Diageo has entered into an agreement for the sale of United National Breweries (UNB), its sorghum beer business in South Africa, to Delta Corporation as the global leader in beverage alcohol reported today. The transaction, which is subject to regulatory approval, is expected to close in the second half of F19. Sale proceeds, which are not material, have not been disclosed.
The transaction marks the second step out of the beer market in South Africa. In 2015, Diageo and Heineken dissolved their joint ventures in South Africa and Namibia and Diageo sold its 42.25% stake in DHN Drinks and its 25% stake in the Sedibeng brewery in Gauteng, South Africa to the Dutch brewer. Diageo said at that time following 11 years of cooperation between the two companies, national distribution and sales networks were in place, along with marketing platforms and the company wanted to focus on spirits and ready-to-drink beverages. 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. For this purpose the global leader in drinks established Diageo South Africa in the same year.
UNB, the other company which was now sold by Diageo, has a rich and varied history. It started out as scattered breweries under the control of various Development Boards, Municipalities and Management Boards which brewed for their local consumers. These operations were amalgamated under the control of Industrial Development Corporation (IDC) by a directive of the Government, in 1990.
This conglomerate was one of the first black economic empowerment companies in South Africa under the name of National Sorghum Breweries (NSB). In 1996 the UB Group of India acquired a 30% stake and eventually increased it to 100%.
In the year 2000 UNB acquired the traditional beer business from Traditional Beer Investments (TBI), a subsidiary of South African Breweries (SAB).
Diageo bough 50% of UNB in January 2013 and took full control of UNB by buying the remainder in 2015 from its partner Pestello Investments. Both times the UK based drinks maker had to invest US$36m.
Delta, the buyer in the new deal, is Zimbabwean biggest company by market value with a diverse portfolio of local and international brands in lager beer, traditional African beer (TAB), Coca-Cola franchised sparkling and alternative non-alcoholic beverages. It has investments in associate companies whose activities are in cordials and juice drinks, wines and spirits.
Last year, Delta already bought National Breweries of Zambia from Heinrich’s Syndicate, a subsidiary of AB InBev. National Breweries of Zambia, not to be confounded with UNB, is the leading producer of traditional African beer in the landlocked country in south-central Africa. (inside.beer, 14.10.2017)
Traditional African beer (TAB) is produced from locally grown sorghum and maize and is mostly opaque as opposed to the clear lager beers, which are brewed with malt, maize and hops. While the more expensive lager beers are considered a premium product, which appeal to Western style oriented, wealthier and better educated people, traditional African beers are cheaper and mostly consumed by the poorer and less educated population.
In South Africa, Sorghum beer is a traditional drink of the Zulu people. It is stronger than normal beer and contains up to 8% alcohol. It is often sold with the fermentation process still ongoing. Sorghum Beer is deeply rooted in every aspect of the Africans' lives. Not only is this traditional African beer a social tool for much mirth in the tree shades and around the fires in Africa for longer than history can remember, it is also an integral part of African cultural and religious practices as almost every ceremony requires traditional beer to show respect to ancestral spirits whom the Africans revere.