Back on the rise
It’s been an encouraging year for drinks giant, Diageo and while there may well be uncertainty ahead, Jorge Lopes is keeping a customary cool head…
Now valued at more than $60bn, Diageo is the largest drinks company in the world by some way.
Preliminary results for the year ending June 2016 reflect a volume growth of 1.3 per cent, net sales growth of 2.8 per cent and a growth of 3.5 per cent in operating profit.
The company’s chief executive, Ivan Menezes said recently that Diageo’s improving performance reflected the additional work that had been done in marketing and innovation and the ongoing expansion of distribution networks:
“Our six global brands and our US spirits business are all back in growth and we have seen a significant improvement in the performance of our scotch and beer portfolios,” he added. “The delivery of volume growth; organic margin expansion; increased free cash flow and the disposal of £1bn in non-core assets comes from an everyday focus on efficiency in each aspect of our business. We have also made significant progress this year in our aim to improve the role of alcohol in society, partner with our communities and reduce our environmental impact.”
Analysts now say that the potential for long-term capital and dividend growth at Diageo is excellent – if you have shares in this company, you should probably hold onto them.
It’s a good place to be for Jorge Lopes, Diageo’s Brazilian-born country director in Northern Ireland. The drinks giant’s operations in Ireland have always been insulated to an extent from the most pronounced peaks and troughs of the global markets. That said, when Jorge arrived here late in 2013, he faced a market still dealing with the aftershocks of severe recession and a poorer-than-expected performance in domestic beer sales.
What was noticeable then, however, was his level-headed approach. When Jorge spoke to LCN in late 2013, he didn’t deny the difficulties that the brand was facing, but emphasised its strong performance locally throughout December of that year and spoke enthusiastically about his plans for a new approach to business development in Northern Ireland.
Jorge spoke with LCN again in December 2016 when he indicated that the position locally has been steadily improving, particularly over the last year or so:
“The summer was brilliant for us,” he reported. “We had the Euros in France, sponsored by Carlsberg and with Northern Ireland doing so well, it created a lot of excitement on the back of an amazing execution of the campaign.
“Also memorable was the 2016 Guinness series [rugby], particularly the first match when Ireland beat New Zealand in Chicago for the first time ever. The excitement around that was incredible and it really helped to drive the success of the series for us,” says Jorge.
Here in Northern Ireland, Diageo employs more than 300 people and operates from three sites – its Baileys manufacturing facility at Mallusk, which accounts for around 80 per cent of the of the worldwide demand for the liqueur; its canning and packaging plant at Marshall’s Road in Belfast and its corporate headquarters at Capital House in Belfast city centre.
Sales and administrative staff moved to the new HQ from their long-standing base at Boucher Road in 2014, signalling in a very tangible way an intention to streamline and modernise the way in which the brand conducted its business locally:
“This is a modern, 21st century facility and so all the ways in which we used to do business have now changed,” says Jorge. “Boucher Road was full of small rooms, you never saw people, now the whole team works together and that makes us think about things differently and much more in line with where this company needs to be. It fits our ambition and that can only be good.”
Diageo’s performance in the burgeoning craft space was “phenomenal” in 2016, says Jorge. Diageo’s flagship artisan beer, Hop House 13 was launched in bottles – primarily for the take-home trade – in February, and the Open Gate Brewery launched a new platform for its craft produce in Belfast – there are now 55 rotating pumps in the city dispensing a constantly changing variety of artisan beers from the innovative Dublin-based producer.
“The Open Gate project does exactly what it says on the tin,” comments Jorge. “It exists to demonstrate what our enthusiastic brewers are capable of. We didn’t just go out and hire these people because they were young or they had beards, they’ve been with us all along and they love what they do. What we did with Open Gate was create a platform for them to showcase their skills.”
Diageo’s Bar Academy offered its training facilities to around 80 local venues in 2016. More than 400 local hospitality staff were coached in everything from pouring the perfect pint to dealing with small emergencies. And Diageo moved ahead with its programme of customer engagement creating a number of “money can’t buy” events to engage customers and consumers.”
There is no denying, however, that a series of events both locally and on the wider stage in 2016 have impacted on Diageo’s markets and will continue to do so going forward.
Uncertainty over the outcome of the Brexit negotiations; political instability here at home and the plight of the weakened pound are all factors that play into the delicate planning process for the drinks giant.
Jorge concedes that a weaken pound has brought more visitors into the province, translating into higher consumption figures, but the future is “a mixed bag”, he argues:
“In the medium to long term, everyone in business is reviewing their forecasts, they’re cautious about predicting what is going to happen.
“In terms of Brexit, this is the most impacted region of the UK, so obviously, we are going to be cautious about forecasting too,” he adds.
“Survival of the fittest is not about strength, it’s about adaptability and so that’s the name of the game and we train our people to be adaptable and flexible in the face of change… I am not someone who worries, I feel excited about the potential we have here and I see lots of opportunity around growing the business and our people and we want to contribute even more to the community here.”
Going forward, Jorge says that as ever, innovation will play a central role in Diageo’s strategy for 2017, particularly in its beer portfolio.
A major event is planned around the Smithwick’s brand for March at a still-to-be-determined large venue in Belfast. It’s an extension of last year’s re-launch for the brand and it will be a celebration of craft beer and ale.
In terms of trends, Jorge predicts that premium whiskey brands will continue in the ascendancy going forward and that quality tequila with a definite provenance will also become more popular.
“As for business, I think the objective has to be sensible growth,” he adds. “It’s all about engaging with customers, developing products and working towards growth. It’s not easy, of course, but I’m confident that we’ll enjoy another great year in 2017.”
Our picture at the top shows Jorge Lopes with chief constable, George Hamilton in RADAR’s boardroom. In 2016, Diageo NI announced a strategic partnership with RADAR, Northern Ireland’s first fully-interactive, safety and life skills education centre.
