Diageo announced today it has agreed to sell Guinness Cameroon S.A., its brewery in Cameroon, to Castel Group for GBP 389 million (USD 468m). On completion, Castel will take over the production and nationwide distribution of Guinness in Cameroon under a license and royalty agreement.
Castel and its subsidiary Les Brasseries du Cameroun - Groupe SABC is already clear market in Cameroon with a market share of about 74% followed by Guinness Cameroon SA with 15% and Union des Brasseries du Cameroun, owned by Cameroonian billionaire Kadji de Fosso with about 10%. Last month, another billionaire, Samuel Foyou, opened the fourth brewery in Cameroon. (inside.beer, 29.6.2022)
After the takeover of Guinness Cameroon, Castel Group will even more dominate the market with a market share which comes close to 90%. As CameroonWeb reports, the sale has not yet been approved by the authorities. The new general manager of the brewery in Cameroon, Stéphane Descazeaud, has already met Prime Minister Dion Ngute, who expressed skepticism and said he cannot approve such a transaction at this stage. Cameroon's President Paul Biya is likely to have the last word on this, but he is said to own shares in Les Brasseries du Cameroun - Groupe SABC, so a positive decision is expected.
Diageo cited a strong growth of Guinness in Cameroon and a strategic review that identified capacity constraints as main reason for the sale. “This agreement provides a robust platform for Guinness expansion in both production and distribution via Castel’s five brewing sites and their national distribution network,” Diageo said in a press statement. And further “Diageo’s flexible, asset-light beer operating model enables it to select the most appropriate structure and route to market, based on local conditions, supporting greater efficiency and profitability.”
The disposal of the business in Cameroon is consistent with Diageo’s long-term strategy concerning its beer assets. In 2015, Diageo sold in a USD 780-million deal its brewing interests in Malaysia, Singapore and Jamaica to Heineken and concluded license agreements for its brands. The sale included a 57.9% stake in Jamaican alcohol-producer Desnoes & Geddes which is known for its beer brand Red Stripe.
Commenting on the sale of its business in Cameroon, Dayalan Nayager, President Diageo Africa, said: “Guinness has outgrown its existing brewery in Douala as a result of its strong performance. Under this new agreement, the brand will have both expanded brewing capacity and distribution. It will remain part of the global Guinness family through direct marketing oversight. We look forward to unlocking even greater potential through this agreement with Castel, ensuring we continue to have great tasting Guinness across Cameroon.”
Guinness marketing in Cameroon will continue to be managed by the Guinness Global Brand Team, who will set strategy with dedicated Diageo resources in market working alongside Castel.
Gil Martignac of Castel noted: "Since its creation, Castel has been constantly on the move. The planned acquisition of Guinness Cameroon marks a new milestone in its development, both in Africa and in Cameroon where it has been recognized as an economic player for many years through SABC. This acquisition expands the company's portfolio in the strategic stout market and strengthens its historical partnership with Diageo in many other markets. Guided by its entrepreneurial spirit, Castel continues its growth momentum and its commitment to promoting the economic and social vitality of Cameroon and the African continent."
The transaction is expected to complete in the first half of fiscal 2023, subject to regulatory clearances. When completed, the transaction will result in an exceptional gain on disposal of approximately GBP 250 million (USD 300m) after tax. The transaction’s impact to pre-exceptional eps in the first full year will be immaterial.