What has Lebanon and the MENA region contributed to Diageo's global growth in 2017?
Globally Diageo increased its net sales by 1.7% in its December 2017 results, but Lebanon exceeded this by growing its net sales 6%. What is important for us here is not so much growing our sales to market, but growing our in-market depletion and brand performance. In Lebanon, Lebanon is a scotch market and we are the leaders in market share when it comes to scotch, which is the biggest spirit category and second only to beer, and we grew our share from 63 to 64%, which is huge from an industry perspective. In addition, our market share for vodka is around 8%. Our only beer product is Corona and it is the fastest-growing beer brand in the country, even though the market share for imported beer has not been as high as for local beers to date.
Do you see growth for all of your segments throughout in 2018?
Yes. The total whiskey market dropped by 1% in 2017 compared to 2016, but Diageo 's whiskey business grew by 6%. The vodka market in Lebanon grew by 1%, versus 10% for Diageo's. That's a clear confirmation we are outperforming the market. For both Arak and Champagne experienced respective drop of 9% and 18% . Main drivers for such a decline are visitors choosing to buy cheaper alternatives instead of champagne. Lebanon's consumption for champagne used to be much higher and this was mainly due to the type of tourists and visitors coming on and off season. We have lost a lot of these visitors. Nevertheless, sparkling wine grew by 18%, rum grew by 6%, tequila grew by 17%, and gin, from a low base, grew by 35%.
What steps should the government take in order to improve the hospitality sector's performance?
What we need from the government is stability and good educated approach to legislation and reforms, through this we feel our industry is supported. Approximately six months ago, the government was trying to introduce a new excise duty as high as 35%, and this would have really caused serious damages to the industry. Sudden changes to legislations and tax models can have drastic impact on the economy, industry performance and system if the industry expertise is not brought to the table. By expertise I meant best practices and capabilities built throughout wide global networks and markets. As an industry we stand as key contributors to tourism and the economy, and the way we showcase Lebanon to visitors matters. Tourists come here for food, drinks, and nightlife. But we need them to feel safe. On a more professional dimension we need a much closer focus from the government on designing strategies and solutions to stop parallel imports and counterfeiting (illicit). Both issues have grown so much to promote unfair competition, pricing confusion and put extreme pressures on brand owners and on our intellectual property protection agenda. In many cases we design market specific solutions that cost lot of money to differentiate our own products: for example a strip or ribbon on most of our core brands. We collaborate very closely with the authorities to stop parallel trading because we want stability and a level playing field in the pricing of alcohol. We also want to bring trust back to our industry system and be seen as key contributors to the economy. Lebanon is unique amongst its neighboring Middle Eastern markets being the only country where alcohol advertising and branding are permitted. This create huge room to innovate and boldly execute activations and build brands and markets to ladder up the whole industry. What we create and innovate here gets replicated in other places like Dubai and we want the authorities to be aware of and support this. We work closely with the Ministry of Tourism and the Ministry of Economy and Trade and we want the legislation to be favorable to our industry and operating environment, instead of suggesting adverse reforms and tax changes that are not based on proper econometrics and data and this is part of our role as a business partner. Lebanon's tourism doesn't include arts and museums and lots of sightseeing but more of food, nightlife, partying, beach and skiing. Providing good service, ambiance, music, and serving good beverage alcohol products are essential parts of this package. Lebanon will not be tourists' preferred destination without those components while the hospitality sector remains a main driver for tourism and the economy.
What are Diageo's specific business objectives in Lebanon for 2018?
We want to keep on recruiting and retaining good talent in Lebanon and then coach, build, and grow them. We offer an early-career program for fresh graduates to join the company and move up the career ladder and become managers within few years and potentially join a Diageo office in the global network. Diageo Lebanon/MENA region has become a talent hub and this is why we have based our MENA office in Lebanon. We want to grow talent here and have them work in Europe, America, and all over the world. We believe in local talents and capabilities and our youths are smart, energetic, passionate, and self-driven. Another objective is to keep growing our brands. We are one of the few companies in our industry that produces our brands TV commercials from scratch locally. This is a big investment and it creates a lot of jobs. Our Lebanese ad won at Cannes five years ago, and this has led Diageo to replicate what we do here in other places. We think globally but act locally in Lebanon. It is key to our success to keep talking to the Lebanese community locally. We are proud to have been present in Lebanon for the last 20 years, and we want to keep growing this partnership with the country. Our third and most important objective for 2018 stems out of Diageo's purpose and existence and is to promote responsible drinking and position alcohol as part of a balanced lifestyle in Lebanon. We want alcohol to be a positive tool for celebrating, not a harm to the community and we want people to drink better not more.