UPDATE: Heineken Opens Brewery In Rival SABMiller's Backyard
25 Marzo 2010 - 12:11PM
Dow Jones News
Roughly three million South Africans have tuned in to the first
episodes of reality television series Class Act on Saturday
evenings, a nationally broadcast search for a striving actor that
is heavily branded by Amstel beer, whose owner conceived of the
program.
The series, along with product placement in episodes of popular
soap opera Generations, is a cornerstone in Heineken NV's (HEIA.AE)
campaign to tap the country's growing, aspirational middle class in
a market that remains a stronghold of beer giant SABMiller PLC
(SAB.JO).
The beer battle between the companies increasingly is focusing
on townships and black South Africans who were previously kept out
of the mainstream economy by apartheid but are finding increasing
affluence.
Heineken on Thursday officially opened Sedibeng, a large-scale
brewery located south of Johannesburg that began with a capacity of
three million hectoliters but can be expanded to six million. The
opening, just a few months ahead of the locally-hosted soccer World
Cup, means that, for the first time since the Dutch company took
back licensing rights from SABMiller, it will brew its namesake
brand and Amstel beers locally.
"If you have to compete against SAB, you need to have strong
fundamentals and a large brewery," said Tom de Man, president of
Heineken's operations in Africa and the Middle East.
Sedibeng, which is co-owned with Diageo PLC (DEO), will also
produce Smirnoff Storm and Spin blended drinks and eventually
Diageo's Foundry cider as well as Namibia Breweries Ltd.'s (NBS.WH)
Windhoek lager.
Heineken and Diageo teamed up in South Africa with the Namibian
company to create Brandhouse Beverages Pty. Ltd. in 2004, a year
after Heineken took back the rights to its namesake beer from
SABMiller's South African Breweries.
Heineken in March 2007 terminated SAB's license to produce and
distribute Amstel in South Africa after a private arbitration panel
ruled in its favor. It has since sourced the beer from its
breweries in Europe, although after a several-month hiatus in which
no Amstel was available in the country.
De Man declined to specify the savings the companies expect by
producing drinks in South Africa and sourcing bottles locally, but
he said the EUR310 million brewery will increase profitability and
make it easier to grow volumes.
In upmarket bars in Soweto, the sprawling township on the
southern edge of Johannesburg, Heineken and Amstel feature
prominently alongside SAB's competing premium brands.
Godfrey Mautloa, owner for the last 10 years of the Masakeng
tavern, said his top sellers are Heineken and SAB's Castle Light
and Hansa. Heineken is also the top seller at Sediba, another
Soweto bar, although manager Sobantu Zuba said sales of SAB's
Grolsch are steadily rising.
"For sure we love to beat the competition, but there's a lot of
growth left in South Africa," said Nick Blazquez, managing director
of Diageo Africa.
Blazquez said the emergence of a black middle class has fueled
demand for premium beers and spirits, segments that continue to
grow.
Premium beer accounts for about 20% of the total beer market in
South Africa, while the beers produced by Heineken and its partners
accounts for about 56% of this but only 11% of the total beer
market by volume, Heineken's de Man said, adding the aim is to
continue taking market share.
SABMiller, which when it lost the license in 2007 estimated
Amstel represented about 9% of its beer sales in South Africa,
hasn't stood still. Days later it unveiled plans to launch a new
premium beer, Hansa Marzen Gold, to help plug the gap. The
London-based company, which originated in South Africa with Castle
Lager in 1895, also has been pushing its Miller Genuine Draft,
Grolsh and Peroni.
SABMiller has seven breweries in the country and the company
sold just shy of 26 million hectoliters here in the year through
March 2009.
-By Robb M. Stewart, Dow Jones Newswires; +27 11 783 7848;
robb.stewart@dowjones.com