This site uses cookies and by using the site you are consenting to this. Find out why we use cookies and how to manage your settings. More about Cookies

Local wealth creation

We have a strategic interest in ensuring that our value chain is both commercially and ethically robust. Doing so underpins our success and contributes to local economic prosperity.

Our approach

Like most businesses, we create wealth directly for our local stakeholders through our daily business operations, including providing jobs, sourcing locally, and paying local duties. However, creating wealth in a lasting way requires more: we must work with local people to address development challenges such as education and health, and advocate high standards of governance in the communities where we operate.

This work is only going to become more important as our presence in high growth markets increases: recent investments, namely in Turkey, Brazil and India, are shifting Diageo’s centre of gravity. These markets represent over 40% of net sales today and are expected to represent 50% by 2015. Contributing to economic and social development will become core to our business success and reputation in those regions, as it already is in the markets where our production footprint is long-standing and well‑established.

Performance

There are many ways that our business created wealth for its local communities this year. For example:

  • We employed an average of 28,410 people in 2013, with 54.6% from high growth markets in Africa, Latin America and Caribbean, and Asia Pacific
  • In Kenya, Ghana and Nigeria, we contributed 6%, 3% and 0.7% respectively of the government’s total tax receipts
  • Some of our subsidiaries are publicly listed on local stock exchanges, where investors receive dividend payments and potential capital growth; in total we have over 100,000 local shareholders in high growth markets.
  • We also create wealth through sourcing our core ingredients and packaging, for example we purchase about 180,000 tonnes of grain from farmers in Africa, as discussed in the sustainable agriculture section of this report
Performance against target
Target by 2015 2013 performance Cumulative performance (2011-2013) Achievement
Source 70% of raw materials used in African operations from Africa 52%1 N/A On track
  1. Given that this number represents agricultural raw materials only, we are confident that, once we include all raw materials in our reporting, we will be on track to achieve our target.

The cash value added diagram below illustrates our total direct cash contribution to the global economy. Roll over the circles marked with a ‘+’ to learn how our revenue flowed to stakeholder groups in our value chain.

Cash value added in 2013

Other income£218m
Diageo
Cash from customers£15,487m
Suppliers£6,539m

Suppliers (£6,539m)

More than 40% of our contribution comes from buying raw materials, logistics and transportation, packaging and marketing materials, advertising and information services and business support from tens of thousands of direct suppliers. This year our procurement spend increased by 7% compared to last year. Where possible and economically appropriate, we source locally to support local farmers, communities and economies. In Africa, we aim to source 70% of our raw materials from the region by 2015. At the moment, we work with thousands of farmers across the continent and source 52% of our raw materials locally.

Governments£4,703m

Governments (£4,703m)

Every year, our tax contribution accounts for a significant proportion of the value we contribute to economies around the world. This year it amounted to about 30% of our total contribution, including £4,054 million in alcohol taxes and £649 million in other taxes. This represents an increase of almost 6% compared to last year. Our tax footprint is made up of direct taxes including corporation and local business taxes, excise duties and other sales taxes such as VAT. Indirect taxes might include income and corporate taxes paid by our employees and suppliers.

Retained/ invested
for growth
£1,453m

Retained / invested for growth (£1,453m)

This year we made a number of acquisitions of brands, distribution rights and equity interests in premium drinks businesses, particularly in high growth markets such as India and Brazil. Such opportunities for growth benefit not only us as a company but also the economies in which we do business. Read more about changes to our business this year in our 2013 Annual Report.

Employees£1,294m

Employees (£1,294m)

Recruiting, developing and retaining local talent is one of the more direct ways in which we can help develop local communities. This year we paid our employees £1,294 million, or 8% of our total contribution, in salaries and benefits.

Investors£1,125m

Investors (£1,125m)

We work hard to add long-term value for shareholders and are pleased to report that our total shareholder return continues to outperform the FTSE 100. Diageo is committed to a sustainable and progressive dividend policy and this year recommended a further 9% increase in the annual dividend paid to shareholders. We encourage our employees to become shareholders. As at 30 June 2013, 16,788 past and present employees held 1.27% (2012: 1.27%) of Diageo’s ordinary issued share capital (excluding treasury shares).

Lenders£538m

Lenders (£538m)

Diageo is an active borrower in global debt capital markets. Investing in Diageo debt instruments allows investors to achieve attractive yields, while their capital is guaranteed by our strong cash flow generation and sound business model. This year, about 3% of our total contribution was paid to lenders.

Community investment£32m

Community investment (£32m)

We invested £32 million this year in community development that aimed to address local interests and needs. In total, this amounted to 0.9% of our operating profit before exceptional items.

Research and development£21m

Research and development (£21m)

Regionally focused innovation helps create local jobs and supports local communities. Guinness Ghana Breweries, for example, launched Ruut Extra Premium beer, brewed from locally sourced cassava which is a mainstay of Ghanaian agriculture. The innovation is designed to benefit local farmers as well as produce a quality branded beer at a reasonable price for the Ghanaian market.

Reporting frameworks in this section

Top Stories