Liquid lucre: Diageo prizes scale as basis for Asia Pacific success

26-Nov-2013 - Last updated on 26-Nov-2013 at 16:05 GMT

Picture Credit: Katsamaniego/Flickr

Related tags Asia pacific Pernod ricard

Diageo says it see a massive opportunity for international spirits in the Asia Pacific and claims its scale lends it a significant competitive advantage in the region.

At the company’s investor conference on November 19, Trip Blum, analyst at Brown Brothers Harriman, asked if any of Diageo’s rivals were able to invest on the same scale worldwide.

“Or are you at such a huge advantage because nobody else is either willing or able to that you’re really setting yourself up for five, 10, 20 years of structurally advantaged growth?” Blum asked.

Gilbert Ghostine, president of Diageo Asia Pacific, replied that international spirits are now worth $9.5bn in a total beverage alcohol market worth $150bn in his region.

‘Exceptional competitive advantage’

Therefore, the upside opportunity for international spirits was huge, he said, adding that Diageo was the No.1 player in Asia Pacific with a circa. 30% market share, according to IWSR data.

The company's main rivals in this region are Pernod Ricard (20%) and Beam Inc. (6%).

“So in the context of operating in Asia Pacific, and you guys know that to compete in China and India you need a substantial investment to win in these markets, you need to have scale in order to win," Ghostine said.

“With the scale of the footprint we have in these markets, this gives us an exceptional competitive advantage to be able to win today and setup an organization that gives us a substantial competitive advantage for the future," he added.

Luxury business doubles in size

Citing Diageo’s successes in Asia Pacific, Ghostine said the firm had doubled its (luxury) reserve business over the last three years.

“We definitely see the opportunity to double it again over the next three to four years with the stuff that we’re doing with the Johnny Walker houses and with the high end,” he added.

Turning to the ‘premium core’, he pointed at Bailey’s strong growth in China and work with the Johnny Walker franchise – Red, Black and new variations, that is “already getting us lots of mileage”.

“On innovation alone, we’ve launched 64 new innovations last fiscal year and we have around 60 to 62 innovations to launch this year.

“The scale that we have will enable us to deliver against these must-dos and make a difference.”