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Distiller: Africa Will Outpace Asia In Consumer Demand For Spirits

Distiller: Africa Will Outpace Asia In Consumer Demand For Spirits

Spirit sales are growing faster than beer in Africa, where demand for distilled liquor is expected to outpace Asia’s as purchasing power grows on the continent, a global distiller predicted in a BusinessDay report.

Brewers and distillers are seeking to benefit from economic growth in emerging markets as Western Europe stagnates and competition ramps up in the U.S., Bloomberg reports.

With $2.4 billion in revenue from Africa last fiscal year, U.K.-based Diageo claims to be the largest distiller in Africa, ahead of Paris-based Pernod Ricard SA.

The maker of spirits including Smirnoff vodka and Johnnie Walker whisky, as well as Guinness and Tusker beer, Diageo said that it has an advantage in Africa in that it distributes beer and spirits together to retailers in many countries. Distribution of the two is usually separate.

Spirits sales are growing faster than beer, Diageo said.

Diageo is set to reissue its Guinness stout brand with new packaging and a marketing campaign across Africa. The Irish brand was first imported to Sierra Leone in 1862, and the new bottle is expected to improve and enhance the brand in an incremental way. The company declined to comment on the cost of the rebranding or growth prospects, saying only it was a “significant investment.” The brand’s biggest market globally is Nigeria.

The “rate of change” across Africa is faster than in Asia, said Nick Blazquez, president of Diageo for Africa, Eastern Europe and Turkey. However, bad infrastructure and political tension mean it’s a “glass half-empty and half-full” situation.

Diageo’s spirits growth is aided by demand for Johnnie Walker Scotch whisky, Blazquez said, and the company commands 70 percent of Scotch sales in Africa. Net sales have risen at a 13-percent compounded annual growth rate and are set to accelerate, the company said, aided by urbanization and growing numbers of young consumers with more disposable income. That typically leads to consumers switching away from illicit alcohol and opting for spirits over beer, the company said.

Some consumers goods companies have said that growth in emerging markets is slowing. Unilever, the world’s second-largest consumer products maker, said Sept. 30 emerging market growth slackened in its third fiscal quarter, sending the shares down the most in almost two years, according to the BusinessDay report. Despite more difficult operating conditions in some countries, including regulation in some markets that’s “less predictable than I’d like,” Blazquez said he still anticipates “superior growth” compared to other parts of the world.

“The much-trailed African growth story is being recognized now,” Blazquez said. “However, I think it will be inevitably bumpy.”