A whole new world to imbibe

Looking after one-quarter of Diageo’s worldwide business is a “dream job” for John O’Keeffe – and it is in far-flung corners that he sees the future of the global drinks giant

FROM AN office at the St James’s Gate brewery in Dublin, Corkman John O’Keeffe holds a key job with global drinks giant Diageo. As global category director for beer and Baileys at Diageo, he is responsible for a business that generates about £2.7 billion a year – roughly 25 per cent of Diageo’s total business.

Together, exports of Guinness and Baileys are worth about €1 billion a year to Ireland. The Guinness Storehouse, with its one-million- plus million visitors a year, also comes under his remit.

“It’s a dream job,” he says, with a mild Cork accent. The rebel twang has softened from the 13 years of globetrotting with Diageo that has taken him from Jamaica to Sweden to Greece and then Russia before returning home to take up this post last August.

“My responsibility is to have governance around that business in terms of global strategy, where to participate, global advertising, positioning, innovation, pricing. We would set those parameters for the various markets.”

He reports to the chief marketing officer in London.

With alcohol sales in established European markets, including Ireland, seemingly in terminal decline, O’Keeffe’s focus is very much on emerging markets – that is Asia, Africa, Latin America and parts of eastern Europe.

Recent half-year results show that Diageo grew its top-line by 7 per cent. Revenues in emerging markets grew by 18 per cent while profits were 23 per cent higher.

“The emerging-market element of the business is now [at] 40 per cent as a group,” he explains.

“A couple of years ago, it was 20 [per cent] and our intent is to get that to 50 per cent by full year 2015.”

Guinness is a good example of the trading trends being experienced by Diageo. In Ireland, its biggest market for the stout, Diageo is working hard just to stand still. In Africa and Asia, it can barely keep up with demand. Nigeria and Cameroon are now two of its five biggest markets.

Overall, Guinness grew by 5 per cent in the first six months of Diageo’s financial year. In Asia, the growth was 16 per cent; in Africa 10 per cent. Revenues in Ireland fell by 3 per cent.

“I think Europe will continue to be quite a tough place for us, hence the importance of getting our brands right in the emerging markets,” O’Keeffe admits. “There’s a two-speed world [in beers], with emerging markets growing double digit.”

There’s better news in the US. After three years of flat sales for Guinness, that market grew by 11 per cent in the first half of its financial year. “There’s a real trend towards craft beers in the US,” O’Keeffe explains. “That really plays into Guinness because it is, I would argue, the ultimate craft beer.”

Really? Isn’t a craft beer something small and distinctive, carefully nurtured in some neighbourhood and given lots of care and attention by its owner, who is usually an anorak about beers? After 203 years on the go, and with some of the biggest breweries in the world, does Guinness match that criteria?

“People use it [the ‘craft’ term] as shorthand for beers with substantial flavour,” he says, by way of explanation.

SITTING ON A leather couch in Arthur’s Bar on the fifth floor of the Storehouse, O’Keeffe goes on to explain Guinness’s long history of innovation and how its latest extension of the famous stout brand – Guinness black lager – is proving a hit in the US.

“We’ll be looking to sell maybe two million cases of black lager in the States this year,” he says. “Our view is that people are a little fatigued of lager and so producing a lager with substantial flavour is potentially very successfully. We’ll see, it was only launched in October.”

Irish audiences have always been a tougher crowd to win over. Many Guinness drinkers here tend to snort with derision at extensions of the brand, such as Ice Cold and mid- strength. The Brewhouse series of recent years got a mixed reaction.

O’Keeffe concedes it has had some “high- profile” flops in the past, but says it is an acceptable price of innovation. Merely standing still isn’t an option for the brand.

So when will black lager be available in Ireland? “We did a test in Northern Ireland but we are looking to roll it out in the next 12 months,” he says, somewhat hesitantly. “We’ll be putting it into the off trade primarily. It’s going after lager drinkers that want a little bit more. One of the things we’ve learned about Guinness is that taking stuff out doesn’t work. Adding stuff in seems to.

“We will always have Guinness as you know it here, but there are a lot of people who wear the Guinness T-shirt but don’t actually drink the brand.”

He argues that mid-strength – with its 2.8 per cent alcohol level – plays to the “new emerging life of today” where people “want to enjoy a few pints [midweek] but don’t want to feel it the following day”.

“It’s a slow burn for us, but one that will ultimately have staying power,” he predicts.

This week is a biggie for Guinness with tomorrow’s St Patrick’s Day celebrations around the world providing a significant lift to sales. St Patrick’s Day accounts for about 15 per cent of Guinness sales in the US, putting it second only to Christmas.

“It’s very big in the States particularly,” he says. “It’s a significant sales peak compared to the rest of the year.”

With it being on a Saturday night, sales in Ireland and Britain probably won’t get the same lift. “We’d have a natural selling day on a Saturday anyway.”

Looking to the longer term, O’Keeffe is excited about Diageo’s decision to invest

€153 million on new brewing facilities at St James’s Gate. This will result in the closure of the Kilkenny and Dundalk breweries but will secure the future of the famous old Dublin brewery, he adds.

“Seventy per cent of the one billion pints we brew here are exported. The reality is that to remain competitive with the big players, we need to consolidate our brewing footprint and become more cost-competitive.

“While the downside is unfortunately having to close Kilkenny and Dundalk, the upside is that it’s a big investment for Dublin and Ireland to secure going forward, and will make us able to compete with the big players like ABI and SAB Miller.”

Originally, Diageo had planned to build a new superbrewery in Kildare but recession hit. Is that plan now dead?

“Pretty much every assumption we made was wrong and the world changed in 2008. We just had to adapt accordingly. We still have a lease there [Kildare], but I can’t see it happening in the foreseeable future.”

Baileys is another Diageo brand that is finding the going tougher in the recession. It’s certainly an important drink to the Irish dairy industry.

“We use 50 millions gallons of Irish milk a year. Ten per cent of all cream produced here goes into Baileys. It’s very important to the Irish economy.”

Baileys might be the best-selling cream liqueur worldwide but that hasn’t made it immune to the global economic downturn of the past four years.

“In terms of its performance, it was probably hit hardest of our premium brands in the downturn, because it was seen as an indulgent brand,” O’Keeffe says. “As consumers tightened their belts, Baileys suffered more than some of our other brands.”

O’Keeffe said the decline of recent years has been arrested and his plan now is to push Baileys aggressively into emerging markets, where sales have been modest. He wants to get it back into double-digit annual growth territory.

“I’m just back from China, where Baileys is growing by 50 per cent. We’re focusing on Shanghai, getting to quite a nice size. We’re also quite big in Mexico, where we sell a couple of hundred thousand cases, and it’s beginning to go nicely in Africa.

“We grew by 10 per cent there in the past six months. Nigeria and west Africa are places where Baileys is firmly on the strategic radar.”

O’Keeffe also has responsibility for the Storehouse visitor centre, which hit the headlines last May when it played host to Queen Elizabeth and Prince Philip, who was captured by photographers standing over a pint of Guinness at the bar and looking as if he might take a big swig out it.

The Storehouse is buzzing in the recession. Visitor numbers rose by 10 per cent to 1.02 million last year and Diageo has set aside €10 million to upgrade the facilities over the next few years. “One of every two tourists coming to Dublin comes here at the moment,” O’Keeffe says proudly. “Obviously, we’d like to make that two out of two. There’s room to grow.”

The upgrade will start with a €2.5-million refurbishment of the fourth floor, where it is putting in place a Guinness “academy”.

“What’s been a great success here has been the ‘pour your own pint’. Consumers want to get closer to the product, so we’re going to expand that. We also going to put in a digital wall, to make it a social-media attraction ready to be open for the peak season in the summer.”

O’KEEFFE HAILS FROM Bishopstown in Cork and, despite the local tradition for Murphys and Beamish stout, he joined Guinness’s graduate programme in 1994.

“I think a few Guinness people thought I was a spy initially when I came up here with my Cork accent,” he jokes.

After a small pause, he adds: “Guinness is iconic. Murphy and Beamish have a lot of local patronage.”

Miaow.

When asked about his own favourite tipple in the Diageo portfolio, O’Keeffe is suitably diplomatic. “Guinness is where my heart is. Depending on the occasion, Johnny Walker Black Label would be my choice.”

He also “loves the taste of Baileys”.

After five years of getting his hands dirty in various parts of the Diageo operation here, O’Keeffe headed to Jamaica to work as marketing director on its Red Stripe lager.

The Irishman had an “interesting” introduction to the country. “I got caught in rioting two days into being there,” he recalls. “The government had increased the price of petrol and there were riots taking place in the city. They forget to inform the new guy, which was me, stuck down in an office in the corner. They all vacated the brewery so that when I came out for lunch, it was deathly quiet.”

O’Keeffe eventually twigged what was going on and took flight by car. “I took a long route home, had to negotiate three or four barriers and guys with machetes and machine guns. It was a tough start but I enjoyed it thereafter.”

After 18 months in the Caribbean, O’Keeffe headed for Sweden in search of general management experience. He spent almost four years there before moving to Greece as marketing director for Johnnie Walker, a huge seller in the Mediterranean country.

In mid-2007, Moscow beckoned, where he ran Diageo’s fledgling Russia business. He also had oversight for a group of markets in eastern Europe, stretching from Iceland to Israel. “I grabbed that opportunity with two hands,” he says. “It was a chance to build a business from scratch. We started with 30 people and ended up with 500 [by the time he left in 2011].”

With a population of 140 million and incomes rising, Russia holds massive potential for Diageo – except for the fact that vodka dominates about 90 per cent of the alcohol market there.

“They are trading up and the biggest category they are trading up into is whiskey. We would have a 40 to 45 per cent share of that category. We’re well positioned to take a slice of that big vodka market. That’s why we’re very excited about Russia. It’s hard yards there in terms of building a business, but the prize is well worth it.”

O’Keeffe enjoyed life in Russia but found the language difficult to master.

“I speak French fluently but I found Russian impossible,” he says. “My excuse is that Russians aren’t used to foreigners speaking it with an accent. You have to speak it perfectly. I found the return on effort very, very poor but I had enough Russian to get around. You need to be able to say a few words and do the alphabet.”

O’Keeffe had spent 13 years away from home. His three children were born in different countries and last year he felt the time was right to come home. “As it happened, Diageo merged the global beer business and the global Baileys business together, which was great because it was my ticket home.”

Before we break up, I ask him the age-old question as to why Guinness seems to taste better in Ireland than abroad?

He argues that it might be due to the fact that its fresher, having been brewed here, but that, in reality, it’s probably mostly psychological.

“I don’t know about you, but red wine tastes better in Paris for me than it does in Ireland.”

Touché.

FRIDAY INTERVIEW:

Name:John O'Keeffe.

Job:Global category director for beer and Baileys at Diageo.

Age:40.

Family:Married with three children.

Lives:Greystones, Co Wicklow.

Hobbies:"GAA is close to my heart."

Something you might expect:"I'm an avid Cork GAA fan and Munster supporter."

Something that might surprise:"Russia would be my preferred place to live. Moscow has an energy to it that I haven't experienced in any other city."