
30 Jul 2015 Diageo moves to go solo in SA and Namibia
Diageo and Heineken announced that Diageo will sell off its interests in the partnership it set up with Heineken and Namibian Breweries three years ahead of schedule, with a view to operating “wholly-owned subsidiaries”.
Diageo said it would receive net cash of R2.5-billion from transactions expected to be completed by the end of the year.
Diageo, world’s largest spirit maker, has said it has agreed to dissolve a joint venture with Heineken in South Africa and Namibia Breweries Namibia three years ahead of schedule.
“With our existing infrastructure, brand strength and national coverage in place, it’s time to move to the next stage of growth, where each of the JV partners can pursue their own commercial agendas independently – Diageo in spirits and RTDs and Heineken and NBL in beer”, said the company.
Diageo will sell its 42.25% equity stake in Diageo Heineken Drinks, its 25% equity stake in South Africa’s Sedibeng brewery to Namibia Breweries and its 15% equity stake in Namibia Breweries to Heineken.
Alongside the 47% growth seen last year in South Africa by the company’s Reserve luxury spirit portfolio, which includes Johnnie Walker Blue Label, Cîroc vodka, Don Julio Tequila and Tanqueray No Ten gin, Diageo highlighted the “very attractive” potential for its premium and mainstream brands.
The Smirnoff vodka maker will buy out the Dutch brewer’s stake in Brandhouse, a sales and marketing entity, while Heineken will focus on beer, ending a joint venture with Diageo that began in 2004 to sell spirits, beer and cider in Africa.
“For the past 11 years we have benefitted enormously from our close collaboration with Diageo and I would like to thank them for their valued partnership and wish them well for their future in the region”, said Jean-François van Boxmeer, Heineken CEO and chairman of the Heineken executive board.
Continuing, he said: “Our new structure allows us to focus exclusively on the beer category and strengthens our platform for continued growth”.
“The read-through is that spirits in SA are growing well. We look forward to working with our longstanding partner Namibian Breweries and developing our business further in this important part of the global beer market”.
Diageo said it has become market leader in spirits in South Africa with a 40 percent share and felt it had the necessary scale to go it alone. “For Diageo, this announcement is an exciting breakthrough on our journey to deliver our ‘Performance Ambition’ in South Africa”.
South Africa is one of the biggest beer markets in the region, with a growing middle-class population and strong GDP growth. The SA beer market is expected to grow by approximately 1.5 per cent per annum from its current size of 30-million hectolitres to an estimated potential of 35-million hectolitres by 2024.