NBL revamps to fight off SABMiller

NAMIBIA Breweries Ltd has launched a restructuring plan to beat down high overheads and an onslaught from global brewing giant and regional rival SABMiller .

Nambrew’s new Managing Director Segun Adebanji said the firm planned to more than double pre-tax operating profit margin from six per cent by cutting production and distribution costs. “Our target is, over time, to get (operating profit) to 14 per cent.Our gross margin is also short of our benchmark,” Adebanji told Reuters in an interview.Since appointing Adebanji in March, the board has already approved the closure of Namibia’s second biggest brewery in Swakopmund to concentrate brewing in the capital Windhoek.”After considering all options, we came to the conclusion that we couldn’t sustain two breweries any longer.”He said savings should outweigh related costs in less than three years.The closure of the brewery and some depots, due by the end of October, would result in the loss of around 130 of Nambrew’s 650 jobs, but Adebanji said provisions for voluntary redundancy, retirement or re-assignment should minimise the impact on staff.Now Adebanji hopes to cut distribution costs and boost service by outsourcing logistics to a third party in conjunction with parent conglomerate Ohlthaver & List, which owns Namibia’s largest dairy chain and over a dozen supermarkets trading under the name of neighbouring South Africa’s Pick ‘n Pay.”Our products have to become more affordable if we are going to grow our volumes, so we have to get our costs down.”A major limitation to growth is the size of Nambrew’s home market: Namibia has just 1,9 million people.”The domestic market is crucial for us, but on its own the size is too small to support the economies of scale required by an independent brewery.We expect growth to come from exports.”Efforts to secure an international future led to Dutch Heineken and British Guinness-to-spirits group Diageo buying an effective 28,9 per cent of Nambrew in 2003, and Nambrew now brews Heineken beer for southern Africa.The following year the three companies launched Brandhouse, a joint sales, marketing and distribution arm, in South Africa.Adebanji said he had “no information to confirm or deny” speculation that Heineken may open a brewery in South Africa – which could rob Nambrew of the contract to brew Heineken beer.”We’ll cross that bridge when we come to it,” he said.A Heineken official said in early June the company was considering opening a brewery in South Africa ahead of the scheduled expiry in 2006 of SABMiller’s contract to brew and market Heineken’s Amstel brand beer in South Africa.Apart from costs, Nambrew is fighting a renewed challenge from its age-old rival SABMiller, whose original South African Breweries unit (SAB) is competing hard for market share both in Nambrew’s home market and in Angola, a vital export market.Nambrew estimates it has around 73 per cent of the Namibian beer market, with most of the remainder going to SABMiller.In March, Nambrew posted half-year revenue of N$525,4 million and operating profit of N$43,8 million.In South Africa, by far the region’s biggest beer market with 45 million people, SAB has around 98 per cent of total beer sales, with Nambrew controlling barely a third of a premium segment accounting for just 7 per cent of the total.”The elements of the SAB threat are to attack us in our own market from a secure base in South Africa using price, to deny us a base in South Africa, and to frustrate the joint venture in South Africa, which they obviously view as a major threat.”Savings on overheads and distribution costs will free up cash to promote Nambrew brands in its home market as well as South Africa and Angola to fight off the challenge, he said.- Nampa-Reuters”Our target is, over time, to get (operating profit) to 14 per cent.Our gross margin is also short of our benchmark,” Adebanji told Reuters in an interview.Since appointing Adebanji in March, the board has already approved the closure of Namibia’s second biggest brewery in Swakopmund to concentrate brewing in the capital Windhoek.”After considering all options, we came to the conclusion that we couldn’t sustain two breweries any longer.”He said savings should outweigh related costs in less than three years.The closure of the brewery and some depots, due by the end of October, would result in the loss of around 130 of Nambrew’s 650 jobs, but Adebanji said provisions for voluntary redundancy, retirement or re-assignment should minimise the impact on staff.Now Adebanji hopes to cut distribution costs and boost service by outsourcing logistics to a third party in conjunction with parent conglomerate Ohlthaver & List, which owns Namibia’s largest dairy chain and over a dozen supermarkets trading under the name of neighbouring South Africa’s Pick ‘n Pay.”Our products have to become more affordable if we are going to grow our volumes, so we have to get our costs down.”A major limitation to growth is the size of Nambrew’s home market: Namibia has just 1,9 million people.”The domestic market is crucial for us, but on its own the size is too small to support the economies of scale required by an independent brewery.We expect growth to come from exports.”Efforts to secure an international future led to Dutch Heineken and British Guinness-to-spirits group Diageo buying an effective 28,9 per cent of Nambrew in 2003, and Nambrew now brews Heineken beer for southern Africa.The following year the three companies launched Brandhouse, a joint sales, marketing and distribution arm, in South Africa.Adebanji said he had “no information to confirm or deny” speculation that Heineken may open a brewery in South Africa – which could rob Nambrew of the contract to brew Heineken beer.”We’ll cross that bridge when we come to it,” he said.A Heineken official said in early June the company was considering opening a brewery in South Africa ahead of the scheduled expiry in 2006 of SABMiller’s contract to brew and market Heineken’s Amstel brand beer in South Africa.Apart from costs, Nambrew is fighting a renewed challenge from its age-old rival SABMiller, whose original South African Breweries unit (SAB) is competing hard for market share both in Nambrew’s home market and in Angola, a vital export market.Nambrew estimates it has around 73 per cent of the Namibian beer market, with most of the remainder going to SABMiller.In March, Nambrew posted half-year revenue of N$525,4 million and operating profit of N$43,8 million.In South Africa, by far the region’s biggest beer market with 45 million people, SAB has around 98 per cent of total beer sales, with Nambrew controlling barely a third of a premium segment accounting for just 7 per cent of the total.”The elements of the SAB threat are to attack us in our own market from a secure base in South Africa using price, to deny us a base in South Africa, and to frustrate the joint venture in South Africa, which they obviously view as a major threat.”Savings on overheads and distribution costs will free up cash to promote Nambrew brands in its home market as well as South Africa and Angola to fight off the challenge, he said.- Nampa-Reuters