New Diageo CEO to set sail for emerging markets

LONDON - Reuters

The world’s largest distiller and owner of Turkey’s leading rakı firm Mey İçki Diageo’s new chief executive is expected to steer the focus of company to emerging markets points to where it sees its future.

Diageo named Ivan Menezes as chief executive on May 7 replacing Paul Walsh, who is stepping down after 13 years, the maker of Johnnie Walker whisky said in an announcement that surprised few investors, even if the timing of Walsh’s exit had not been certain.

The British brewing giant, which produces Johnnie Walker whisky and Smirnoff vodka, was boosted by the purchases of Turkish spirits group Mey İçki and Ethiopian brewer Meta Abo.

The value of Diageo has tripled under Walsh and grew by around 30 percent over the last year alone, as the world’s biggest spirits group has sucked up acquisitions in markets such as Brazil, India and Turkey.

But its shares barely reacted to his departure; those close to the firm, which also sells Tanqueray gin, Guinness beer and Smirnoff vodka, said much of the move to emerging markets that is welcomed by investors has been driven by Menezes and others, including American chief financial officer Deirdre Mahlan.

“Paul was burned in the emerging markets crisis in the late 1990s so he was very anti those markets,” said a British equities manager with Diageo shares in his portfolio.

“He didn’t see the point in buying local spirits businesses - even though they offered perfect distribution platforms for his branded products. He changed his mind latterly, but he never quite grasped that fast enough.”

Faced with sluggish demand in recession-hit Europe, Diageo - like many of its consumer goods peers - has been expanding in emerging markets, where it aims to make around half of its turnover by 2015, compared to a current 42 percent.