Diageo PLC rolled out part of its plan for the African market this week by appointing John Musunga as Managing Director of its African arm, Diageo Africa.   

Musunga, a former Managing Director of Kenya Breweries Limited (KBL), will relocate from London and work from Nairobi, which has effectively become the headquarters of Diageo Africa.   

The British company’s latest move is an indicator of its positioning after the transaction in which it will transfer its 65 per cent stake in East African Breweries PLC and 53.68 per cent stake in UDV(K) for a sum of US$2.3 billion.   

In a press release announcing Musunga’s appointment, Diageo said, “His appointment underscores Diageo’s confidence in Kenya’s position as a leading regional business and financial hub, and its importance in supporting the company’s long-term ambitions across the continent.”   

In January, Diageo indicated through its general counsel that it would establish a Kenya-incorporated company employing up to 20 employees who would provide services in Kenya and other African markets.   

Musunga will oversee the implementation of Diageo’s asset-light business in Africa, where the company has disposed of non-core assets by selling its 80 per cent stake in Guinness Ghana Breweries, its controlling stake in Guinness Nigeria, Meta Abo Brewery in Ethiopia and exiting Seychelles Breweries.   

Shifting Gears 

Rather than own the infrastructure, Diageo will concentrate on licensing, brand management and third-party production.   

The firm has committed to entering into long-term licensing agreements with EABL to secure the continued production and distribution of Guinness, local spirits, and ready-to-drink brands, as well as the distribution of Diageo international spirits.   

Diageo’s prominent locally produced spirits in Kenya include Captain Morgan, Smirnoff Vodka, Gilbey’s, and Black & White whiskey. At the same time, the ready-to-drink brands are variants of Smirnoff (Black Ice, Pineapple Punch, and others).   

EABL distributes the Johnnie Walker whiskey varieties and a range of premium spirits, such as Ketel One vodka and Don Julio tequila varieties.   

Diageo said Musunga would “lead the next phase of Diageo’s growth across the continent, accelerating innovation, strengthening customer and consumer connections, and advancing the company’s ambition to create lasting economic and social value in the communities where it operates.”   

The transaction between Asahi and Diageo is pending approval by the Competition Authority of Kenya. A judge has also halted the transfer of shares from Diageo to Asahi on account of a case filed by Christine Irungu at the High Court in Machakos, arguing that her constitutional rights as a minority shareholder have been interfered with in the course of the transaction.  

Ms Irungu also wants Diageo’s acquisition of additional shareholding in EABL in 2023 to be part of a strategy to use privileged information to build up their stake and then sell it off at a premium, which put those who sold their shares at a disadvantage.   

Lawyers for Diageo have filed an application seeking to have the matter transferred to Nairobi, where two other judges are handling similar matters, and to have the interim orders lifted. They also informed the judge that she had been misled to issue the orders without hearing from both sides when the case was filed.   

EABL has filed an affidavit challenging the jurisdiction of the court, while Asahi Group’s lawyer emphasised that the court in Machakos does not have jurisdiction to handle the matter. Lawyers for the Competition Authority have also backed the position on jurisdiction.   

Justice Eric Ogola, the Principal Judge of the High Court, has since directed that all cases challenging the acquisition be handled in the Commercial and Tax Division of the High Court, based at the Milimani Court. He directed that all the cases be transmitted to Justice Francis Gikonyo, the Presiding Judge of the Commercial and Tax Division.