30 Jun 2016 The SAB vs Heineken beer war
This might have been because, as it emerged at the recent Competition Tribunal hearing, SAB was apparently so troubled by the prospect of serious competition that it resorted to some “unsavoury tactics” to defend its 90% market share. However, the absence of a real competitive war was more likely because Heineken’s execution of its South African venture was ill-considered.
In 2007, beer drinkers, SABMiller shareholders and, it seems, most of SAB management were stunned when Heineken revoked a 40-year agreement that had given SAB the production, marketing, sales and distribution rights to Amstel Lager in Southern Africa. Heineken’s move was prompted by Bevco (SABMiller’s Latin American subsidiary) taking a 15% stake in SABMiller.
Heineken believed, and persuaded private arbitrators, that this move had resulted in a material change in SABMiller’s ownership, which gave it the right to terminate the Amstel trade mark agreement.
SAB was enraged. As a virtual monopoly supplier of beer (with a market share of just more than 98%), the company was accustomed to getting its own way.
It had taken over Amstel in 1965, and built it into the leading premium brand in the country.
By the time Heineken reclaimed it, Amstel had a 9.7% share of the beer market. As a premium brand, it was an extremely profitable part of SAB’s portfolio.
It took SAB several years to recover from the knock, and its market share never again moved much above 90% again.
But despite a few promising signs of competitive vigour, Heineken’s assault on the South African beer market never gained the sort of traction hoped for by many beer drinkers, and expected by many analysts. Heineken’s South African venture began badly and seems not to have been thought through; a jilted SAB immediately abandoned Amstel, leaving local consumers without supply for almost 12 months.
Then it decided, to much consternation, to recategorise Amstel as a mainstream brand, shifting it from the premium-brand image domestic drinkers were used to.
Over the years Castle Lite took up much of this highly profitable abandoned market niche. Eight years after Heineken took it back, Amstel’s market share had shrunk to less than 4%.
It was inevitable that Heineken, which will move into second position in the global beer rankings on completion of the Anheuser-Busch InBev merger with SABMiller, would attempt to secure some advantage from this week’s proceedings before the Competition Tribunal. By alleging “dirty tricks”, it is hoping to secure some market advantage from the tribunal.
It is not the first time we’ve heard stories about SAB and dirty tricks. They are part of SAB’s long history. Back in the 1970s, when Louis Luyt and the Rembrandt group’s Intercontinental Breweries was about to launch in opposition, SAB is said to have spread rumours in the shebeens that the new beer made you impotent and infertile. What is different this time is that the allegations were made from a public forum.
Heineken refused to comment on the allegations, or explain why it had not referred the anticompetitive behaviour to the Competition Commission. SABMiller would also not comment. No doubt it will be making an indignant rebuttal before the tribunal in a bid to ensure it does not have to give one inch of space to its competitor.