unsplash pint of guinness

Guinness Nigeria contributed about $154m of consolidated revenue to Diageo in the FY23 and $16m of EBIT

Diageo has sold a controlling stake in its Nigerian Guinness operation to its distributor in the country in a deal worth about $70m (£55m).

The drinks group said it was creating a new model for Guinness in Nigeria and its locally manufactured ready-to-drink and mainstream spirits products in the country. It has partnered with Tolaram, the specialist manufacturing, marketing and distribution conglomerate, under a new, long-term license and royalty agreement.

Tolaram will acquire Diageo’s 58% shareholding in Guinness Nigeria plc, which produces and distributes Guinness in the African country and is listed on the Nigerian Stock Exchange, for a share price of 81.60 Nigerian naira per share. The price represents a 63% premium to the stock value over the past month.

Diageo added that it remained “deeply committed” to Nigeria and would retain ownership of the Guinness brand, which would be licensed to Guinness Nigeria for the long-term, enabling “continued growth and development” in the country.

Diageo will also remain in the country through its wholly owned international premium spirits business, built to serve a wider geographic reach across west Africa, with Nigeria as one of the main operational hubs.

As well as the Guinness brand, Guinness Nigeria will continue to have rights to manufacture and distribute other Diageo brands currently manufactured and distributed.

CEO Debra Crew said: “Guinness has been Nigeria’s favourite beer for nearly 75 years. Tolaram share this passion for Guinness and for Nigeria, making them the perfect partners as we continue to grow our business and seek to delight even more consumers in the country.”

A Bernstein note said Guinness Nigeria contributed about $154m of consolidated revenue to Diageo in the 2023 financial year and $16m of EBIT. The firm added the sale would bring in $69m in cash.

Analyst Trevor Stirling added the deal resolved a business issue that had been “a thorn in the flesh of Diageo for over a decade”.

“The Nigerian beer market has been weak and volatile due to economic volatility and devaluations,” he said.

Stirling speculated whether the move foreshadowed an eventual complete exit from beer in Africa following the sale of Guiness in Cameroon to Castel in 2022.

“It still owns an 80% stake in separately listed Guinness Ghana,” the analyst added. “The last big asset left in African beer is the 50% stake in East African Breweries. We think this would be a great fit for Heineken, but probably too much overlap for AB InBev, which already have operations in Uganda and are the market leader in Tanzania, but never say never.”

Dayalan Nayager, president for Diageo in Africa and chief commercial officer, said: “Guinness is one of Diageo’s most iconic brands and holds a special place in the hearts of Nigerian consumers. Our flexible, asset-light, beer operating model is working well in other markets, and we will unlock the full potential of Guinness in Nigeria with our new, long-term partner Tolaram.”

Tolaram Africa managing director Haresh Aswani added: “The acquisition of Guinness Nigeria marks a pivotal moment in Tolaram’s journey of growth and diversification. We are thrilled to welcome a company with such a rich legacy and strong consumer loyalty into our ecosystem.

“This strategic move not only expands our footprint in the Nigerian market but also presents an opportunity to leverage our combined strengths to foster innovation and deliver immense value to our customers and stakeholders across the nation.”

Following completion of this transaction – expected in the 2025 financial year – Guinness Nigeria will remain listed on the Nigerian Stock Exchange.

Established in 1948, Tolaram is a Singapore-headquartered group working across Africa, Asia and Europe. In Nigeria, its consumer business operates under joint ventures the likes of Kellanova (formerly Kellogg’s) and Colgate-Palmolive, making and distributing partner brands.