Okay, I confess, Im not a big beer drinker. I know thats a bit sacrilegious as far as British culture is concerned, but its the truth. That said, I have had my moments of walking home through Central London in the summer time and wanting nothing more than to down an ice-cold lager. The problem with me though is that Im well satisfied after a pint or two. Basically, Im of very little interest to a company like Diageo (LSE: DGE) one of the worlds largest producer of spirits, and a big player in the beer and wine business. Instead, the company has its heart set on Africans. Not surprising really. The market in Africa is frankly enormous.
According to the WSJ, Africa already accounts for around 40 per cent of Diageos annual beer sales. Thats about $3.7 billion in beer revenue coming from Nigeria and other parts of West Africa. And heres another statistic thatll knock your socks off the African Development Bank says there will be 65 million more legal drinkers in Africa in 10 years time.
The Problem
Many African countries are an the grip of a deep economic malaise. The recent outbreak of Ebola in West Africa is just one symptom of a continent that is deeply scarred by social and financial issues. Any examination of the Central African Republic in recent years will also reveal deep hatred and violence thats hurt one country that can least afford it. Without being crass about it, one side effect is that Africans are drinking less expensive alcohol (like Guinness) in favour of cheaper beer, or spirits that pack more punch. Its the same story in Eastern Europe. Hard times can manifest themselves in all sorts of different ways. This is one of them.
The Solution
I dont really believe that beverage companies can change the world for the better. I do, however, believe that alcohol is an important social lubricant, and, pitched the right way, can benefit consumers and society. Diageo has seen the need for a clean approach in Africa and is throwing money (more than 1 billion pounds) at it. The company is looking to engage with Africans through sport and by encouraging the younger generation with the slogan, Raise Your Game. Its one way companies like Diageo can market their products responsibly.
Heres to alcohol: the cause of, and solution to, all of lifes problems. (Homer Simpson)
Im not going to kid myself and say Diageo is going to clean up Africas problems. What has to be said though is that the beer/alcohol market in Africa is now hotting and just a few companies are trying to get as large a slice of the pie as they can. Diageos campaign seems clear and transparent. Its also consistent with its other socially-conscious campaigns around the world including a new road safety programme in India.
Cheers!
This series is about companies that will look after you. In that respect, alcoholic beverage companies are indeed a relatively safe play in wobbly markets. In addition, Diageo is being aggressive with one of its most important markets, and its doing it the right way. So if you want to help fix the problems in Africa you could donate to charity, or sponsor a child, or be a volunteer for a reputable organisation. Theres so much that can be done! If you would like to make what I understand to be a sensible investment decision, have a little look at Diageo.
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David Taylor has no position in any shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
