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Diageo boosting SE-Asia presence

Alcoholic drinks firm drawn to region's strong macro factors

[SINGAPORE] Alcoholic drinks distributor Diageo is looking to capitalise on the opportunities presented by the South-east Asian market by boosting its local knowledge and presence in the region.

The British maker of alcoholic beverages such as Guinness stout, Johnnie Walker whisky, Baileys liqueur and Smirnoff vodka has created a new position in its Singapore office - managing director for South-east Asia Emerging Markets and JVs (joint ventures), a post now occupied by Apurvi Sheth.

Formerly Diageo's managing director of innovation for the Asia-Pacific, Ms Sheth told The Business Times that the strong macro-fundamentals across South-east Asia is the main reason for the group's emphasis on the region.

"Strong GDP growth, a population of 500 million people and one which has an exciting profile," said Ms Sheth. "In the Philippines, for example, the average age is 22."

Due to such demographics, Ms Sheth added that the region alone could see about 20 million consumers come of drinking age in the next five to seven years, with higher disposable income and a larger propensity to spend, particularly on international brands - a trend that serves Diageo and its brands well.

To capture these opportunities, Diageo will rely on its strategy of local partnerships. "In the Philippines, Singapore, Nepal and Sri Lanka, we already have a presence . . . What we have learnt based on our experience and performance in these markets is that local partnerships are really going to be critical," said Ms Sheth.

She revealed that the group is looking to build such win-win partnerships across the region where local partners bring in strong local insights and routes to consumers while Diageo brings its international brands and innovation expertise to the table.

In addition to teaming up with local partners, Diageo will also look to setting up a specific team in each of the emerging markets in the region. "We want to set up a team and a business model that is going to be fit for a purpose: a team that is quite agile, that builds strong relationships locally, that is also actively working with the government in these markets on policy, so that we are seen as a trusted and respected player in the industry" she said.

The approach of seizing opportunities in the region by leveraging on deeper local knowledge and presence is obvious from the company's latest financial results.

On one hand, Diageo would have been in high spirits after its full-year double-digit growth in net sales in Indonesia, the region's largest market that was driven by a 7 per cent growth of Guinness consumption and strong performance in its ready-to-drink beverages.

The company also gained market share in Scotch in both Thailand and China. At the same time though, the company's performance was also affected by the social unrest in Thailand and by the Chinese government's recent hard stance against corruption, which has led to a reduction in consumption of high-end consumer goods. This highlights the need to grow government relations and advocacy functions to navigate the uncertain political terrain in the region.

Nevertheless, Diageo is not put off by this uncertainty but is bent on capturing business opportunities in the region.

"If people get the jitters by emerging markets going up and down, I'd say: 'Go do something else.' I am totally relaxed and confident about where to take the company," Diageo chief executive Ivan Menezes said recently.