By Andrew Starke
The world’s largest spirits company is investing heavily in emerging markets with Diageo CEO Paul Walsh predicting these fast-growing regions will account for half of its sales in three to five years time.
Walsh told the annual meeting of the Consumer Analyst Group of New York (CAGNY) held in Boca Raton, Florida recently that the global spirits giant’s acquisitions in emerging markets and a growing middle class in countries like Colombia, India, South Africa, Nigeria, Ethiopia and Mexico created significant opportunity for Diageo.
The London-based Diageo acquired Mey Icki, a Turkish distiller, for about 1.3 billion pounds from TPG Capital and Actera in late February and has also unveiled plans to expand or enter strategic partnerships in a number of other emerging markets.
In his presentation, Walsh cited Global Insight research which predicts that middle class consumption across emerging markets will increase from 7 percent of the global total to 20.5 percent by 2022, largely off the back of China’s rapid middle class growth.
For the six months to December 31, 2010, Diageo’s net sales volumes were split developed markets 56 percent, emerging markets 33 percent and PIIGs 11 percent.
For this analysis, emerging markets included Russia and Eastern Europe; Asia Pacific excluding Korea, Australia and Japan; and international excluding global travel.
PIIGs are the five Eurozone nations which were considered weaker economically following the financial crisis: Portugal, Ireland, Italy, Greece and Spain and all other markets are included in developed markets.
By 2016, Diageo expects the picture to look very different with developed markets dropping to 42 percent of the total, emerging markets taking 50 percent and PIGGs at 8 percent.
Walsh also revealed net sales by category for 2010.
Scotch whisky accounts for 27 percent of Diageo’s global sales, beer 22 percent, vodka 11 percent, RTDs 8 percent, whiskey 6 percent, rum 6 percent and wine 6 percent.