Diageo Plc, the United Kingdom-based majority core investor in Guinness Nigeria, has led a N40 billion recapitalisation of its Nigerian business, a strategic move that underpins the importance of Nigeria to the global business group. Guinness Nigeria Plc Managing Director Mr. Peter Ndegwa, in this interview with TAOFIK SALAKO, speaks on the multinational’s outlook on economy, corporate growth strategies and social responsibilities, among others. Excerpts:
WHAT are the barriers that must be removed to enhance trade and cooperation among African countries?
I think we have a lot of lessons to learn from the various sub-regional economic integrations in Africa. For example, the Economic Community of West African States (ECOWAS) Trade Liberalisation Scheme (ETLS), which I am very familiar with having worked in some West African countries, has tremendously boosted trade among member-countries of the sub-region by encouraging the free flow of goods and services as well as transfer of skills. The scheme promotes the West Africa region as a Free Trade Area.
In strengthening Nigeria as the regional economic hub, what do you think will facilitate greater flow of foreign investments into Nigeria?
Further diversification of the economy from dependence on crude oil will enhance national development and create more opportunities for Nigerians. A major leg in the diversification drive is to target sectors with export potential. A boost in non-oil exports will definitely generate capital inflow and investments. Another factor to consider is to add more value locally rather than being an import country. So, it is not just dependence on oil, but adding more value to local production. Let’s localise production, source locally, and then let us drive export. ECOWAS is a big market for Nigeria. The regional blocks are within Africa, we can source more trades regionally within Africa. Part of the reason why our exports, as a company, are increasing is because we have increased exports to Ghana and Cameroun, to some of our sister companies. Certainly, I think Nigeria should drive the diversification of its economy and also add more local value in the areas of raw materials substitution and manufacturing.
What’s your perception of the economy? What changes or improvements have you seen in recent times?
Although still somewhat fragile, it appears the recovery is bringing the economy back in the right direction. Looking back, there is no doubt that a number of areas have improved in the country’s economy. Specifically for us, first we have seen better availability of liquidity for foreign currency especially for manufacturers who import raw materials and also spare parts for their plants. We have seen some level of stability both in terms of the expected range of price versus the volatility we have seen in the currency before. That is good because it improves predictability, ability to plan and even when costs are higher, it helps that we know what the price is, which is key.
The second is the availability of gas. About 12 months ago we had fluctuations on the availability of natural gas which we use to power our plants. When we had shortages we had to go into the use of diesel, which is more expensive, less environmentally-friendly and more erratic. Previously, we experienced incredible delays in getting work permits or travel permits, however, in these areas, we have seen some level of improvements.
Areas I feel we could improve further are the congestion at the seaports. Our exports have doubled in the last 18 months and one of the reasons we are doubling exports is to get foreign currency, which is very helpful for us. But we have seen some level of delays as a result of the congestions at the ports, both in terms of outbound and inbound of raw materials. As a result, two things happen to the business eventually, we incur demurrage and more transport costs and also when we don’t get the materials on time, it is challenging to ensure continuity of production.
Additionally having regular power supply is something everyone yearns for. The benefits arising from this are obviously very enormous.
Regardless of the outlined challenges, the economy holds much promise. I believe that we will continue to unlock growth as we continue to take the right steps. However, it is good to see that government wants to spend more money on infrastructure.
After the recent rights issue, was there any significant change in the shareholding structure of Guinness Nigeria?
The rights issue was undertaken to optimise and de-leverage the statement of financial position and reduce finance costs. The rights issue was an optimal recapitalisation opportunity for us, whilst providing all shareholders with an equal opportunity to maintain their shareholding. Also, the company is able to strengthen its capital base to support business growth whilst giving it greater financial flexibility. There has been no significant shift in the shareholding structure as a result of the rights issue.
What new business opportunities and expansion of your existing businesses do you see in Nigeria?
We still believe very much in the potential of the market. That is why, despite the challenges in the operating environment, we continue to invest behind our business. We have invested in our production capacity to produce spirits locally and today we are producing Smirnoff X1, Gordon’s Moringa, and McDowells locally instead of importing. This allows us to keep costs down and in turn we are able to offer these brands at the right price so that consumers can enjoy international quality standard products at accessible prices. Our investment in spirit shows that we are committed to the future.
The second is we have also increased our local sourcing. We used to source only about 40 per cent locally; now we are sourcing about 75 per cent of local materials like sorghum, glass, packaging materials like labels and crown corks. This reduces our cost of doing business.
Innovation continues to be a core part of our business and we have come to be known as the business that innovates. In addition to the spirits segment mentioned above, we have also expanded our participation in some of the other categories, including beer and soft drinks. We are the only total beverage business which has spirits, beer and soft drinks, giving us a bit more opportunity to service consumers, compared to if we were specialists in a particular area. For us, growth has a lot to do with expanding our portfolio through innovation and also through building existing brands. It is about lowering our costs both through local sourcing and locally produced brands instead of importing. We also continue to drive our productivity agenda, which is all about reducing waste and being more effective.
What are you doing to address the harmful effects of alcohol?
Alcohol has been part of the society for a long time and had been used in celebration for many centuries but if misused, it can cause harm, which is the primary basis of all the messaging on the responsible drinking campaigns that we do. As you know, Guinness is a household name, it is a brand that is known for quality and it has been in Nigeria for 67 years. So, for us, it goes beyond just alcohol. The whole issue of alcohol in the society, and in particular, our response to the drinking agenda, is very important to us. While our commercial interest, investment and paying dividends and returns to shareholders are very important, success for us is more than the commercial aspect. Reputation, trust and respect are also very important. What consumers, customers and society think about us is a big part of what makes us successful.
As leaders in the alcohol industry, we want to make sure that we also lead the agenda in raising awareness about responsible drinking with stakeholders, not just consumers but communities, suppliers and the public. The other context is at a global level. Diageo, our parent company, is a part of the global producers and marketers of alcohol. The CEOs of global companies that produce alcohol came together and made a commitment that across the countries they operate, they will ensure that they focus on efforts that reduce the harmful use of alcohol. So, as part of Diageo, the activities that we take part in locally are a part of that bigger commitment and global collective. Also in Nigeria, we are part of Beer Sectoral Group (BSG) for beer and for spirits, we are also part of the Spirits and Wine Association of Nigeria (SWAN) and we work with these groups to tackle the misuse of alcohol.
Many reports have linked alcohol abuse to road accident. Specifically, what are you doing to address this problem?
The first one I’d like to mention our partnership with the Federal Road Safety Corps (FRSC) across the country. We have partnered with the FRSC for the past 13 years on our “Ember Months Campaign”, a responsible drinking campaign targeted at commercial drivers and motorists, especially those using public transport. It aims to help them to understand the importance of not drinking when driving or about to drive. In 2015, we gave them breathalyzers to enable them test drivers and this also provides a way to check that our education and awareness initiatives are working.
Secondly, this year, we are starting a radio programme where we will be giving a lot of information about responsible drinking, making people aware of the various elements about responsible drinking, for example how they shouldn’t drink if driving and how much alcohol is permitted in your body according to regulation. Our overall message to drivers is ‘Don’t Drink and Drive’ and we have mostly focused on this campaign around the ember months. However, from 2018 we have decided to extend it through the year, from January to December. This is because accidents don’t just happen towards the end of the year, and drinking doesn’t stop at the end of the festive season, it goes throughout the year. So far this year, we have launched one of the ember months campaign in Agege Motor Park here in Lagos and we will also be launching in other parts of the country, including Abuja, Kano, Benin and Onitsha, just to sensitise the commercial drivers on the risks of harmful misuse of alcohol especially when driving.
Thirdly, for the first time ever, we will be organising structured trainings for new driver’s license applicants and fleet drivers across the country and this plays well into our education piece for responsible drinking.
What other initiatives are you taking?
Soon, we will be launching an initiative called Join the Pact. This is a global initiative that Diageo introduced over nine years ago. It is a global initiative for people to make a pledge not to drink and drive. Working with our trade partners and at every touch point where our brands are consumed and enjoyed, this will cut right across all our external stakeholder groups.
We aim to collect 100,000 pledges from Nigerians not to drink and drive. When you drink, don’t drive. When you go out in a group to have fun, designate one of you to drive and that person should not drink. If you are going out alone, arrange for taxi to take you home after you have had something to drink.
Diageo has also launched a new campaign called ‘Drink Positive’, which is also aimed at creating awareness about alcohol. The advantage of looking at alcohol in a positive way is to recognise that alcohol, if used in moderation is a part of a balanced lifestyle. Therefore, Drink Positive is asking employees to engage consumers in their jobs and personal lives about the positive role that alcohol can play in our lives. For example, I am talking to you as a journalist; this is part of my role to create awareness about responsible drinking to the public through the media. As we go to the motor park for our rallies, that is another way of creating awareness on responsible drinking through various forums. We are saying that consumers should not abuse alcohol, they should drink positively. On one of our internal websites where employees collaborate and communicate, an employee said that every time he sees a behavior that is not positive he will use the knowledge he has to tell the individual to stop misusing alcohol and convince the person to drink positive.
We are also part of the Beer Sector Group (BSG) of the Manufacturers Association of Nigeria (MAN). As a group, the BSG of MAN, which comprises alcohol beverage manufacturers, has come together to drive the responsible drinking campaign in the society, and drive awareness around responsible drinking. We have a programme that we normally run during the ember months, which is Drive Alcohol Free. It is a way of encouraging drivers, whether commercial or private, not to drink and drive. Individual companies do various things on their own but we also come together to create awareness and communicate the dangers of drink driving. We support FRSC in their initiatives, and we will continue to do so. We also do research on areas we should be focusing on as far as alcohol in the society is concerned. One of the issues we research on is underage drinking. We are interested in knowing which parts of the country are more prone to issues around drink driving; which parts of the country would be prone to underage drinking; which types of drinks should we be watching out for in terms of underage drinking; We do these researches because there are lots of perceptions about what alcohol does and doesn’t do. There are lots of misconceptions about alcohol and we try to educate consumers around that. Some people may believe that alcohol gives you more power to drive. So, we make sure we remove that kind of misconception in our communication.
Talking about the dangers of underage drinking, do you have any programmes targeted this societal problem?
As part of the global CEOs commitment, one of the areas we focus on is underage drinking. We need to make sure that young people understand the dangers of alcohol misuse from when they are younger rather than when they have already started to engage in drinking. We have a programme called “Smashed”, which has been running in Diageo for about nine years. We are going to launch the programme in Nigeria in the year.We will work with an agency to run this in schools, using drama to educate young people about the dangers of excessive drinking so that they understand what alcohol abuse means from the time they are young and understand the harmful impact this may have. We believe by doing this and doing it in an interesting way, in an environment where they are comfortable, they will respond to the message on the dangers of alcohol misuse.
The second thing we are doing is to look for advocates within youth communities. We recently signed a partnership with the National Youth Service Corp (NYSC) and we use that platform to recruit responsible drinking ambassadors amongst the Corp members who are then tasked with spreading the message of responsible drinking in their communities and places of primary assignment. These ambassadors will be chosen and trained to influence their colleagues not to engage in alcohol in harmful ways.
We are also increasing awareness and knowledge on alcohol and its uses. One of these is our “Drink IQ” programme. The Drink IQ website, www.DRINKiQ.com was first introduced in 2008 when Diageo led the industry in launching a responsible drinking website. Information on questions, such as what should I know about alcohol, how is alcohol harmful to my body and how much alcohol should I drink, among others, are made available on this website. The website has been refreshed, it is much more engaging and more user-friendly and consumers can actually teach themselves.
Like they say, ‘charity begins at home’, so our members of staff also have access to it. Very soon, it will be extended to professional bodies and at the end of the day it is about increasing awareness on alcohol.
But with all these initiatives, don’t you at any point think these campaigns may have a direct negative impact on your sales?
Our objective is not only to be the best performing business, but also to be the most trusted and respected. We would not have been in this country for 67 years if we had taken a short cut in the way we drive our sales. The reason we preach responsibility in the way people consume alcohol is so they can have a balanced lifestyle that incorporates alcohol while celebrating or enjoying themselves. Abusing alcohol is harmful and we do not want harm in our society. Part of our responsibility is to ensure that there is increased awareness of the dangers of alcohol misuse and how to reduce related harm. And where we have carried out a number of these initiatives we have recorded a reduction in the incidences of abuse. This means that a lot of the work we have done around the “don’t drink and drive” initiative has had impact. So, the level of awareness is much higher. It is like safety, when people are more aware of the need to stay safe, they wear seatbelts. They know that when you are in the car and if we do not wear seat belt, you are likely to be injured if an accident occurs.
We believe that we will create a better society if we have a better understanding about alcohol use and its role in a balanced lifestyle. That is why it is not in conflict with our commercial interest. In fact, it supports our ability to be in business because we will be a more respected organisation if we are seen to be responsible.
