The Business Year

Peter Ndegwa

NIGERIA - Industry

Stout & About

Managing Director & CEO, Guinness Nigeria Plc (A Diageo Company)

Bio

Peter Ndegwa holds a BA from the University of Nairobi. He is a qualified accountant and alumnus of the London Business School, University of IESE, and Strathmore University. Peter has over 10 years working experience in East Africa and the UK with PriceWaterhouseCoopers. He joined East African Breweries Limited, an integral part of Diageo Plc, in 2004 as Strategy Director. He was then appointed sales director in 2006 and group finance director in 2008. He was appointed Managing Director of Guinness Ghana Breweries Limited in 2011. He was appointed as the Managing Director and CEO of Guinness Nigeria Plc in July 2015.

"Guinness has been associated with Nigeria for over 66 years."

What is the significance of the Nigerian market for the overall strategy of Diageo in the West African region and for the whole continent?

Diageo has four big markets in Africa. These are East Africa through East Africa Breweries, Nigeria through Guinness Nigeria, South Africa, and what we call the Africa Regional Markets (ARM), which includes big markets like Ghana, Cameroon, and Ethiopia. Nigeria is the largest single market within our Africa business. Today, the Africa business contributes approximately 14% to Diageo’s annual turnover and Guinness Nigeria plays a big part in this. The Nigerian market is important because of its large, dynamic, and fairly young population. It is a strong and attractive market for both our alcoholic and non-alcoholic beverages because of the positive demographics, and also because it is growing both in terms of its economy and population. We were predominantly a beer and soft drinks business, but now we have expanded into spirits. We are installing a new state-of-the-art line in our Benin City plant that will produce spirits locally, an investment of about GBP12 million. At the beginning of 2016, we also acquired distribution rights for Diageo’s International Premium Spirits (IPS) brands such as Johnnie Walker, and brands like McDowell’s from our India business United Spirits Ltd. (USL).

How has the demand for Guinness products evolved in Nigeria over the last few years?

The brewery in Lagos was the first ever to be built outside the British Isles for Guinness and since that was commissioned in Lagos in I962 the brand and the company have continued to enjoy a deep connection with Nigerians and Nigeria. The Guinness brand is still the strongest contributor to our turnover and profit with Guinness and Malta Guinness making up about 60% of the business. The rest is lager and other brands like Orijin and Harp. Our beer market has changed a bit with more consumers demanding lower-priced brands. Consumers are down trending, as the economy has become more challenging, so we have introduced brands to ensure we are able to compete in that segment. Over the past few years, innovation has contributed more than 50% to our YoY growth. Some of the innovations we have introduced in the last three years include Orijin, which is a contemporary bitters product. Guinness is one of our core brands and we have launched Guinness Africa Special, which has a slightly lower alcohol content and appeals to consumers who want less bitterness in their beer. We have other new brands in the pipeline as well.

How would you characterize the role of Guinness Nigeria in the social and economic development of the country?

Guinness has been associated with Nigeria for over 66 years. Since setting up our plant in Lagos in the early 1960s, we have really got involved in the community. We set up an eye hospital in Kaduna in northern Nigeria, one in the east in Onitsha, and another in Lagos. The other major area that is sometimes overlooked, but is really important, is the sourcing of raw materials. We source a significant portion of our raw materials locally and this contributes to growth in agricultural communities and puts cash back into the economy. Our goal is to source 75% of our total inputs locally by 2019. Guinness Nigeria employs about 1,000 people directly and another 2,000 under contracts. Through our distribution and retail network, we touch a significantly higher number of people in the workforce. Guinness has been a household name for a long time and we have operated in Nigeria at the highest standard. In 2015, we won an award for being one of the top-three Best Companies to Work for in Nigeria. This is an acknowledgment that we have been able to develop talent and also keep our employees engaged in a way that makes them feel we are adding value to their careers.

How would you describe the business environment, especially in the manufacturing sector?

The operating environment is tough because the economy is going through a challenging period given the low oil prices and the effects of currency fluctuations; however, as a business, Guinness Nigeria has invested in this country for the long term and as a long-term investor this is an attractive market. Nigeria has a large, young, and dynamic population; it is a resilient market that is also growing in terms of its population base and income. There are still many opportunities in whichever area you look at in terms of growing consumption. We believe there are still opportunities to grow the spirits segment of the business and on the soft drinks side, as well as the opportunity to provide more choice of beer products.

Guinness Nigeria is on the Nigerian Stock Exchange (NSE). What advantages does that bring?

Listing on the stock exchange creates a number of advantages for us. First of all, Diageo as an international company generally wants to be associated with local companies that have strong roots in the community and society they operate in. So listing is one of the ways of allowing local shareholders to participate in the progress and prosperity of the business. Guinness Nigeria has been listed for a long time and this allows local retail investors, including our employees, to participate and own part of the company. It also means that we can share with the local exchange our commitment to operating to the highest standards both locally and internationally and also allows us to be able to raise capital when necessary and this can be very helpful to us.

What can the government do to further support the manufacturing industry in Nigeria?

Power is one area where improvements would enable industry to do business more easily. Without reliable power the interruptions to production and to our retailers are significant. Then there is the issue of government policies and making sure that these are more consistent and predictable so we can plan for the future. The regulatory requirements need to be clarified, especially for importing and exporting goods, and there also needs to be more cohesion between the ministries otherwise the layers of policy at the state and federal levels can be confusing for businesses and can prove challenging to comply with where these are not fully transparent.

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