Asia-Pac centre of gravity for alcoholic beverages: Diageo

MUMBAI: The world`s largest drinks company Diageo Plc expects emerging markets to contribute almost 50% of its global revenues by 2015. The London-based behemoth, makers of Johnnie walker and Smirnoff, is betting big on China and India where rising consumerism and changing lifestyles are fuelling growth for premium spirits brands. Diageo has trailed global rival Pernod Ricard in Asia`s two largest economies.In India, Diageo is betting on organic growth and does not want to increase the exposure in JV with Radico Khaitan. Diageo`s president for Asia Pacific Gilbert Ghostine, who was in New Delhi to host the company`s third international bartending competition, spoke to TOI. Excerpts:
Diageo India went through a difficult phase couple of years ago. There have been several changes within the company after the financial irregularities episode. Could you tell us about the transformation at Diageo?
Diageo India is completely a new organization. There has been a complete turnaround in our approach to the Indian market over the last two years. We have a new management team. We recruited people from best organizations and from other sectors. Investments have been increased to build our brands. , relationships with key customers and trade partners.
We rebuilt the distribution set up and now have 350 dedicated distributor sales force. As a result, we now reach out to 70% of the outlet universe directly. Our brands, Vat 69 and Smirnoff are growing at double digits in India. To match up with the increased demand, we are considering increasing our supply footprint.
Where does India stand in Diageo`s Asia-Pacific operations?
Asia-Pacific is the centre of gravity for alcoholic beverages. We look at Asia-Pacific as two markets. One as the developed market comprising Australia, Korea and Japan; and the other as a developing market, which includes China and India. Scotch accounts for nearly 45% of our Asia Pacific operations. Nearly 50 million consumers hit the legal drinking age in Asia Pacific every year. Of this, 22 million and 19 million are added in China and India, respectively. People in the Asia Pacific region are spending more on international premium brands and this should help us grow further.
We expect 20% of Diageo`s global revenues to come from the region by 2015. Currently, 70% of the global revenue come from Europe and US and the rest from Asia-Pacific, Latin America and Africa. We expect the share of revenue from emerging markets to be as much as 50% by 2015.
How is Diageo`s joint venture with Radico Khaitan doing? It has only rolled out a single product since its formation in 2007?
That`s right. The joint venture has come out with just one whisky brand, Masterstroke. The brand has not been as successful as we expected it to be. The JV was a good learning experience. It helped us understand the dynamics of the Indian market better. We would `ramp` down our interests in the venture.
Diageo globally owns 34% stake of Moet Hennessy (the wine and spirits unit of French luxury goods group LVMH). In several countries, Diageo and Moet work together, an exception has been India...
We have joint ventures with Moet He nnessy in six countries in the Asia-Pacific region. In China, for example, we operate as one. The company markets and distributes both Cognac Hennessy and Johnnie Walker. I don`t have an exact answer as why we don`t work together in India. I guess the nature of product portfolio is different. We are more focused on scotch and vodka here.