Diageo, Heineken sever ties in SA, Namibia
DIAGEO and Heineken have agreed to dissolve their joint ventures in South Africa and Namibia, so the British spirits maker and Dutch brewer can pursue their own growth strategies in the countries.
Diageo said yesterday that it would receive net cash of R2.5 billion from transactions expected to be completed by the end of the year.
Heineken said the overall cost to it would be R1.9bn. Following 11 years of co-operation between the two companies, national distribution and sales networks are in place, along with marketing platforms.
Diageo said it had become market leader in spirits in South Africa with a 40 percent share and felt it had the necessary scale to go it alone.
“We were feeling 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 focusing on spirits and (ready-to-drink beverages) and Heineken and (Namibia Breweries Limited) NBL on beer,” Jeff Milliken, who is to run Diageo’s South Africa business, said.
Nomura analysts said the collapse of the ventures might suggest that a “total beverage alcohol” approach in Africa, where one company sold various types of alcoholic drinks, did not necessarily work.
“Could this encourage thinking that the company could sell or spin off beer as a whole?” Nomura said.
Diageo generates one-fifth of its revenue from beer, mostly the Guinness brand, which is growing more slowly than spirits. Despite the weak performance, Diageo often says the business is critical, since it gives it a route to market in Africa, making it easier to sell its spirits such as Johnnie Walker whisky.
Heineken, the world’s thirdlargest brewer, said it would increase its stake in DHN Drinks, the entity holding the licences for the drinks portfolios, to 75 percent, with NBL owning the other 25 percent.
The two would also own the same stakes in the Sedibeng brewery in Gauteng which was built in 2009.
Heineken and NBL have agreed a new joint venture in South Africa, the region’s biggest beer market which is seen growing at about 1.5 percent a year.
Heineken would also take Diageo’s 15 percent stake in NBL, increasing its indirect ownership to 29.9 percent.
Following 11 years of co-operation, national distribution and sales networks are in place.