Diageo hoping Ivan will be great

Ivan Menezes. Picture:  Tim Bishop/Diageo via Bloomberg
Ivan Menezes. Picture: Tim Bishop/Diageo via Bloomberg

Incoming Diageo CEO Ivan Menezes, the latest Indian-born businessman to head a global multinational, is likely to continue the strategy of his predecessor by focusing on growth in emerging markets, writes John Daly

Ivan Menezes was named this week as the next chief executive of Diageo — the world’s biggest producer of alcoholic drinks and maker of iconic Irish brands Guinness, Bailey and Bushmills and global brands Johnnie Walker and Smirnoff.

Mr Menezes, 54, the current chief operating officer, will replace Paul Walsh as the chief executive on Jul 1.

He began his career with Nestle, India, in 1981, and went on to work across a variety of sales, marketing and strategy roles with the company in Asia. He also held positions with Booz-Allen & Hamilton in North America and Whirlpool in Europe.

He holds a number of non-executive positions, as well as roles in the British government’s departments of business and energy. He is also a non-executive director of Coach, a luxury goods company based in the US.

Mr Menezes played a key role in Diageo’s taking a $2.1bn (€1.6bn) stake in United Spirits. The deal, announced in November, will see Diageo take a majority shareholding along with management control resulting in greater access to the fast-growing Indian whiskey market.

To date, he has little exposure to the group’s Irish operations.

Noted for his breath of vision in mergers and acquisitions to enlarge the company’s global brands, Mr Menezes’ tenure as chief operating officer saw him involved in the buying of Brazilian brand, Ypioca, as well as a Chinese spirit manufacturer.

Likely to adopt a continuation of the existing strategy toward focusing on emerging markets, he said he had been “extremely fortunate to be at Paul’s side for the last 13 years and been very much alongside him shaping the company. Our strategy is clear, and it’s not complicated,” he added.

Since his tenure as chief executive in 2000, Mr Walsh has been responsible for selling off Diageo’s stakes in Burger King and Pilsbury to concentrate on the core business of alcohol. He spent $10bn on the takeover of Seagrams in 2001, and, more recently, Turkey’s Mey Icki raki brand in 2011.

Mr Walsh paid tribute to Mr Menezes, saying: “The pivotal role which Ivan has played in building the business demonstrates that he is the right person to lead Diageo on the next stage of its journey.”

Diageo’s shares have more than doubled under Walsh’s reign, and have risen 10% over the last year, trading at 17.5 times expected earnings. With further expansion into China, Africa and Latin America, the company will likely see 50% of sales coming from emerging markets by 2016.

Mr Menezes has been the chief operating officer of Diageo since Mar 2012, a role overseeing the commercial operations of Diageo globally. He also sits on the executive committee and the board of directors of the company. Prior to that, he was president and chief executive of Diageo North America for eight years.

Having joined Diageo in 1997, he held various senior management positions with Guinness and then Diageo until 2004 when he was appointed president of Diageo Venture Markets Venture — a division with direct responsibility for 123 countries, representing nearly 70% of the world’s population.

Mr Menezes was heading Guinness United Distillers and Vintners’ business as its managing director when the latter merged with Grand Metropolitan to create Diageo in 1997. He holds a BA degree in Economics from St Stephen’s College, Delhi and a PG Diploma from the Indian Institute of Management. He holds an MBA degree from Northwestern University Kellogg School of Management.

He joins a growing list of Indian-born CEOs of global companies like Indra Nooyi of PepsiCo, Ajay Banga of Mastercard and Rakesh Kapoor of Reckitt Benckiser.

Mr Menezes’ presence at the helm of Diageo will help to underline the global credentials of the London-listed firm.

“We are delighted to have a leader of Ivan’s talents and global experience to succeed Paul,” said Diageo chairman Franz Humer.

“The handover is being made at a time when the business is strong and Ivan takes on the role of CEO at an exciting stage of the company’s global development.”

Diageo’s brands include Crown Royal, J&B, Buchanan’s, Windsor, Bushmills, Ciroc and Ketel One vodkas, as well as Baileys, Captain Morgan, Jose Cuervo, Tanqueray and Guinness. Up to 40% of Diageo’s business is in emerging markets.

In its interim statement for the nine months ended Mar 31, Diageo delivered 5% organic net sales growth with volume up 1%. Despite consumer weakness in Korea, Nigeria and Brazil, Diageo’s performance for the nine months was in line with expectations with a strong performance from its biggest business, US spirits.

This was bolstered by the continued growth of spirits in Africa; share gains across Asia Pacific markets and the double-digit growth of Johnnie Walker, Crown Royal, Buchanan’s, and Tanqueray. At Mar 31, net assets were €9,085m, and net borrowings were €9,987m.

Diageo said Europe, Britain and Ireland continued to be challenging, with continued tough trading conditions evident.

In Ireland, Guinness maintains its 32% market share, with the spirits division holding its 36% share. Bushmills continues to perform strongly with net sales up 28% year-on-year. In a statement, the firm said: “Despite tough market conditions we remain committed to the Irish market and we are investing in supporting pubs and building our brands, including the sponsorship of over 40 Irish sports, music and cultural events.”

In the latest Impact Databank Top 100 Premium Spirit Brands rankings, Diageo brands accounted for more than 13% of the top 100 by volume and almost 25% of the total retail value generated by all brands in the top 100.

For the sixth consecutive year, Smirnoff and Johnnie Walker topped the rankings — the latter accounting for more 7% of the top 100’s aggregate value, growing by almost 11% and nearing an estimated value of $6bn. Smirnoff grew volume to an estimated 26.3m nine-litre cases and also ranked the number two brand by value for the sixth consecutive year.

GETTING TO KNOW: Ivan Menezes

- Born: India, 1952

- Education: BA degree in economics from St Stephen’s College,Delhi; PG Diploma from the Indian Institute of Management, Ahmedabad. He is the holder of an MBA degree from the Northwestern University Kellogg School of Management.

- Career: Started with Nestle, India, followed by positions with Booz-Allen& Hamilton Inc in the US and Whirlpool Europe. Chief operating officer ofDiageo since Mar 2012. Was president and CEO of Diageo North America for eight years, as well as chairman, Asia Pacific, Latin America & the Caribbean.

- Family: Married with two children.

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