The Wehring Interview - Diageo Africa president, Nick Blazquez - Part I
Late last year, Olly Wehring visited New York with Diageo, and sat down with the company's head of Africa, Nick Blazquez, for an hour. Earlier today (10 January), Diageo completed its purchase of Meta Abo in Ethiopia. Put the two together, and welcome to part one of the first Wehring interview of 2012.
The opportunity to sit down with Nick Blazquez, Diageo's president for Africa, has been sprung on me somewhat. I'm in New York to attend the company's North American investor conference, and presentations today and tomorrow centre on the potential that remains in the premium spirits category in the US. That Nick has joined most of Diageo's executive team here at Credit Suisse's offices just off Madison Avenue, to give analysts an overview of the state of Africa, has given me an idea, however. And, Diageo are happy to oblige, even giving us our own room.
Of course, just-drinks has met Nick before. But, that was almost two years ago, and the African region has grown in importance for Diageo since that heady afternoon on the outskirts of Johannesburg.
In the company's most recent fiscal year, to the end of June, Africa (take a look here for the region's vital statistics) was responsible for around 14% of Diageo's total turnover – GBP1.3bn (US$2.01bn) in net sales.
“That's grown significantly,” notes Blazquez. “About five years ago, it was about 7% of Diageo, and it's pretty much doubled in the last five years. Last year, it contributed 30% of our total growth in terms of net sales value, and 40% of operating profit growth.”
Nick Blazquez, president of Africa for Diageo
The region is growing at quite a steady clip, and Blazquez, naturally, believes the potential is huge. “If you look back over the last few years,” he says, “the GDP growth for Africa has been significantly above the world average. This year, it's forecast to grow by about 5.5%. At the time of the crisis, a couple of years ago, it dipped, but nowhere near as much as the global rate.
“Seven out of the top ten fastest growing markets in the world are in Africa. That's projected to continue; the GDP is going to grow.” Then, there is the expected entry of more legal drinking age consumers going forward. “Over the next decade, there's going to be another 85m consumers above the legal drinking age coming into the market.
“So, you're going to have more GDP, more folk, more GDP per capita growth and the formal beverage alcohol market correlates very closely with GDP growth. I suspect, as we've seen over the last few years, one of the things that's driven our growth is that we've benefited from the favourable macroeconomic environment; the tide's been rising, so our business has grown.”
Also adding to the potential for Africa is the region's rate of annual population growth, which is around 2.2%; in Asia, it's 0.9%. The median age of people in Africa is 19.7 years, in the BRIC economies, it's 35. “So,” Bazquez says, “there are going to be more consumers coming into LDA in Africa than anywhere else.”
All this excitement sounds very much like the fuss surrounding Asia Pacific (If you're ever feeling cold, just ask any drinks exec about China, or India: The arm-flailing will soon warm you up). Blazquez, however, is well-placed to compare the two regions: Prior to becoming president of Africa in 2004, he was MD for Diageo's key markets in Asia.
“Africa is pretty similar to Asia in many regards,” he says. “But, whilst a lot of people talk about India and China being big opportunities – which they are – we've got scale in Africa. So, a few percentage points on scale is a lot of money.”
When asked to compare the two regions, Blazquez highlights recruitment issues. “The biggest challenge we've got is the availability of talent. Many more of our businesses now are led by African leaders, but that's been hard yards. There's a real war for talent out there. It was similar in Asia when that region was really accelerating: people would job-hop quite quickly.
“In terms of the legislative environment,” he continues, “Africa's pretty dynamic. But, it was in Asia. Also, sometimes, it takes a long time to get stuff through the ports, so you have to keep an eye on your working capital. But, it's not much different to other markets around the world. Because Diageo's been here for so long, we know how to navigate these sorts of challenges.
The drinks company does have quite a history in this part of the world and, like its operations across the continent today, it is firmly anchored in beer. In 1827, Guinness first arrived in Sierra Leone from Ireland. Diageo's (rather, the various companies that make up Diageo today) first first brewery outside the British Isles was built in Nigeria in 1962.
Driving this beer presence in Africa for Diageo it Guinness; a fact that has always surprised me. Indeed, you can surprise your own friends with this one: More Guinness is sold in Nigeria today than in Ireland. “And,” Blazquez adds, “in Nigeria, you pay twice as much for a bottle of Guinness than you do for a bottle of lager. Nigeria is actually a big premium market, because they buy so much Guinness.”
So, what's the secret of the black stuff's success? “At the core of the brand is power, goodness and communion,” Blazquez opines. “In Africa, I've really been impacted by the spirit of community. People look after their families, their communities - there's a real feeling of shared ownership. That resonates very well with the communion aspect at the heart of Guinness. It's a beer of substance for men of substance: African men are men of substance! So it's a perfect fit.”
Within the next two years, Blazquez believes, Guinness will be the number one beer brand in value terms across Africa. “Guinness is unique in its broad footprint.”
For part two of this interview, click here.
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