Diageo, Heineken take on SAB

Diageo, Heineken take on SAB

Diageo and Heineken have officially opened a brewery in South Africa as they look to take beer sales off SABMiller in its home territory.

Around 200 people attended the opening ceremony today (25 March).

The ZAR3.5bn (US$473m) brewery began operations late last year, but strong early demand for the firms' premium beers means that they have decided to raise capacity by a third, to 4m hectolitres, by September 2010.

Diageo and Heineken own 25% and 75% respectively of the new Sedibeng brewery, which is based near to Johannesburg.

Africa's growing thirst for beer has caught the attention of many multinational brewers and the opening of the 83-hectare Sedibeng brewery is a direct assault by Diageo and Heineken on SABMiller's home turf - only a few months before the FIFA World Cup kicks off in the country.

SABMiller has around a 90% share of the South African beer market and a 58% share of the country's total alcoholic drinks market, according to the brewer's own figures.

However, its beer sales by volume fell 3% in the country for the six months to the end of September and the group reported an undisclosed fall in year-on-year market share.

Heineken, Diageo and Namibia Breweries own Brandhouse Beverages, the parties’ cost sharing joint venture in South Africa and a marketing, sales and distribution company for premium alcohol beverages.

In addition to Heineken and Diageo beers, Sedibeng will also brew Namibia Breweries' Windhoek lager.

"Each of our premium beers are brewed under the watchful eye of Heineken, Amstel and Windhoek brewmasters, in accordance with the original recipes and the highest international brewing standards," said Johan Doyer, managing director of the brewery, which employs more than 3,500 people.

Sedibeng will allow Brandhouse to reintroduce Amstel Lager in a “returnable” bottle format, to replace the existing one-way bottles.

Gerald Mahinda, managing director of Brandhouse, said: “The returnable quart segment comprises the overwhelming share of the local beer market, and our ability to offer our customers our premium product in this format will enhance our capacity to meet consumer demand.” 

Nick Blazquez, head of Diageo Africa, said: "South Africa continues to present significant opportunities for growth in premium alcohol beverage categories."
As well as beer, Sedibeng will also supply ready-to-drink beverages Smirnoff Spin and Smirnoff Storm.

Diageo's capital expenditure in Africa is set to top GBP80m (US$132m) in its fiscal 2010, the highest level for at least five years, reflecting investment in the Sedibeng brewery.