The world’s largest liquor company, Diageo PLC, has its eyes set on Africa as it drives smaller native companies out with cheap spirits and easy access. But, what does this mean for the future of Africa? Could these new liquor companies hungry to capitalize on the market bring more jobs or are they crippling societies just getting on their feet?
The Wall Street Journal spoke with Leonard Odhiambo who has run a homemade liquor distillery for 20 years in the slums of sub-Saharan Africa. Despite years of success, now that Diageo has set up shop just a few doors down with cheap drinks Odhiambo’s business is suffering. Diageo has set up shop in shacks across Kenya to compete with one-man merchants such as Odhiambo where a whiskey can go for just 20 cents. The London-based spirits company has invested more than $1 billion in Africa in the past five years and controls almost 25 percent of legal-spirit sales.
International liquor companies are expanding across Africa as markets close up in other territories yielding less sales. The London-based Diageo saw sales drop in America, but with highly discounted drinks in Africa profits rose by 6 percent. While wealthy African communities can afford more expensive liquor, Diageo and other companies have targeted many of the poorest communities and dominate lower markets.
But Diago isn’t the only liquor company hoping to gain new sales in Africa, beer companies and other hard liquor brands are all vying for a piece of the pie.
SABMiller PLC, the No.2 brewer in the world by sales, began selling in Tanzania last year and already holds a 30 percent stake in the South-African based Distell Group Ltd., the No.2 African distiller.
Liquor companies are battling for their share of the market with Nairobi, Kenya, being a hotspot for many brands. Walking down the streets of Nairobi one would run into multiple billboards with brands from Diageo to SABMiller hoping to appease consumers and to get into new bars opening every year.
The battle for new consumers and profits in Kenya, will likely happen across the entire continent as liquor brands eye out lower markets.
“Africa is Asia in 15 years,” said Alexandre Ricard, Pernod Ricard’s chief executive. “That’s how important it can become for us.” Pernod is another liquor company expanding in Africa.
But health administration in Africa says the rapid increase of liquor brands spreading across the country presents a serious problem. While almost half of African men abstain from alcohol, many who do drink have the highest cases of “heavy episodic drinking” than any other region in the world reported the World Health Organization.
“In our society, drinking is a big problem,” said William Ntakuka, a program officer for SCAD, a Kenya-based nonprofit organization that campaigns against alcohol and drug abuse. “It’s bad, and it’s getting worse.”
The spirit companies argue that they all manage responsible-drinking initiatives and publicize the fact their alcohol should be consumed in moderation. But is that enough?