In the latest development of Big Alcohol making inroads in the African region, Heineken has acquired the South African Distell Group which is a stronghold in the African region. Distell is not a beer company, their categories include cider, sprits and wine. Heineken will use Distell’s infrastructure to push higher sales of Heineken products in South Africa and the wider African region. It looks like Heineken is gearing up for a fight with Big Alcohol competitors AB InBev and Diageo in the years to come for market domination and profit maximization in African countries.

As Movendi International has reported previously, Big Alcohol is making inroads in the African region with their efforts to convert alcohol abstainers to consumers, specifically targeting the growing middle class as well as young people.

In the latest development on this front, Heineken has acquired their competitor the Distell Group in South Africa. Talks of Heineken acquisition of Distell began about six months ago. Heineken has now confirmed an €2.2bn (US$2.52bn) purchase of a 65% stake in Distell. At the same time, the beer giant will also acquire Namibia Breweries, and thereby taking full control of ‘Heineken South Africa’ – Namibia Breweries has a 25% interest in the division.

Heineken plans to create a “gateway” to Africa with the new acquisitions and is prepared to “capture significant growth opportunities” in the region. In other words, Heineken is gearing up for an aggressive push to turn the people in the region to consumers of alcohol, especially Heineken products.

Heineken has been thirsting and pushing for more profits in the African region for a long time. As ten years ago then Heineken CEO Jean-François van Boxmeer said: “What Brazil is for Anheuser-Busch InBev, Africa is for Heineken.”

Who is Distell?

Distell has been a smaller player in the international alcohol market but is an established stronghold in South Africa and the African region. 95% of the company’s operations reside in the continent of Africa, with 75% in South Africa. The company operates across multiple categories of beverages with 37% cider, 35% spirits, 25% wine (and 3% unaccounted for).

The company claims they are the largest cider brand owner worldwide, led by the Savanna and Hunter’s brands and the biggest alcohol company in its home market of South Africa. They are known in the spirit category for the cream liqueur brand Amarula and Scotch whisky Three Ships. The company has extensive distribution operations across Africa – which is part of the prize for Heineken.

Another beerhemoth?

When AB InBev took over SAB Miller in 2015,  South Africa’s Competition Commission approved the takeover on the condition that SAB offloaded their 26.5% Distell holding, then estimated to be worth about US$600m, within three years. A year after, a buyer was found in Public Investment Corp – a South African company that acts on behalf of the Government Employees Pension Fund. In South Africa, the Government Employees Pension Fund invests in Big Alcohol – a clear case of conflicts of interest.

Meanwhile, Distell has been slowly expanding to international markets as well. In 2013, Distell purchased Burn Stewart Distillers and its Bunnahabhain, Tobermory and Deanston Scotch whisky distilleries. This opened up Taiwan for the group through Scottish Leader blended Scotch, inherited from Burn Stewart. In 2015, the group secured a spirits and wine joint venture in the United States with Terlato Wine Group. In 2017, the alcohol giant entered the Vodka category through Cruz Vodka, buying a 75% stake from owner Blue Sky Brand Co.

In terms of wine, around 2019, Distell was relying on a mainstream wine category in South Africa and premiumization in other countries, such as the Nederburg brand in Germany. The company has been expanding the premium wine category in recent years. Distell sold Stellenbosch winery Uitkyk in 2018 and focused on its higher-end products through the establishment of premium wine unit, Libertas Vineyards & Estates. The alcohol giant then started positioning their higher-margin brands, Nederburg, Fleur du Cap and Durbanville Hills within South Africa’s premium wine category.

Big Alcohol battle brewing in years to come

This new acquisition by Heineken is putting Africa in the middle of a battle of the global alcohol giants AB InBev, Diageo and Heineken. AB InBev acquired SAB Miller five years ago for the same reason as Heineken now took over Distell – to concentrate more market powr, includinng distribution networks, to drive more consumption of their products in the African region. Diageo, which was Heineken’s partner with Namibian Breweries until late-2015, has also been pushing to increase use of spirits in the region.

Heineken’s new acquisition positions themself for a fight with AB InBev for market dominance in the African region. Distell’s infrastructure would provide Heineken a way to increasing sales of their brands and products in South Africa and the wider African region. Distell’s existing brands would only be surplus for the beer giant.

According to Heineken CEO Dolf van den Brink, the acquisition is about South Africa and its profitability. But also about nearby Namibia, where Heineken was previously been only a minor shareholder. Not stopping there, Heineken plans to smooth out their struggles in countries like Botswana and Zambia, all the way to Tanzania and Kenya by combining their operations with Distell, which has driven higher sales in these countries.

While the move is also about expanding to other categories, for Heineken owning Distell means they can push for more sales of their beer brands as well.

There’s still intense competition in Africa’s beer market – the complimentary position and scale of ours and Distell’s routes-to-market will help us unlock further opportunity on the beer side,” said Dolf van den Brink, CEO of Heineken, as per Just Drinks.

Dolf van den Brink, CEO, Heineken

Big Alcohol fight spells harm against people in the African region

For the people of the region a Big Alcohol battle for market dominance spells increased harm. The companies will use their arsenal of tools to try and get more people to use their products. This means an avalanche of advertising and other marketing, exposing the largely alcohol-free population, young people and children to continuous alcohol promotion.

The multinational alcohol corporations already exploit the mostly unregulated alcohol policy landscape (weak or non-existing taxation, availability, marketing rules) across the region for their goal of private profit maximization. These tactics will undoubtedly become even more aggressive.

Turf wars between multinational alcohol corporations have been raging across the African region for many years, with dire consequences for people and communities who face rising alcohol use and harms.

Since 2019 at least, Heineken and AB InBev are battling for domination of the South African Beer market. In 2019, AB InBev stood for 88% of South Africa’s beer volumes and 86% of beer value. To compete with AB InBev, Heineken invested in its Sedibeng brewery near Johannesburg. This investment meant an aggressive push to increase Heineken beer consumption. The aim was to hit annual capacity of 7 million hectolitres in SouthAfrica. 

Heineken and AB InBev are also aggressively competing in other African countries. In March 2019, Heineken opened a US$100m brewery in Mozambique, where AB InBev controls 99% of the beer market through the Cervejas De Moçambique unit, also inherited from SABMiller.

This beer war is unfolding on the back of people and communities. Using over-sized bottles, beer giant AB InBev is pumping up the volume in Africa in pursuit of ever more profits, driven by competitor Heineken.

The stretagy to achieve market dominance and turn alcohol abstainers into heavy users is clear:

  1. Cheap prices,
  2. Aggressive discounts,
  3. Super-large bottles, and
  4. Heavy promotions.

These tactics are highly harmful because they drive higher alcohol use and more heavy and high-risk alcohol use.

In East Africa, similar battles are unfolding. Alcohol producers are competing for control of the liquor market — currently the most lucrative. Alcohol industry executives say an increase in taxes, competition, drought, economic growth that does not trickle down, political instability, regulatory headwinds and millennials-led dynamics are altering the alcohol industry in favour of spirits and low-end beer brands. Despite economic growth in East Africa averaging 6% in the years before the coronavirus pandemic, the ‘trickle-down’ effect has been minimal. This has impacted disposable incomes and slowed down bottled beer consumption in favour of liquor. Therefore, alcohol producers such as East Africa Breweries Ltd (EABL) – a subsidiary of alcohol giant Diageo, and Kenya Wines Agency Ltd (Kwal) have accelerated competition in the liquor market, where they push easily available raw spirits and cheap brands.

And also in West Africa a beer war is unfolding. In Ivory Coast, Heineken-owned Brassivoire and Castel-owned Solibra are putting children and youth in harms way through their relentless beer marketing war.

Nigeria is among the most profitable beer markets for industry giant Heineken. Locked in relentless competition with other multinational alcohol corporations, Heineken has been pursuing the consolidation of its grip of Nigeria. Through the acquisition of additional equity stakes in Nigerian Breweries, in 2020, Heineken ensured growing market domination in the country.

All this has serious consequences. As Big Alcohol is making inroads with their aggressive efforts to convert alcohol abstainers to consumers, communities, policy makers and the World Health Organization are increasingly alarmed.
Alcohol use and related problems, including addiction, are rising fast in Africa – driven by multinational alcohol industry giants in pursuit of profits.

  • For example, in Nairobi, Kenya there are 40,000 bars. That is more than shops and pharmacies combined. 
    • In Kenya out of the 50 million population, an estimated 2 million are alcohol dependent.
  • In South Africa, 60% of all car accidents are said to occur due to alcohol.
    • 75% boys and 40% girls between 15 to 19 years of age consume alcohol heavily in South Africa.
    • Violence is also growing in the country, fueled by alcohol. In fact, 171 people are reported to die everyday due to alcohol.

There are a four key strategies the alcohol industry is deploying across the African region:

  1. Marketing alcohol products as cool and as a way to forget everyday problems;
  2. Aggressive exploitation of largely unregulated alcohol advertising and other alcohol trade aspects (taxation, availability) across the region;
  3. Corporate interference in public health policy making cross the African region; and
  4. Extreme availability and affordability of alcohol.

These four key strategies will be further accelerated through take overs and resulting fights over market dominance, such as in the case of Heineken’s acquisition of Distell.

Heineken in Africa: Pushing for growth at the cost of lives

Heineken entered Africa through the Democratic Republic of Congo. The company owned a share in Congo’s Bralima Brewery for decades before taking a 95% controlling stake in 1987. Since then Heineken has steadily captured markets across the region.

Heineken’s most recent focus has been on Southern Africa. Which is where Distell comes to play a major role. For Heineken the African region has been a ground for experimenting and they use it as a blueprint on increasing sales in countries where there is less demand for beer. In Ethiopia, for example, the company increased their market share from 10% when it entered the country in 2012, to more than 30% in 2018. Meaning they aggressively recruited more people to consume their products.

Heineken’s growth and profits come at a price. That price is paid by people in the African region. The book “Heineken in Africa” by Olivier Van Beemen exposes with compelling evidence and stories the unethical practices of the Dutch beer giant Heineken.

Heineken boasts that its presence on the African continent boosts development. After six years of research, journalist Olivier van Beemen provides a detailed investigation. The truth he uncovered is not a love story: Heineken is exploiting people, communities and countries in Africa. The book details a shocking list of unethical practices employed by the world’s second largest beer producer:

  1. Support for apartheid
  2. Complicity in genocide
  3. Support for authoritarian regimes and collaboration with rebel groups
  4. Corruption
  5. Tax avoidance
  6. Aggressive political lobbying to obstruct, derail and undermine public health policy making
  7. Unethical alcohol marketing, like beer promotion in schools
  8. The beer promotional girls scheme, running for almost two decades
  9. Exploitation of young women
  10. Sexual abuse
  11. Serious problems with protecting worker’s rights
  12. Severe issues with ensuring adequate workplace safety
  13. Misinformation about alcohol’s effects
  14. Fuelling stereotypes about Africa

Sources

Just Drinks:

Anheuser-Busch InBev, Diageo set for Africa fight as Heineken readies Distell acquisition

Heineken lines up Africa play with Distell Group acquisition talks”

Heineken in talks with Distell Group – But, who is Distell Group? – analysis”

““The mainstream part of our wine portfolio is incredibly important for Africa” – just-drinks meets Distell CEO Richard Rushton – Part I

“We’ve got to be a little different and break some of the moulds” – just-drinks meets Distell CEO Richard Rushton – Part II

“This is about moving the ball further up the field”- Just Drinks speaks to Heineken CEO Dolf van den Brink – JUST DRINKS EXCLUSIVE

What are Heineken’s plans for Africa? – focus

Why Heineken’s Distell Group swoop would be all about South Africa – analysis

Why Distell purchase would not make Heineken a spirits or wine player – comment