to discuss the company’s performance.
Ekwunife Okoli, Managing Director for the African Regional Market who previously held the position of Managing Director of Guinness Nigeria among many others, spoke to Capital’s Eskedar Kifle regarding issues and challenges Meta is facing, the company’s overall performance as well as the newly-introduced brand, Malta Guinness.
Capital: Why this visit to Addis Ababa now?
Ekwunife Okoli: The African regional market is a cluster of markets in 40 countries; Angola, Ghana and Ethiopia are among them. We have an executive team and we sit down to review our businesses. So, the reason we are here is to have an executive meeting and conduct a review.
Capital: How do you rate Diageo’s operations here in Ethiopia?
Okoli: It is really good. This is one of the most inspiring markets. Every time I come here I am impressed with everything. As you know, our business here is called Meta, which is a brewery that we acquired a couple of years back. We have reviewed our performance and everything is on track; our brands are doing really well and Ethiopia is a good place to do business so we are really delighted.
Capital: Can you tell me a little bit more about the performance of Diageo here?
Okoli: All I can say to you is that when we bought the business, we had some financial projections in terms of growth, market share and profitability; regarding all that we are solidly on track. Our year-on-year growth is well over 50 percent. Meta has a very significant market share. More importantly, it is not all about money or market share, it is about how solid the business is, the people we employ. We have employed more than a hundred people so far.
The talent we are developing, the capability we are building, the trainings we are providing people and also the impact we are making on communities is growing. We want to develop our business, acquire profit and pay our employees generously, but we also want to contribute back to the communities. I am really delighted that we are making progress on all fronts.
Capital: Speaking of market share, St. George currently has the largest. What about Meta?
Okoli: People should understand the background; for years St. George has been a privatized business with a lot of investment, and Meta wasn’t a private business and didn’t receive a lot of investment. Therefore, St. George grew to become a significant number one brand. That is fine. Now that we have taken over, we are really happy that we are beginning to grow considerably.
We are nowhere near where St. George is; it will take time and we are not in a rush to become number one. We want to build a solid brand and improve the quality, and our consumers are telling us clearly that Meta is the best brand in Ethiopia today. We are doing a really good promotional work. I don’t know if you were there but we brought in P-Square for a huge concert; we do that to engage young adult consumers and they loved it.
However we do not tend to disclose how much our market share is to the public, but all I can say is that we believe we are clearly the number two brand and we will continue to make progress. You also have to remember that we have been here for just about 20 months, but think what it will be in five years’ time; it will be amazing.
Capital: You recently introduced a new brand, Malta Guinness, and the information I have indicates that a lot of people don’t like it. What kind of research do you do before you introduce a new product in a market like Ethiopia?
Okoli: First of all concerning this brand, I hear differently. For me it’s not just that I hear, but I also look at the numbers. As you know, Diageo has a wide variety of products, most of them in the alcohol sector, such as spirits and beer, and also produce soft drinks as well, of which Malta Guinness is a part. When we come into a market like this, we spend some time trying to understand it and understand the consumers’ preferences. We saw that there is a strong Muslim population, female population and a good number of people who desire non-alcoholic drinks. Currently, the option is very limited; there are just carbonated drinks. But most of these people are adults and they don’t want these carbonated soft drinks.
So what we are doing is bringing an alternative for adults. As I said earlier, Malta Guinness is a drink in the segment that we call premier soft drinks; it is an adult premium soft drink. We have this brand in many countries in Africa like Cameroon, Tanzania, Nigeria and so on. It is a really successful brand across Africa and we just introduced it in Ethiopia. What I hear is that the target consumers like it, but it is not meant for everybody. When I was told the sales number for the first four weeks, I asked if it was being exported outside Ethiopia, because I couldn’t believe the amount of volume sold in one month.
In the context of bringing new products, yes we do have plans to bring in many more brands; we do not know yet which brands we will introduce. We first have to understand the consumer and the market, like we have previously done, and figure out where the opportunities are. We do not do this by guesswork but by studying and checking whether they fit the market or not.
So yes, we will continue to bring in new brands.
Capital: What would you say is Diageo’s biggest investment in African countries?
Okoli: It depends. If you are talking about breweries, there is Nigeria and Kenya; in South Africa we are mainly into spirits but also have a joint venture in the brewery business. We also have breweries in Cameroon, Tanzania and Uganda, but the bigger ones would be in the bigger countries, which would be in Nigeria and in East Africa. If you are looking at success in growth rate, I think it is Ethiopia; there is no other market where we are growing as fast as Ethiopia. But if you are talking about the size of the business, it will be Nigeria, as it is a bigger country with a bigger economy; so that would be our biggest business.
However, it is my job to bring bigger investments to Ethiopia and, as you know, we bought the Meta Abo brewery for USD 225 million, which is a big chunk of investment. We have invested over USD 50 million after acquiring the business and have plans for further investments. Ethiopia’s economy is growing; people are getting more money and people who get more money will want a better lifestyle. For those who choose to drink alcohol, we provide it for them and similarly for those who do not drink alcohol, we have brands for them as well. I look around the country and I am so impressed with the efforts made in building infrastructure and the different investments. That is why we also have an obligation to invest in our business and become a partner in development. We have done a lot to contribute to that. We are not in the business of just making and selling products; we also contribute to the social well-being of Ethiopia.
An example of this would be our involvement in the agriculture sector. We started a pilot project for the local production of high quality barley. First, we started with 800 farmers and the yield was very good. We buy 50 percent of the farmers’ produce. So, the farmers had a guarantee that for what they produced there would be a market from the beginning. The government was really appreciative of that, and this year we are working with about 1,200 farmers, and as we are looking to increase our output, we will be buying big chunk of their produce.
There are other options like importing. However, we are not using such options because we are a partner of the government of Ethiopia. We also have a significant investment in leadership development. I would say recently this has been one of the most strategic new markets we have gone into, and as we look back, we are really happy we are here and we are here for the long haul.
Capital: Earlier, you mentioned a new investment; can you tell me more about that?
Okoli: When you have a country like this where the economy is growing fast, you cannot afford to have your business stand still. We are thinking about capacity building, and as demand grows, you are going to have to consider either putting in a new production line or a new brewery. We are committed to put in more investment here and to expand our business, as well as follow new business opportunities that are within our strategic interests. In a growing market like this, as in many parts of Africa, it means investment and you have to be on top of that.
Capital: More specifically, what exactly will you be investing in?
Okoli: We are going to be investing in building our brewing capacity. Currently, in the area of packaging there are constraints, so we are also investing in packaging capacity, meaning there will be a new packaging line. This is a clear investment. In a couple of months’ time, you will be able to observe construction work going on at our Meta Abo brewery site.
Capital: Can you provide a number on the planned investment?
Okoli: I can tell you that we are putting in not less than USD 50 million in order to expand our capacity at Meta Abo. Our next investment after this will be, either to continue to further develop the Meta Abo site or it might be to look for another site; we haven’t decided yet. The only thing we know is that demand is increasing for our brand so we will keep investing.