just On Call - Diageo holds fire on stepping up LatAm beer focus
Diageo has a presence with Guinness in the region, but wants to focus on spirits
Diageo will hold back on more involvement in Latin America's beer sector for at least another year because it would distract it from spirits, the company's regional head has said.
Randy Millian, president of Diageo's Latin America & Caribbean unit, told a conference call today (10 June) that the company needs to “be selective about beer”. “Getting beer into our strategic agenda would probably take us off-focus,” he said.
Millian, who is due to retire next year, added that in the past seven years, Diageo has increased the region's sales growth in Scotch by 15%, vodka by 19% and rum by 23%. He also said market share is increasing, and the company's next step is to gain leadership status in the whole spirits category in the region.
“Once we've done that and we've laid down our route to market then I think maybe we could look at a premium beer. But I wouldn't do that for another year or two at least, because I think we've got more than enough to capture the middle class,” he said.
Nomura analyst, Ian Shackleton said in a note following the call: "We believe that Diageo did look at the Schincariol acquisition in Brazil, as its position in the northeast would have helped spirits distribution."
But he added: "We believe it more likely that the company will make local spirits acquisitions in other markets to get more critical mass rather than link up with a beer company for distribution."
Anheuser-Busch InBev subsidiary, AmBev, is the dominant force in Latin America's beer category, especially in Brazil, where it has about 70% of the market.
Millian said a slowdown in Brazil over the past six months has affected Diageo's top-line growth in the country. He expects growth to remain flat or even drop over the fiscal year ahead the FIFA World Cup, due to be held across the country next year.
However, he added: “I find it hard to believe there won't be good growth out of Brazil next year from the World Cup.”
To read an exclusive just-drinks interview with Randy Millian from earlier this year, click here
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