Bloomberg reported on Dec. 17 that the spirits supplier Diageo sold off its 65% majority stake in East African Breweries Ltd. The company sold it to another giant within the beverage world: Japan’s Asahi Group Holdings Limited.
The sum? A hefty $2.3 billion.
“We are incredibly proud of the achievements of EABL and our colleagues across Kenya, Uganda, and Tanzania. EABL and Diageo have built the largest beer business in East Africa, a testament to driven people with a passion for the consumers and the communities they serve,” said Diageo Interim Chief Executive Officer Nik Jhangiani in a statement. “We are excited to partner with Asahi through the licensing of Diageo brands in the region going forward.”
As part of long-term licensing agreements, EABL can keep making, distributing and selling multiple Diageo brands like Guinness, Smirnoff, and Captain Morgan.
“This transaction delivers both significant value for Diageo shareholders and accelerates our commitment to strengthen our balance sheet,” said Jhangiani in a statement. “We remain committed to returning the group to well within our target leverage ratio range of 2.5 to 3.0 times [its earnings] through disposals of non-strategic, non-core assets, alongside delivering positive operating leverage and tighter capital discipline. This disposal, alongside the recent announcement by USL [United Spirits Limited] to conduct a strategic review of its ownership of RCB [Royal Challengers Bengaluru cricket team], represent material steps in delivering on this commitment.”
Diageo has faced a challenging year, like many companies within the spirits industry. The supplier chose to sell off that portion of the portfolio as part of a long-term strategy focusing on streamlining to face the current headwinds the company faces.
In November, Diageo shut down production at Roseisle Maltings, and the company shared it would resume operations at the facilities next summer. Six staff members were working at the facility, and they were moved over to other facilities within Diageo’s robust scotch portfolio, which includes other brands like Lagavulin, Port Ellen, and Brora.
Diageo faced $150 million in losses due to the tariffs imposed by the Trump administration, which clocked in at 10% in May. The loss served as a flashpoint in the spirits supplier cutting some “significant assets” within its portfolio to try to turn things around. Additional cuts to advertising and its supply chain were also in the cards, and Jhangiani shared that the goal was for Diageo to get an additional $3 billion per year.
“It’s clearly going to be above and beyond the usual smaller brand disposals you’ve seen over the last three years,” Jhangiani said in a statement.
Yet, interestingly enough, Diageo appears to still be pumping money into some brands. In September, an expansion plan for Diageo’s scotch whisky brand, Talisker, aimed to demolish the brand’s current facilities and build them up to twice their original size. The new distillery will occupy 3,100 square meters and is set to double production. The project should be finished by 2026.
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