Last week, the brewer announced two multi-million investments to promote ‘scaleable’ barley and sorghum farming ventures in Ethiopia and Tanzania respectively, providing a "long-term, secure and sustainable" raw material source insulated from volatile global commodity markets.
The drinks giant now sources around 50% of raw materials locally in Africa, but said it aims to increase this to 70% in the medium term, an increase of 30% from a 2007 baseline of 40%.
Projects in Sebeta (Ethiopia) and Mogoro (Tanzania) are worth $1.5m (€1.17m) and $2m respectively, and will begin this year to support development of agricultural communities across Africa.
Guinness Foreign Extra Stout
Diageo is seeking to scale-up sorghum sourcing cultivation and sourcing in Tanzania to 20,000 metric tonnes (MT) per year by 2015 for local use and export, via collaboration with the country’s government.
This project aims to build a sustainable sorghum value chain, with smallholders linked to larger ‘nucleus’ farms, and to develop and share both sorghum cultivation and post-harvest practices. A similar project aims to increase Ethiopian barley yields from 1,000 MT to 20,000 MT.
James Crampton, Diageo spokesman, told BeverageDaily.com: "We currently already source sorghum in Tanzania from smallholder farmers around our breweries (we have three in the country) but we want to ramp levels up."
"Sorghum and barley beers are traditional to these parts - the key is to move sorghum brewing to a commercial status, since it requires different technical capabilities versus malted barley, and you need a decent local source."
He added: "We don't create a sorghum beer specifically - but we use it in the brewing process in East and West African beers. Certainly, in West Africa there's an obligation to source within markets, take the likes of Guinness in Nigeria brewed partially with sorghum.
"Guinness Foreign Extra Stout [pictured] and Guinness Original are specifically designed for the African palate. In places like Nigeria where we opened up a brewery in the 1960s, it's definitely regarded as an African beer rather than a beer with Irish origins. It's a little stronger and has a different carbonation."
Asked about UK sales of Guinness Foreign Extra Stout (brewed in Lagos, Nigeria), and whether Diageo saw further promise for the beer abroad, Crampton said: "We're delighted that we're beginning to sell it in places where there are African communities, outside of Africa - whether in London or the US. I doubt there will be a wholesale push towards this, but where there is demand we will facilitate supply."
Impressive African growth
Crampton noted three fundamental African growth drivers fuelling Diageo sales: population expansion, seven of the ten fastest growing economies in the world (for instance, Ethiopia, Ghana, Angola) and urbanisation and 'premiumisation', bringing a resultant desire for Diageo's international brands.
"Over our past five years, we've had a compound annual growth rate (CAGE) of around 15% in terms of [African] sales, and we expect that to continue going forward," he said.
Diageo announced both farming investments at last week’s Symposium on Global Agriculture and Food Security hosted by the Chicago Council on Global Affairs (in collaboration with the World Economic Forum).
The symposium brought together US President Barack Obama with G8 and African leaders to discuss initiatives to advance food and nutrition security in Africa.
Diageo CEO, Paul Walsh, said: "As our business grows we will have to look at more areas where we can source locally - but these projects are pilots that depend on investment and collaboration with governments and partners. We're hopeful, but we're hoping that we can scale-up these models to use further afield in Africa."