Strategic focus by region
We aim to create long-term value for shareholders by driving sales and profit growth in a responsible and sustainable way. While our culture, strategy and commitment to sustainability and responsibility apply to our entire business, our economic, social and environmental impacts around the world vary by market.
Our consistent growth in net sales and profit has been driven by our work to build outstanding brands, strengthen our sales and marketing capability, improve market access, increase efficiencies in our operations, and develop strong relationships with our customers and suppliers. We increasingly focus resources on the fastest growing countries and categories, including making investments and acquisitions around the world, most recently in new growth markets such as Turkey, Vietnam, Ethiopia and Brazil.
In everything we do, we aim to work sustainably and responsibly – whether that means adhering to rigorous marketing standards; managing social, ethical and environmental risks in our supply chain; creating local jobs; or using resources efficiently. In some cases, such as our environmental initiatives, this creates cost savings. In others, such as promoting a positive role for alcohol in society, this helps us build a lasting social licence to operate.
What this means in practice differs by region, depending on their different operating environments. Below are summaries from each region.
North America is our largest region by net sales and operating profit, and the largest market for premium drinks in the world. We sell and market our products through four operating units within the United States and Canada: US Spirits & Wines; Diageo-Guinness USA; Chateau & Estate Wines; and Diageo Canada. From the year ended 30 June 2012, North America also includes the North American operations of Global Travel. This business focuses on four things: using its scale to reduce costs; continuing to grow the on-trade (restaurants, hotels and bars); delivering industry-leading brand innovation; and broadening its reach to the multicultural consumer.
Operating in the most profitable alcohol market, Diageo North America continues to promote responsible drinking along with the industry – including addressing underage consumption and drink driving through consumer-facing brand campaigns and customer partnerships. Through the carbon reduction initiatives of our environmental programme, we have reduced costs in the region. Overall Diageo North America has a strong culture of compliance and ethics, health and wellness and diversity and inclusion. Our employee-focused culture won the company the best place to work accolade from the Human Rights Campaign, and Diageo was listed as one of Working Mother magazine’s top 100 companies this year. Diageo Canada was also awarded the prestigious “Best Places to Work” designation by Fortune magazine for the fourth year in a row.
Our European business comprises Western Europe, Russia and Eastern Europe, Turkey and the European operations of Global Travel. In Western Europe, our country directors’ focus is on sales delivery, while we have made considerable efficiencies by consolidating back office and marketing functions regionally. We have invested resources into the remaining emerging European markets to capture the opportunity presented by the growing number of middle-class consumers.
With our biggest production footprint, Europe leads our environmental agenda – pushing innovative investments such as the new bio-energy facility at our Cameronbridge distillery, where we make Tanqueray gin and grain whisky for Johnnie Walker, Buchanan’s and Windsor. In Europe we focus on promoting responsible drinking particularly through partnerships with large retail customers such as Sainsbury’s, Metro and Carrefour. Importantly, we’ve also played a role in leading the development of responsible standards for the industry – such as the European Responsible Marketing Pact, where we pledged with others to agree, implement and monitor common standards for responsible advertising and marketing to adults. In Russia we have launched some highly innovative responsible drinking programmes aimed at tackling excessive drinking.
Our Africa business comprises Nigeria, East Africa (Kenya, Uganda, Tanzania, Rwanda, Burundi, South Sudan), Africa Regional Markets (Ghana, Ethiopia, Cameroon, Indian Ocean and southern African countries), South Africa and African operations of Global Travel. We are a large-scale brewer, producing and distributing Guinness, Africa’s leading premium beer brand. We also own many strong local lager brands and are the region’s leading international premium spirits company. During the year, we acquired Meta Abo Brewery, the second largest beer company in Ethiopia.
Our success in Africa depends on our role as a leading private sector company to stimulate economic growth and contribute to sustainable development. With 20 operational sites – including breweries, glass manufacturing, blending, malting and cider plants – we aim to create wealth directly through employment, and indirectly through partnerships in our supply chain, such as working with and supporting local farmers.
Twelve of our sites in Africa are considered ‘water stressed’, so we focus particularly on water – whether that is investing in community programmes such as our pan-Africa Water of Life programme, or setting ambitious environmental targets, against which we made great strides this year. We also won the Good Corporate Governance award at the Africa Business Awards 2012 for our responsible business ethics and practices.
Latin America and Caribbean
Our Latin America and Caribbean business comprises Paraguay, Uruguay and Brazil (PUB), West LAC, Andean, Mexico and the LAC operations of Global Travel. Our primary focus is to continue to lead the scotch market while increasing our category breadth to include vodka and liqueurs. Diageo also owns a controlling interest in Desnoes & Geddes Limited, the Jamaican brewer of Red Stripe lager. This year, we expanded our production footprint in the region with our acquisition of the Ypioca distillery business in Brazil.
Our sustainability and responsibility strategy in this region focuses on initiatives that harness the impact of our business partners. For example, a partnership with Carrefour in Brazil that encourages consumers to recycle bottles improves our environmental footprint while helping create jobs through the development of recycling co-operatives. Other customer programmes, for example those with Walmart in Mexico and Puerto Rico, fight issues such as underage drinking. Our brands are also connecting with consumers in a sustainable and responsible way, for example Buchanan’s has engaged consumers in volunteering and charitable efforts. Finally, a region-wide programme, Learning for Life, provides skills and training to equip people better for employment, in particular in our own value chain.
Asia Pacific comprises South East Asia (Vietnam, Thailand, Philippines, Indonesia, Malaysia, Singapore), Australia, North Asia (Korea, Japan), Greater China (China, Taiwan, Hong Kong, Macau), India and Global Travel and Middle East, a business unit including duty free sales along with middle eastern markets. In a number of markets such as China and Thailand, we distribute most brands through an agreement with Moet Hennessey. Our strategy is to drive net sales growth by continuing to develop super and ultra premium scotch and to capture the opportunities presented by emerging middle-class consumers.
Here our sustainability and responsibility strategy remains an important focus and we aim to grow social enterprise through our Champions for Change programme which encourages individuals to tackle the region’s social and environmental issues. However, where we can, we also use our influence to promote sustainable principles. For example, as part of improving the consumer experience at restaurants, bars and hotels across the region, we trained almost 20,000 bartenders on how to be responsible servers of alcohol. In Australia, which is home to our largest blending and packaging site in the region, we have developed some of our most innovative, award-winning sustainable manufacturing.