Set for cheers to Guiness in SA

The local arm of drinks giant AB InBev is confident it will be able to hit a regulator-imposed threshold to begin producing Irish stout Guinness locally.

If SAB manages this, SA could join the 49 other countries where the beer is brewed, including African countries Nigeria, Ghana and Cameroon.

This comes after the competition tribunal gave its conditional approval last week for a licensing agreement between SAB, and Guinness owner Diageo, which will see SAB become the exclusive licensee for the manufacture, distribution, marketing and sale of Smirnoff and Guinness-branded products in SA.

One of the conditions is that SAB will begin producing Guinness locally should its sales reach a certain annual threshold within three years of the deal. Although the threshold is confidential and the company did not comment on the figure, Business Day has been able to determine that it will amount to about 2m litres.

“We have a high level of confidence that we will reach the target to begin local production,” said Richard RivettCarnac, the director for mergers, acquisitions and treasury, at SAB and AB InBev Africa.

“Our confidence stems from the fact that Guinness is a globally renowned and iconic stout brand. It has strong brand equity in SA and we can bring to it our dedicated beer route to market.”

Rivett-Carnac said that the Guinness brand will not be changed and will be produced under licence and within Diageo’s guidelines.

Until the target is reached, Guinness will continue to be imported.

The tribunal has also ordered that SAB market the Guinness brands and reach minimum volume targets when it comes to the number of outlets that serve Guinness from draught taps and the 440ml cans.

The tribunal’s approval of the licensing agreement also came with a number of other conditions intended to offer consumers more choice and promote competition. These include that Diageo and SAB adhere to “information barrier provision” to regulate the flow of information between the parties so as to avoid the exchange of competitively sensitive information.

The tribunal has also carried through a condition relating to cider brands from a previous merger deal between AB InBev and SAB-Miller, requiring SAB to provide competitor brands and independent producers of flavoured alcoholic beverages with at least 10% of refrigerator space.