In this Bain executive conversation, Nick Blazquez, president of Diageo Africa, sits down with James Allen of Bain's Global Strategy and Consumer Products practices to talk about doing business in Africa. In this segment, they discuss how Africa's growth and growth potential keeps it a business priority for Diageo.
Allen: In talking to you in the past, one of the fascinating things about Diageo is the way you've kept Africa at the top of the agenda. Can you describe a little bit about how Africa became important to Diageo?
Blazquez: Diageo's got a long history with Africa. I think we first exported Guinness to Sierra Leone in 1827, so it's quite a long history, and the business has been consistently growing. Over the last fifteen years, it has started growing even faster.
When I started about seven or eight years ago, Africa was significant, but it was regarded as perhaps somewhat unreliable in terms of delivery—a little bit too volatile. But then as Africa grew in its scale and contribution to Diageo, as the growth was consistently delivered, people said "Oh, is this not a one-off thing?" It happened the next year, and the next year—and after three or four years, people realized that we could increasingly rely on the businesses in Africa to deliver great growth and the sheer scale of our business in Africa was much bigger than our businesses in Asia.
Allen: It's interesting, because I would have thought most corporates—if they look at Africa in their portfolio—would never have said what you just said, which is, 'Africa is to us a sustainable source of profitable growth.' That's not the stereotype of Africa.
Blazquez: I think that the image of Africa is being more balanced and that is encouraging people to invest more. If I look at companies like Unilever or Coke, many of the companies are enjoying significant growth and I think that's changing the view of Africa as a good place to invest. There are challenges, for sure, but there are challenges all over the world and the same drivers of growth exist in Africa as they do elsewhere, so there's lots of further opportunity for growth.
Allen: For some business executives, it still almost feels like they view it as a nascent market that's the future, 20 years out. And yet, as I understand it, this is pretty significant for your business now.
Blazquez: For sure, Africa is really significant for Diageo. In 2011, our sales were more than 1.3 billion pounds. Pretty impressive. And that's doubled over the last five years and that rate of growth is set to continue. Another way of looking at it: In 2011, I think Africa contributed something like 40% of Diageo's growth globally.
Allen: Do you it's almost too late for your competitors to enter? Have you seen a first-mover advantage for being in Africa as long as you have, for being as committed as long as you have, especially in the last five to ten years?
Blazquez: I'm not sure I subscribe to that, actually. One of the things we found more recently—as more consumers are coming into the segment, and Internet penetration goes up, and people get access to more global media—is that people will aspire to international brands that perhaps aren't there. So even if you aren't in a particular category, but you can bring a brand in that meets their needs, you can quickly gain market share.
Allen: Is Africa beginning to have an impact on your business? Are you beginning to export ways of working and ways doing business to other places?
Blazquez: Yes, it is quite interesting. Some folks think that it's a developed world that's going to give the developing world all the new marketing ideas or ways to build a business. That's just not the case. If you take mobile phones, for example—mobile phones in Africa have leapfrogged the traditional technology and they provide us a fantastic marketing opportunity. We're developing social networks with our brands that are adding real value to consumers and that allow us to distribute our messages to our consumers to tell them about the promotions going on. We're utilizing that new technology to really add value. And not just to Africa. We've now taken that marketing approach and rolled that around the world. So Africa, in our business certainly, is leading other parts of Diageo.
Allen: Nick, hearing about the outstanding success you've had in Africa, I guess one question is, are Africa's best days already behind it? Or is there future growth in the market?
Blazquez: Africa has enjoyed a lot of growth over the last few years. I think that's set to continue, and I actually think it will accelerate. Some of the benefits of all the infrastructural work will start to be fully realized. I think the economy's going to grow. I think more people are going to come into the formal sector, and I think we're actually going to see an acceleration of the consumer segment. I think GDP growth will accelerate. I think we'll get into a virtuous cycle of people seeing good returns for their investments and more people will invest more money
Notwithstanding all of that optimism, there are still challenges. A large part of the population is still in poverty. That's a real issue. There are still infrastructural challenges and there are still occasional difficult situations on the political scene. So I think there will be bumps in the road, but for those companies that take a longer-term view, they will continue to enjoy—over the medium- to long-term—good growth.
So I think the best days aren't behind us. They're still to come. But I'm sure the road will have its ups and down as does any broad-based economy.
Allen: Nick, thank you very much for coming. We really appreciate your taking the time.
Blazquez: Absolute pleasure.