Diageo Boosts Marketing Spend to Lift Flat Guinness Markets

By Saabira Chaudhuri​

​LONDON--​Although drinkers around the world will toast St. Patrick on Friday with about 14 million pints of Guinness​--enough to fill 32 Olympic-size swimming pools--the big day masks a tough global picture for the Irish stout and its owner, Diageo PLC (DGE.LN).

​In the ​six months through December, the ​first half of ​Diageo's ​fiscal 2017​, Guinness sales revenue was flat as volumes fell 3%.

Beer volumes have ​slackened as consumers flock to cocktails and wine in developed countries​,​ while big markets like India retain a strong preference for whiskey over beer. Beer volume​ growth​ globally dropped ​​to just 0.94% last year​ ​​from 4.4% in 2007​,​ ​according to ​industry tracker GlobalData PLC.

​​Now, Diageo​ is increasing marketing investment in major Guinness markets​, ​said John O'Keefe​, the drinks giant's Africa president,​ in a Thursday conference call with investors​.

"Guinness is the cornerstone of Diageo's Africa business," he said.

Mr. O'Keefe ​said he ​expects Diageo's beer sales there to improve in the second half but warned that a 43% in excise duty on bottled beer in Kenya that took effect in December 2015 would continue to hold back Guinness sales there.

Diageo has been working to cut costs in Nigeria, where it is battling input inflation on imports as well as local inflation, Mr. O'Keefe​ said​. The company has cut staff at its breweries, improved its bottling efficiency by 10% and is reaching out to more suppliers in a bid to get the most competitive prices, he said.​

Nigeria ​has been one of Guinness's biggest markets for years, but sales have dwindled there recently. A chronic shortage of foreign currency, combined with high demand for dollars, has caused the naira to lose as much as 45% of its value on the black market, making it one of the world's fastest-falling currencies.

Diageo in October pedaled back from plans to raise its stake in Guinness Nigeria​, which houses brands such as Guinness, Harp and Malt. Raising its stake as planned to 70% from 54.3% would have given Diageo more control over its business in Africa's most populous nation.

Diageo's biggest beer markets now include Nigeria, Ghana, Cameroon, Ethiopia, East Africa, Ireland and Indonesia, with beer making up ​more than​ 60% of Diageo's sales in those markets. By contrast​,​ in the U.S., Britain, Canada and ​South ​Korea​,​ beer makes up 5% ​to ​20% of net sales.

Write to Saabira Chaudhuri​ at saabira.chaudhuri​@wsj.com

(END) Dow Jones Newswires

March 16, 2017 11:43 ET (15:43 GMT)

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