Windhoek Lager, Heineken lead SA premium beer market

AFTER just five years, Heineken and Namibian Breweries have managed to secure a leading position in the hugely attractive premium segment of the South African beer market.

The latest available figures, which are for the period to end September, reveal that Brandhouse’s share of the premium beer segment by volume is 55 per cent.Brandhouse beer products comprise Heineken, Amstel, Windhoek and Guinness. Heineken’s share, alone, of the premium segment of the market was 12,98 per cent at the end of September. This reflects a steady and impressive increase from 11,24 per cent in September 2008 and 8,73 per cent in 2007. The strong performance in 2009 is expected to put South Africa among Heineken’s top 10 markets.The urban township market, a traditional stronghold for South African Breweries (SAB), appears to be the source of the strongest growth for Heineken.As one local analyst remarked: ‘This cannot be a comfortable position for SABMiller to tolerate in its own backyard.’What may be particularly galling for SAB, the South African division of SABMiller, is that until 2003 it was in charge of sales and distribution of Heineken. In March of that year Heineken terminated its licensing agreement with SAB in a move that was widely regarded as a response to SAB’s multibillion-dollar acquisition of US-based Miller. Shortly after that deal SABMiller added Pilsner Urquell and Miller Genuine Draft to its premium beer offerings for the local market.Although Heineken terminated its licensing agreement, SAB continued to brew and distribute the highly popular Amstel, which belongs to Heineken. The Amstel licensing agreement was terminated with effect from 2006. From that date the sales, marketing and distribution of Amstel has been done by Brandhouse, which is a joint venture between Heineken, Namibian Breweries and Diageo that was established in 2004.The premium segment of the beer market is the most hotly contested segment as it offers more attractive margins in what is generally a very tight margin business. During 2008/09 when the overall beer market was declining, Heineken – coming off a very low base – increased sales by 40 per cent.’This performance has topped an uninterrupted string of growth years, which has seen the Heineken brand in South Africa growing by an overall 600 per cent since 2004,’ said a Brandhouse spokesperson.This is in stark contrast to SAB’s experience in calendar 2008 and 2009. In its 2009 annual report SAB noted that in recent years the most significant increase in beer sales was in the premium segment of the market, however: ‘Now, with the recession biting and consumer spending tightening, the trend has slowed. With price-conscious consumers buying fewer premium beers less often, the segment is no longer growing as rapidly as it was.’For the past few years Heineken has been produced by Namibian Breweries in Namibia for distribution in South Africa; where necessary this has been topped up by imports from Europe. A few months ago Heineken’s brewery in Sedibeng commenced production of Amstel. Early next year the brewery, which has a three million hectolitre capacity with built-in flexibility to expand, will commence production of Heineken.SAB’s response is that it welcomes any competition that creates excitement in the marketplace. It said that its strategy was to improve the package offered to the customer and to provide even better service to the retailer.But it is significant that the all-important urban township market is a major focus of SAB’s recently announced N$7,3 billion broad-based black economic empowerment transaction. In terms of that generous deal, tens of thousands of black retailers will be offered just over 19 million SAB shares for a minimal cash outlay. – Business Report

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