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Spirits group Diageo sees faster growth in Africa

By Martinne Geller

LONDON (Reuters) - Diageo (LSE:DGE), the world's biggest spirits group, should see sales growth in Africa accelerate as it expands into new markets like Ethiopia and Angola and rising incomes enable traditional beer drinkers to try spirits, it said on Tuesday.

Africa currently generates 1.4 billion pounds ($2.2 billion)in annual sales for Diageo, accounting for 12 percent of the group total, and sales have been growing at a compound annual rate of 13 percent over the past decade.

"I fully expect that over the long term to be the same, if not accelerate," said Nick Blazquez, Diageo's president for Africa, Turkey, Russia and Central and Eastern Europe.

The lion's share of Diageo's sales in Africa come from Kenya, Nigeria and South Africa, but as it expands in places like Ethiopia, Mozambique and Angola, the rate of growth should increase, Blazquez told reporters ahead of a meeting on Tuesday with investors in London.

The meeting was meant to be in Nairobi, but Diageo moved it to its home city after last month's shopping mall siege in which Islamist gunmen killed 67 people in the Kenyan capital.

Most of what Diageo sells in Africa is beer, both local brands like Tusker and Serengeti, and its global brand Guinness.

The bigger opportunity, therefore, lies in spirits, which Diageo is pushing at many of the locations it already sells beer. In addition to its premium, international brands like Johnnie Walker Scotch and Smirnoff vodka, Diageo sells value-priced brands like Jebel gin.

Africa has become a key battleground for consumer companies hoping to offset weakness in Europe and North America. French spirits group Pernod Ricard (PAR:RI) recently increased its investment there.

Several consumer firms with big emerging market presences, including Diageo and Unilever (LSE:ULVR), have come under pressure recently due to slowing growth and falling currencies.

"There will always be ups and downs in emerging economies, and I would caution us not to be over-optimistic. But do I think Africa will accelerate faster than Asia? Yes I do," said Blazquez.

Diageo gained strong footholds in key markets like Brazil, Turkey and China by buying local spirits brands. That strategy could work in Africa as well, Blazquez said, say for a popular brand of bitters, if it could provide scale and a strong brand.

Diageo aims to make half of its turnover in emerging markets by 2015, up from 42 percent now.

($1 = 0.6244 British pounds)

(Reporting by Martinne Geller in London; Editing by Mark Potter)