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Sorghum beer barney between SAB and UNB


This represents the latest battle ground for SABMiller’s local business and Diageo as they slug it out for the parched throats of South Africa’s low-income earners.

This new complaint comes days after SABMiller’s local arm, SA Breweries, defended itself at the Competition Tribunal over claims of “anti-competitive” conduct in how it picked an elite group of 14 companies to distribute its products in rural areas. SA Breweries accounts for nearly 90% of the beer market through brands like Castle and Hansa, but is a small player in the umqombothi market.

Daigeo’s UNB is the country’s biggest brewer of traditional beer through its Chibuku beer. But it accuses SAB’s subsidiary, Alliance Beverages, of muscling Chibuku off the shelves of a wholesaler in Mahikeng, North West, and replacing it with its own product, Eyethu.

Business Times reports that it has seen documents stating that SABMiller “purchased all the stock of UNB and replaced the purchased product with their own product”. UNB accuses SABMiller of “predatory pricing”, “abuse of dominance” and “springboarding” off the success of the Chibuku brand in the community.

The stakes are high in the sorghum beer battle. Lower-income earners whose purchasing power has been hit by transport costs, electricity price hikes and rising unemployment are opting for cheaper products such as sorghum beer, which is based on traditional African recipes.

Keen to tap this market, London-based premium drinks company Diageo, which own brands such as Johnnie Walker, Baileys and Guinness, bought 50% of UNB in June.

SAB largely exited the South African sorghum beer market more than a decade ago when it sold its subsidiary, Traditional Beer Investments, to UNB.

But SABMiller still produces sorghum beer in other African countries. While UNB holds the licence for Chibuku in South Africa, SAB holds the licence in the rest of the continent.

The company last year announced plans to roll out the brand in six more countries, bringing the total to 10. But SABMiller is not allowed to use the brand in South Africa.

Instead, SAB’s subsidiary, Alliance Beverages, brews its products across the border in Botswana, from where Eyethu is being imported to compete with UNB’s Chibuku and other brands in South Africa.

“Given the fact that Eyethu is produced in Botswana and accordingly incurs certain import duties and VAT, and taking into account that buying up all of the Chibuku product would have to be added to the costs, it is suspicious that Eyethu was able to be sold at a price lower (than) that of Chibuku,” said UNB’s complaint.

SAB said it was not aware that the Competition Commission had been approached. “As a new entrant into the market we aim to price competitively,” said a spokesman….. Read more