The just-drinks Interview - Randy Millian, Diageo's president of LatAm & Caribbean
Last year, just-drinks travelled to the US to report on Diageo's investor conference. The subject of the presentations was the company's hopes and plans for the Latin America & Caribbean region. While there, just-drinks' managing editor, Olly Wehring, sat down with regional president Randy Millian, to discuss the region, as well Diageo's distribution presence, the battle with brewers and the looming shadow of Brazil.
Latin America and the Caribbean makes up one of Diageo's five regions around the world. In the drinks giant's fiscal year to the end of June last year, the region, which comprises 43 markets with a population of 600m, delivered 12% of Diageo’s total net sales and 11% of its operating profit.
And, as the group's fastest growing region, Diageo clearly has high hopes for Latin America and the Caribbean (LAC), where rising living standards, improving personal income and a burgeoning middle class give the future quite a positive glow.
Randy Millian, Diageo's president of LatAm & Caribbean
Having been head of operations in the region for the best part of 12 years, Randy Millian has overseen the rise to prominence of LAC – a part of the world where, he says, “if you're not willing to have one foot in success and one foot in disaster, then don't come work here”.
It's clear from talking to Millian that he has quite a fondness for the region. “I get a kick out of going to Colombia, which was written off ten or 15 years ago,” he says. “I get inspired by the Venezuelans, who get up every day and still believe in the future. The Argentinians are always fun to be with. The Chileans are pragmatic, the Peruvians are on fire.”
That's not to say, however, that LAC is not without its difficulties. The authorities in markets like Venezuela – a country so fed up of coups that it has elected the anti-imperialist socialist Hugo Chavez three times – and Brazil – an emerging market keen to wield high import tariffs to protect its domestic industries – have provided headaches in recent years. Millian, however, is somewhat sanguine about his playing field: “Governments are going to be governments anywhere in the world,” he says. “I'd say the biggest challenge for us in LAC is to focus on building the right culture, then the rest comes. Within that, you've got to make sure that you run a business in a very ethical way. If you make one mistake, you're in trouble.”
Diageo looked to erase one of its weak spots in the region in May last year, when it bought the Ypióca cachaça brand in Brazil from Ypióca Agroindustrial Limitada for US$454m. Not only did the move mark the company's entry into the country's domestic spirit market, it also plugged a gap in its distribution footprint, particularly in the rapidly-rising north-east.
About nine months prior, Diageo had cast its eyes in the direction of Brazilian brewer Schincariol, before Kirin made its move. “We were looking for the right route-to-market to help us,” explains Millian, “but decided to go for Ypioca – its brand was a better fit.
Does the swing past Schincariol indicate a preparedness to team up with a brewer, if the need dictates? “We'll look at anything that makes sense at the time,” says Millian. “But, unless there's a major global deal in beer, for us our focus in Latin America is to continue developing our leading position in spirits.
“That doesn't mean if somebody came to us with a deal we wouldn't listen to it,” he adds. “We've got some pretty good routes-to-market that we've built in the last ten years. Getting the balance right is important: Do you want to be a small fish in a big pond, or do you want to have a route-to-market that you can make sure is focussed on your brands, and activate it? You've got to really make that decision in each market.
"Up until now, our spirits route-to-market, expanding it with different pack sizes, innovation and acquisitions like Ypioca, we think we can get the job done that way.”
Of course, Latin America has been a battleground for the global brewers in recent years. With the likes of Anheuser-Busch InBev's Ambev division in Brazil and SABMiller's Colombian unit, Empresarial Bavaria, dominating their respective beer markets, spirits producers have a battle on their hands when it comes to stealing share of throat.
“As we develop our spirits category,” says Millian, “we have to be smarter about how we market spirits versus beer and how to get those messages across. We're good marketers, so we'll find our own ways to do that. But, we're small compared to them. There are some dynamics in spirits that are hard to stop: They're aspirational, they can be mixed in different ways, some people think they're less fattening or bloating. So, we have some inherent characteristics (in spirits) that can help us.”
That said, Diageo also has a beer presence in the region. “We have a great beer in Jamaica, in Red Stripe,” proffers Millian. “But, when you look at the brand positions we have in spirits in the region, we need to first focus on them and develop them as much as we can. We'll continue developing Red Stripe where it makes sense, and we'll continue developing our Argentine wines, but it's not going to be a focus of ours like developing spirits will be.”
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