Reigniting Growth on Guinness

John O'Keeffe
Global Head of Innovation, Beer and Baileys
Good morning, everyone. Allow me to first of all introduce myself. My name is John
O'Keeffe, I'm the Global Head of Beer and Baileys. I'm also the Global Head of Innovation.
I've been with Diageo for over 19 years now and I've lived and worked across five different
geographies during that tenure, moving between marketing and general manager roles.
This morning, I'd really like to share with you how we're stepping up our activities on the
Guinness Brand. From introducing our new packaging and how we turn up in bar through to
a new global positioning and how we're going to bring that to life with advertising, all the
way through to how we're going to step up our game in the digital world through to
strengthening our participation and sponsorship platforms.
What I'm not going to speak to today is innovation, because Syl Saller covered that last night,
nor will I speak to route to consumer because Nick Blazquez will cover that more generally
later today. But clearly both innovation and the must do of route to consumer will also add
additional momentum to the Guinness Brand.
Okay, so let's start with the category. Beer is a very large category, it's about 2 billion
hectolitres growing at approximately 1.5%, 1.6% CAGR over the last five years. What's
been driving that growth has been really two factors, premiumization and emerging markets.
The beer category is a very consolidated category with the big four players now accounting
for over 50%. Of course, we ourselves have also partaken in that consolidation process with
acquisitions of Serengeti in Tanzania and the Meta brewery in Ethiopia quite recently. We
are a relatively small player, 13th in terms of brew size with about a market share of 1.3%.
So why is beer important to Diageo? Well first of all, it gives us scale. It's our second most
important category, accounting for 20% of our total business revenue and it's our single
biggest category by far in our African business, just under 50%. It's also our biggest category
within Western Europe. We also like beer because it gives us great exposure to emerging
markets. In fact, disproportionately more exposure with 58% of the beer footprint in faster
growing markets versus 42% for the rest of the Diageo business.
If you look at the Guinness brand which really is the cornerstone of our beer business, we too
have great exposure to those faster growing markets with 44% of all sales of Guinness
coming from the emerging markets. You can see that over time our dependence on Western
Europe has declined from F08 of 47% to just under 37% today and during that same period,
we can see that now Africa has grown in importance to 31% of our total beer sales.
Interesting as well, we're building a small but getting increasingly larger business in South
East Asia, predominantly across Indonesia and Malaysia, growing at a very strong doubledigit CAGR.

Let's just tune into Africa for a second, because we feel really good about our position in
Africa. First of all, our participation is wide and it's strong. We are the fourth biggest player
in Africa with a 12% share. I think the macroeconomic case and the economic case for
Africa has been well made and is well understood. It's got fantastic GDP growth forecasts. If
you take Nigeria, for example, by 2030 it is forecast it will have the same GDP as that of the
UK.
Of course, it's not just GDP, it's also fantastic demographics, urbanisation and low per capita
consumption are all reasons why it is forecast for Africa to be the second fastest growing beer
market in the world going forward and we are well positioned to take advantage of that.
A final reason why we really like beer in Diageo is that combining beer and spirits together
allows us to access both revenue and cost synergies. Now this is a slide that you may recall
that Nick Blazquez took you through a few weeks ago at the African Investor Conference.
You'll see in the top right hand side, if we take our spirit only markets in Africa for the last
three years, we've grown our business 11%. But in markets where we combined beer and
spirits together, we've taken that NSV CAGR up to 24%.
There are numerous examples I could share with you of how we're bringing both these
businesses together to drive a superb business outcome. Let me just share with you the most
recent one, Jebel Gin. We've just launched this in Kenya, we're putting it through our beer
footprint - in fact our Senator Keg footprint, which is approximately 12,000 outlets and in the
first year of sales, we'll sell 250,000 equivalent units.
Okay, so let's move into Guinness specifically, because as I mentioned it really is at the heart
of our business. The first thing I'll say is, beer is a bit different to spirits. Beer tends to be
local, it's a fresh product therefore there are very few global beer brands in the world but
Guinness is arguably one of the most iconic and it is accounting for over 50% of our sales
within that.
If I speak to performance, over the last five or six years, up to and including F12, we've
delivered a solid performance on the Guinness brand of 3.4%. You can see that's been driven
by double-digit growth in Africa, up 11%, mitigated somewhat by decline in Western Europe.
Again, some good growth coming through particularly in our South East Asian business.
Now, if I narrow the performance focus to the last 18 months, it's true it's gotten softer. This
is driven by worsening macroeconomic conditions in Western Europe, particularly in Ireland.
The last six months of our last financial year, we really felt the austerity programs biting in. I
don't see the Irish beer category turning around any time soon. However, we've also seen a
slowdown in Africa and West Africa in particular and I think the macroeconomic challenges
in West Africa and Nigeria have been well flagged and are well understood.
We know that in Nigeria the consumers haven't yet shaken off the removal of the fuel
subsidy. We also know that government expenditure on the capital side is behind plan and
that has a very strong - that's a very strong driver in disposable income. We are seeing
consumers in Nigeria today reprioritising that shrinking disposable income to things like
food, health, transport and education. However, we are confident that those fundamentals
will improve in the medium term. Of course, given our positioning as a premium positioning,
we have suffered a little disproportionately as those macroeconomic environments worsened.

However, if I park macroeconomics for a second, and we know that those will improve in
Africa, if I take our top three markets of GB, Ireland and Nigeria, which collectively account
for over 50% of Guinness sales, you can see that our market share performance has been flatish. To Ivan's provocation that we need to grow price, equity and market share, we need to
do something about that, we're well on the way to doing that. I really want to share with you
how we are significantly stepping up our activities to drive our equity and market share
performance further ahead on Guinness going forward.
So let's drill into that. There are essentially two consumer issues that I believe we need to
address in terms of driving the equity on the Guinness brand. First of all, we need to better
underpin the premium positioning for this brand. Secondly, we need to do what we've always
done for the 255 years history of this brand, which is re-frame it for the next generation,
keeping it relevant and important in popular culture.
So let's talk about how do we better underpin our premium price positioning. Foreign Extra
Stout, which is our Guinness variant in Africa and South East Asia accounts for about 41% of
Guinness sales and is typically positioned at quite a hefty premium to mainstream beer. For
example, in Nigeria, Guinness will be typically anywhere between 40% and 60% premium to
mainstream beer. But if you look at our pack on the left, which really is the bellwether for
any brand, you can see that we felt it really no longer justified that premium. It was looking a
bit old, a bit staid, not as aspirational as it needs to be.
We feel really excited about the new pack that we're rolling out as we speak. We've launched
Nigeria and South East Asia, we're launching in Ghana next week and the rest of the
continent for the remainder of the year. I'm sure you will agree this is a really step up change
in terms of packaging. Certainly our consumers agree with a 74% purchase intent with that
new pack and an 87% preference.
Of course, we are going to support that new pack with a through the line program from PR
through to digital and print and television. I'll just play for you the ad that we broke recently
in Nigeria to support this.
[Video presentation]
So that's a really big launch for us and early signs are very encouraging. If I move across to
our draught markets, primarily Western Europe and the USA, we are also upping our game in
terms of underpinning our premium credentials. How you show up in bar - and this is the
new counter-mount for us, we've got new taps, we've also got new glassware, it's critically
important. Not least because approximately 25% of consumers who enter a bar do not yet
know what they're going to order. Once they've ordered something we know that about 85%
of consumers will stick with that first drink for the rest of the evening. So winning at the
point of visibility, the point of purchase is critically important.
We know we did research, the Guinness brand was fairing about sixth in our class and with
this new counter-mount introduction, we believe we've moved to best in class. We are rolling
this out and we're going to be supporting it with quality programs, a quality accreditation
program with 18,000 bars and the new counter-mount and taps will turn up in 14,000 bars in
the UK, we've rolled into 5000 bars in Ireland and 35,000 bars in the States.

Now running alongside our new advertising, which I'll share with you in a little while, we're
also going to bring back the lens to our product advertising. We're going to be interspersing
that through the course of the year as we go forward. We're really going to hero what the
Guinness pint is all about.
[Video presentation]
Created like no other. Very simple, very iconic, really underpinning what's at the heart of
this brand, that powerful surge.
In terms of reframing the brand for the next generation. We are really excited to say, for the
first time in the history of Guinness, we have now moved to single global positioning,
encapsulated by the consumer tagline, Made of More. Guinness has always been about more,
it's got more look, black and white, it's got more taste, it's got more distinctivity and arguably
it's got more soul. So we're going to try and bring that positioning to life in different ways.
There are a myriad of benefits to having a single global positioning not least to Ivan's point, it
will allow our teams to focus on executional brilliance and bringing that positioning to life
with flair.
So let me just play it for you, the advertising that we've run this year in Western Europe,
some of you may have seen it, that really - it's using a - in this instance, a metaphor of a
clock, but actually it tells a story of humanity.
[Video presentation]
A brand made of more for people of more. Now we do have a global positioning, but I don't
anticipate that we will have global advertising. We will want to manifest that positioning in a
locally resonant way, we want to tap into the zeitgeist of what's going on in any particular
culture. So I'm now going to play for you a piece of advertising we developed for our Korean
market against the same positioning. Now it's going to feel a little bit different, it's going to
feel a lot more premium, a lot more aspirational because it is a super-premium position brand.
In fact, Korea is quite an interesting market, it's got a CAGR of the last five or six years of
73%. Still quite small, 50,000, 60,000 hectolitres, but it's consumed in equal measure by both
males and females. It's quite an exciting market for us.
So if we bring that same positioning to life, it's still a story about human spirit and character.
In these adverts for Korea we use famous chefs, famous musicians, in this case we've used a
famous actor. Let me play it for you.
[Video presentation]
Of course, advertising is one thing, but one of the things we are really pushing hard now is to
raise our standards in the digital space. I'm going to play for you the Guinness basketball ad
which we launched in the US in early September and on the back of its success, we rolled out
globally. Let me play it for you first and then I'll come back and speak to it.
[Video presentation]
Beautiful piece of content. To date it's had 17.2 million views on YouTube, according to
Google it's the most watched alcohol advertising ever in the history of YouTube. For every

one view that we paid, we got 1.3 views shared organically. On the Google love index,
which is what they use to measure how effective and engaging a piece of content is, the most
you can score is one, the average you can score is 0.5, that scored 0.92. That is the kind of
standard that we're now pushing into digital space and that we're setting for ourselves to beat
moving forward.
Of course, you couldn't talk about digital without talking about mobile. In Ireland, we've just
launched the Guinness Plus application aimed at driving traffic and footfall into the Irish
pubs. So this is essentially a mobile rewards platform, so if you were in the pub, a week ago
and you were watching Ireland against Samoa - Ireland beat Samoa, I won't talk about the
Australian result last weekend - in that case, you could have got - if you'd checked in, you
would have got an instant voucher on your smartphone that you then took to the barman and
translated into a free pint, instantly. That can really transform that platform, the way we
interact with consumers, real time, in our bars across Ireland.
Across to Africa. Of course, we know that Africans absolutely love football and the English
Premier League in particular. We also know that Africans love mobile phones, so we're
bringing those two passion points together in what's called the Guinness Football Manager,
whereby pretty much any African now, as long as they've a mobile, can become a manager of
an English Premier League team. Let me just bring this platform to life for you with a small
edit and then it's going to roll straight into the piece of advertising we have pushing this
platform out.
[Video presentation]
We're going to be targeting over 1 million Africans with that program this year.
Okay, alongside with advertising and how we shop up in bar and digital, of course we're also
looking at how we can strengthen participation programs. Particularly Gen Y millennium
consumers. They want to interact with brands, they want to have conversations. The best
way to facilitate those is to look at the passion point of our consumers. We're really looking
with the Guinness brand to look at sport and to look at music.
Let me start with Africa where we're focussing on football. As I mentioned football - anyone
who's been to Africa, you know that people live and breathe it every minute of the day,
especially EPL. We are the official broadcast sponsors of English Premier League, so every
match broadcast into the continent of Africa is brought to you by Guinness, we advertise and
activate around that. We also have assets such as, we're the official beer to the Super Eagles,
the national squad in Nigeria.
We've also decided to move into becoming a TV producer and we have produced 10 one hour
episodes of a TV program with very, very high production values. Think of this as Top Gear
does football. It's in studio, with guests and then interspersing that with very interesting clips
and activities on the ground from Africa. So rather than me try and visualise it for you, I'll
just play a short clip that brings this to life.
[Video presentation]
A really stunning platform, hoping to reach 100 million Africans this year on the back of that.
The quality of the show is so good that in many cases we negotiate with the networks to get

those 10 one hour shows on for free, in some cases we'll actually hope to sell it to the
networks. So strengthening football as a big platform is a really big driver for us in Africa.
If I switch across to Western Europe, it's rugby that is the sport that we're choosing to build
out big consumer participation on. There's over 1.1 million rugby fans in Ireland, rugby's
become really mainstream in that country, through to 8 million fans in GB. Over the last 24
months, we have really strengthened the assets that we have, whether it's official beer to the
RBS, all the way through to the Guinness Series in Ireland, all the way through to some of the
big provincial teams. We are now the number 1 associated brand with rugby in Ireland and
the number 2 associated brand with rugby in GB.
Finally to music. We are now in the fifth year of Arthur's Day. We have rolled this music
platform out across 55 markets across the globe and we're activating it each year more and
more. Let me just play for you the clip that gives you some of the stats.
[Video presentation]
It's a very big global platform that's running across 55 countries, generating PR value of 11
million. So you can see there's a huge step up in activity that we're doing right now in order
to reframe this brand for the next generation.
So, in summary, the beer market is a very big market and it's growing and it's driven by
premiumization and emerging markets. Two factors that really play into the Guinness brand,
given where we sell and our price positioning. We really like beer, because it gives us scale,
it gives us access to those emerging markets and Africa in particular and we feel really good
about that because Africa's forecast to be the second fastest growing beer market moving
forward. We also like the ability to bring beer and spirits together and access the revenue and
cost synergies as we've been doing over the last number of years.
You can see that we're massively overhauling what this brand is about in terms of our pack
through to how we show up in bar through to a new global positioning and how we're going
to regionally bring that to life in a way that's culturally relevant and resonant for the next
generation. We're also strengthening those participation programs whether it's football in
Africa, rugby in Europe or music across the globe. All of those things. In addition the work
we're doing in innovation and the work that we're doing on route to consumer fills me with
very strong confidence that we will take Guinness equity and market share forward over the
next few years.
Thank you very much.

Q&A Session
John O'Keeffe
Okay, I'm going to open up for questions now. So we're going to have some roving mics, so
if you just want to raise - if you want to have a question just raise your hand and we'll try and
get a microphone to you. This gentleman here at the front, please.

Chris Wickham Consumer Goods Analyst Oriel Securities

Yes, thanks. Chris Wickham from Oriel Securities. Great presentation. I think regionally
you've clearly got some very big strengths there and some very good associations. I suppose
one area where we've always felt a little bit disappointed over the years has been the United
States. I just wonder if perhaps you could talk a bit more about what you plan to do in the
United States? Then just as a supplement, perhaps give us some indications of Asia as well?
John O'Keeffe
Yes. Okay, thanks Chris. In terms of the United States, we are a small player there. We're
less than 1% share of market. That gives you a lot of growth to go after. But that growth
hasn't been at a level that we'd like and right now we have changed the team, we're focusing
on the commercial effectiveness in that organization and we have felt that our marketing
drivers in the US have not been to the quality that they should be.
Actually, on the back of that new team, they generated the Guinness basketball ad, first out of
the blocks over the last couple of months. I think that's really setting the kind of standard for
the marketing of the Guinness brand in the US. I also believe that with the craft trend that's
now in play, and particularly in the US - if you actually break down the craft trend, what's
that all about? It is consumers who are looking for brands with more authenticity, more
heritage, more provenance and also more taste. I think Guinness ticks an awful lot of those
boxes. I just think we need to play more into that trend than we have been so far.
In terms of your second question, in terms of South East Asia, as I say, really happy with - it's
quite a small part of the business but becoming increasingly more important. Very strong
growth, particularly in Indonesia. We're now almost a 400,000 hectoliter business and have
been growing double-digit. I'm happy that we're also taking a position in China, we're quite
small there and obviously you've seen the work that we're doing in Korea. So small, but in a
particular region, but growing out nicely and I'm feeling quite good about the kind of growth
we can get from that part of the business.
Okay. I'll take you after that. Right?
From the floor
Yes, similar question. In terms of the trends of the US, this last year the decline there, is that
pretty much lapping of Guinness Black or is there some other factor that the core brand is
actually slowing down as well? If I remember, a couple of years ago, your strategy for
Guinness in the US was to build on occasions beyond your peak holiday and - I don't know if
a whole lot has happened there in terms of building other occasions? Thanks.
John O'Keeffe
Yes. In terms of last year specifically, yes, it would have been the lapping of the launch of
Guinness Black Lager. By the way, on Guinness Black Lager, just so I can speak to that, it
hasn't been to the scale of success that we would have liked it to be. That said, at a 600,000
case brand, it's pretty big if you put it through the lens of a craft brewer. In terms of US, I
think we still depend on Patrick's Day as a really big sales period for us, and Christmas. We
are trying to take the Guinness brand outside of the Irish pub footprint in the US and I'm

encouraged particularly in performance in the last couple of months by the movement

forward on equity.
I don't know, Larry, if you've anything else to add to that, but that's...
Larry Schwartz President, North America
The good news is the wheelchair ad is actually working. So over the last two months we've
actually seen a lift, especially off-premise. We've cut the loss on premise in half and offpremise the brand is actually growing. So the wheelchair ad has really had an effect. What
we've done - because it was working so much, we just - not everything works so we took
another $6 million and put it behind the wheelchair ad, so we'll continue to advertise it.
So we're actually seeing the brand turn around. As John said, Black Lager is still 600,000
cases. It's probably in the top 15% in terms of crafts, in terms of value created. So feeling
much better about Guinness, especially off of the wheelchair ad.
John O'Keeffe
Yes, great. The other thing, too, we are looking to innovation, we're just rolling out slim kegs
into the US which will get us into at least 10,000 more distribution outlets than we have thus
far. Thank you.
This lady here please, thank you.
Melissa Earlam Managing Director UBS
Thank you, Melissa Earlam, UBS. You mentioned just over 3% CAGR for the Guinness
brand globally over the last six years. So I was just wondering how meaningfully could that
accelerate over the mid-term? Thanks.
John O'Keeffe
Look, I think the premium beer market will grow low single-digit going forward and I would
expect us to be slightly ahead of that. I would also expect us to get a kicker from price,
although I do want to moderate and get a bit more balance between price mix and volume
growth going forward. As I said, I'm very happy about the exposure of our beer business into
emerging markets and Africa in particular. With that exposure, of course, in any one year
you may get volatility. It's helpful, though, that our first Guinness that we shipped to Africa
was in 1825, through Sierra Leone, so we have a good history of managing that volatility in
any one year and balancing out that risk. Thank you very much. Any other questions?
Chris Pitcher Partner, Redburn Partners
Hello, Chris Pitcher from Redburn, at the back here.
John O'Keeffe
Oh at the back, sorry.

Chris Pitcher
Just broadening out Melissa's question, going beyond Guinness, looking at the beer business
in aggregate, given your brands and your footprint. Ivan's tasked the group to be best
performing within CPG, do you expect your beer business to be best - one of the better
performing net sales growth within the beer business? Then a follow up question on Nigeria,
there's obviously been a shift down the value chain this year, the recent Africa presentation
the Head of Guinness Nigeria was confident on a recovery next year on the back of the
election. Do you stick by that and are you doing anything to address the shift downscale?
John O'Keeffe
Yes, so in terms of our business performance, I think up to F12 and for the previous three
years our performance has been very credible and has benchmarked very favorably in terms
of the other big four beer players. I would see no reason why we can't continue to perform
really well up there.
In terms of Nigeria specifically, I was there last week with Nick and Andy and Ivan. Clearly,
it is going to come back. I'm not going to tell you exactly when. We do know that there
seems to be a high correlation between political cycles and discretionary income and with the
elections in 2015, we do anticipate government expenditure increase with a pretty rapid
knock-on effect that will have in positive terms on the consumer.
We are, though - to answer your third question, is we are deploying ourselves well to take - to
leverage the growing value for money and value play on the back of our success with Senator
Keg in East Africa and in Ghana we just launched a brand called Ruut, which plays in that
space, and into Nigeria, we've just introduced a brand called Dubic and it's performing very
strongly and that's going to play in that value space.
Of course, we will also - getting some good response with our RTDs which are very margin
accretive and we'd like to balance out the mix through a combination of value for money,
beer, Guinness and RTDs across Africa and Nigeria in particular. Thank you.
At the very, very back there?
From the floor
When we talk about local brands, how they are giving you scale in emerging markets, in the
case of Africa, can we be specific about what percentage of your volumes in Africa come
from Guinness and what from local brands? If I wanted to strip out, say Guinness, I want to
strip out Nigeria, how relevant is Guinness to the rest of your business? My assumption from
outside is that it's really the local brands, the ones that are giving you scale for your liqueur
business in Africa, not necessarily Guinness but correct me if I'm wrong, please.
John O'Keeffe
Yes, I didn't quite hear. Was that about...
Unidentified Company Representative
It's about how much of your business in Africa is driven by Guinness.

John O'Keeffe
Yes, Andy do you want to take that?
Andy Fennell
Yes, hi. So beer is 60% of the business and Guinness is 50% of beer. That's in Africa.
From the floor
But if we strip out Nigeria?
Andy Fennell
Nigeria is slightly more skewed to beer so spirits are less than 10% currently and Guinness is
about 60% of the beer business.
John O'Keeffe
Nigeria is about 20% of our global Guinness business. Okay, just last question or two.
Is that someone at the back, no? Hand has gone down. Okay, let me draw to a close there.
I'm now going to hand over to Nick Blazquez to take us through the other must do of route to
consumer. Thank you very much.