Diageo furthers commitment to sustainable agriculture in Africa through investment in Ethiopia and Tanzania

Diageo plc, the world’s leading premium drinks company, announced today that it has signed letters of intent to foster partnerships and projects that will aid in the agricultural development of Ethiopia and Tanzania. Diageo will work to develop and implement a scalable barley farming project in Sebeta, Ethiopia and a scalable sorghum value chain project in Mogoro, Tanzania. The projects when fully realized will represent an overall investment of $1.5 million in Ethiopia and $2 million in Tanzania and will begin to be implemented in 2012. They build on Diageo’s commitment to support the development of agricultural economies in Africa, a business imperative in line with the Company’s growth ambitions across the continent.

This new investment was announced at the Symposium on Global Agriculture and Food Security hosted by The Chicago Council on Global Affairs, in collaboration with the World Economic Forum. On the eve of this weekend’s G8 Summit, this high-level symposium brings together US President Barack Obama, with G8 and African leaders, businesses, international organizations and civil society to discuss new activities to advance global agricultural development, and food and nutrition security in Africa.

Paul Walsh, CEO Diageo and signatory of a pledge in support of the G8’s food security agenda commented, “The complex global challenges we face – from climate change to resource scarcity – will require even greater cooperation and collaboration of the public sector, private sector and civil society. At Diageo we know that to achieve our business aims we have to engage our stakeholders across the whole value chain to create strong socio-economic development programmes. It is my firm belief that the most genuinely strategic and forward looking businesses treat sustainability as a core component of business delivery.”

Diageo is committed to local, sustainable sourcing of agricultural raw materials. In Africa, Diageo currently sources about 50% of its raw materials locally, and aims to increase the sourcing of local raw materials to 70%, which is an increase of more than 30% from a 2007 baseline. The new projects in Ethiopia and Tanzania will provide Diageo with a long-term, secure and sustainable source of raw materials, which reduces exposure to increasingly unpredictable changes in availability of material, and potentially volatile global commodity markets.

In Ethiopia, Diageo will build a public-private partnership through which the Company will work with the Ethiopian Agricultural Transformation Agency (ATA) to design and implement a barley contract farming project strategy. In support of the G8 Member’s pledge and in line with Diageo’s own commitment to development in Africa over the next 12 months, Diageo will design and test a pilot barley contract farming project with the aim to source 1000 metric tons (MT) barley from a substantial number of local smallholders in the first year. In the years that follow, the project could increase in scale, extending its work with both local smallholders and larger farmers, with a potential capacity to source up to 20,000 MT of barley within Ethiopia for local use and/or export.

In Tanzania, Diageo will collaborate with the Government of Tanzania to develop and implement a scalable sorghum value chain project in Morogoro that will scale-up sorghum cultivation and sourcing in Tanzania up to a potential 20,000 MT/year by 2016, for local use and/or export. They will also work to build genuine appetite and capacity (e.g. training, financial and physical infrastructure) to build a sustainable sorghum value chain which consists of local smallholder ‘satellite’ farming communities commercially connected with larger ‘nucleus’ farms, and will promote the development and sharing of sustainable sorghum cultivation and post-harvest practices.

Nick Blazquez, President, Diageo Africa, commented: “Diageo is proud to take part in this leadership initiative between African governments, the private sector and development organizations to accelerate the growth of agriculture in Africa.

As a business that has operated across the continent for many decades, we see firsthand the importance of this agenda to local economic growth and the social empowerment of farming communities, and are fully committed to Grow Africa and supportive of the New Alliance for Food Security and Nutrition. In the spirit of partnership, we are excited to work closely with the Governments of Ethiopia and Tanzania to create innovative solutions that are commercially and environmentally sustainable, scalable and socially inclusive.”

These new initiatives build on Diageo’s current projects that are in place to assist African communities. These include supporting local enterprise development, investing in and stimulating a competitive beverage industry, building local skills and capabilities, and researching options to increase inter-regional trade and product exports. Additionally, as part of its commitment to the UN Millennium Development Goals, Diageo launched the Water of Life programme in 2000 with an aim to provide access to clean drinking water and sanitation to a million people every year. To date, Diageo has funded over 170 different water and sanitation projects, impacting nearly 5 million people in 16 different countries across the continent.