NBL won’t go flat after SA Breweries deal

ALTHOUGH a price storm will be brewing before long now that beer giant SABMiller got the official go-ahead to produce locally, observers doubt whether Namibia Breweries’ (NBL) head will spin to the extent that its legs buckle.

Stiffer competition and headaches as profits margins come under pressure are a given, market analysts Emile van Zyl and JD Van Wyk agree.But they both maintain that NBL will survive this market tasting competition too.Proving that it is fighting fit, NBL yesterday said in a trading announcement to the Namibian Stock Exchange (NSX) that it expected its earnings and headline earnings per share for the year ended June 30 to be 15 per cent to 25 per cent respectively higher than the previous period.SABMiller last week announced that that they have formed a subsidiary, SABMiller Namibia, with black economic empowerment (BEE) partners, Onyewu Holdings, and trusts from the Omaheke, Karas and Northern Regions. Onyewu Holdings own 20 per cent of the shares in the new company, while the trusts have 20 per cent in total.Government has granted SABMiller Namibia a licence to open a brewery to produce Castle Lager and Black Label. The N$250 million project can start as early as December at Okahandja, Onyewu Chairman Samuel Jafet Victor told The Namibian.’SABMiller, Diageo and Heineken are currently in a tug of war for control of Africa’s beer markets and this in a sense is a victory for SAB,’ Investment House Namibia (IHN) Analyst JD Van Wyk said.Not only will a local brewery and the ability to sell beer in returnable bottles ensure significant cost savings for SABMiller, but its presence through SABMiller Namibia will allow the company to introduce new brands to compete with NBL’s Windhoek Lager and Tafel Lager, Van Wyk said.However, NBL’s products are well established in Namibia and SA and they have many loyal consumers, Simonis Storm Securities Research Director Emile van Zyl said.’So I don’t think that the survival of NBL is threatened at all,’ he said.Van Wyk agreed.’Windhoek Lager remains a strong brand in South Africa,’ he said.Furthermore, Diageo’s and Heineken’s new brewery in South Africa will mean a huge reduction in NBL’s operating costs, as they will not have to import Amstel anymore, Van Wyk said.Locally, NBL will have to knock back a stiff competition schnapps though.’Competition is going to be tough. It can spur a price war, in which NBL will probably be hurt most due to its relative size,’ Van Zyl said.However, looking at the N$250 million earmarked for the local brewery investment, Van Zyl believes that it will be a ‘relatively small operation’.’But their increased presence will definitely mean that they are going to be in NBL’s face a lot more,’ Van Zyl said. NBL currently enjoys about 20 per cent of the Namibian beer market.Van Wyk said that the ‘competitive pressures from SAB are now a real challenge locally’. ‘NBL should face some margin pressure on its local brands,’ he said.