Heineken Acquires Local Brewer Distell Group Holdings
Heineken has finalised its move to acquire the controlling shares of African brewer Distell Group Holdings Limited.
Heineken’s take-over of competitor Distell had been in the works for several years. In late 2021 Movendi International reported about Heineken’s plans to take-over Distell and use Distell’s infrastructure to drive higher sales of Heineken products in South Africa and the wider African region. But to earn approval, the take-over needed to go through several control measures put in place by various authorities, such as the Namibia Competition Commission and the Common Market of Eastern and Southern Africa.
Heineken CEO and Chairman Dolf van den Brink described the take-over as a bid to “create a regional beverage champion” and become a “strong partner for growth”.
The beer giant’s thirst for growth means Heineken will pursue aggressive tactics to make more people in Africa consume more alcohol, more often. But increased alcohol consumption leads to rising negative health, social, economic, and development problems.
Heineken’s total spending in Newco, the new company formed with the take-over of Distell, is close to €2.4 billion to acquire 65% of shares. At the same time, the beer giant will also acquire Namibia Breweries, thereby taking full control of ‘Heineken South Africa’.
The multinational beer producer now needs to drive up sales and consumption of its products to maximize profits and generate returns from this massive investment. This is placing public health and development interests of the people and societies in Africa in an inherent and direct conflict with corporate interests of beer giant Heineken.
The approved take-over is a clear sign that Heineken is gearing up for a fight with Big Alcohol competitors AB InBev and Diageo in the coming years about market domination and profit maximization in African countries.
Tight conditions for Heineken
South Africa’s Competition Commission’s approval comes with a host of tight conditions for Heineken, such as ongoing business investment, broad-based black economic empowerment, job creation, localisation and supplier development, talent development and contribution to the economic development of the region. According to the Commission, Heineken’s takeover would ‘hit competition in South Africa’s cider category’. The conditions set out by the Commission reflect its attempt to negate the adverse effects of the emerging monopoly and total market domination by the beer giant.
For example, under the terms set out in the agreement between the Commission and Heineken, the brewer is to invest more than $584.4 million to “maintain and grow the aggregate productive capacity” of operations, “maintain aggregate employee headcount” for a total of five years and “not to retrench any employees below specified managerial grades which includes the bargaining units”. Other conditions include the establishment of a share ownership scheme, the formation of a “supplier development fund” and setting up a R&D hub in South Africa.
This approval, which took nearly a year and a half to obtain, was hindered by local resistance due to fears that the acquisition would remove any effective competition within the market.
Why Heineken is pushing into African societies with massive spending
Africa has a young growing population. Sub-Saharan Africa’s population is growing at 2.8% a year — twice as fast as South Asia (1.2%) and Latin America (0.9%). But Big Alcohol giants such as Heineken are aggressively pushing into African societies o drive up alcohol consumption in their relentless push of ever more profits.
While being home to 16% of the world’s population only 5% consume alcohol. The region has always been one with low consumption and most people living alcohol-free. Out of the 10 countries with the lowest alcohol consumption in 2019, four of them were African.
According to alcohol consumption forecasts, the region’s alcoholic products market is set to increase 15% over the next two years. The expansion in beer production is predicted to fuel a 12% rise in beer volumes by 2023.
In Africa Big Alcohol is making inroads with their efforts to convert alcohol abstainers to consumers, specifically targeting the middle class and youth. The World Health Organization is alarmed.
Alcohol use and related problems, including addiction, is spreading fast in Africa – driven by multinational alcohol industry giants in pursuit of profits.
Overall, trends in alcohol consumption, alcohol’s contribution to the burden of disease and death are all pointing the wrong direction.
Without action, Africa could see an increase in both the absolute number and proportion of people consuming alcohol, the amount consumed per capita and heavy episodic alcohol use.
But people, communities, and societies in Africa are already struggling with a heavy and growing alcohol burden.
Big Alcohol drives up heavy alcohol use. The International Alcohol Control estimated how much heavy alcohol consumption contributes to the alcohol market. In five different countries the alcohol industry is relying on heavy alcohol use for major parts of their profits.
- 76% of sales in middle-income countries are resulting from alcohol consumption in excess of the WHO heavy episodic alcohol intake definition.
There is a direct link between alcohol industry products and practices, their profits and population-level alcohol harm.
Four Big Alcohol strategies to take over Africa
- One way is marketing alcohol products as cool and as a way to forget everyday problems.
- The second way is the aggressive exploitation of largely unregulated alcohol advertising and other alcohol trade aspects (taxation, availability) across the region.
- Thirdly, there is a powerful alcohol lobby interfering in public health policy making cross the African region.
- Fourthly, Big Alcohol tries to conquer Africa through extreme availability and affordability of alcohol.