In order to achieve permission for its proposed purchase of wine, spirits and cider company Distell Group, Heineken has agreed to divest its cider brand Strongbow in South Africa and other SACU (Southern African Customs Union) countries.
Last November, Heineken announced to buy a 65% stake in Distell for ZAR 38.4 billion (USD 2.44 bn), creating a new regional group to compete with the much larger beer group AB InBev and spirits group Diageo. (inside.beer, 15.11.2021)
The deal included the flavored alcohol beverages (FABs), and wine and spirits operations, as well as Namibian Breweries . Excluded from the deal are certain spirit brands including Scotch whisky brands Black Bottle, Bunnahabhain, Deanston, Scottish Leader and Burn McKenzie, as well as gin brands Gordon’s and Tobermory.
According to the commission, adding Distell’s cider brands to Heineken could lead to a 65% market share in the country, giving it a dominant position in South African which could substantially prevent or lessen the competition in the relevant markets.
The South Africa's Competition Commission therefore ordered that Heineken
- not only dispose of its international cider brand Strongbow but also
- that the merged entity invests ZAR 10 billion (USD 585 million) to maintain and grow the production capacity of its operations and related facilities in South Africa over a five-year period,
- to implement an Employee Share Ownership Scheme that will transfer more than ZAR 3 billion (USD 173m) of equity directed to workers of the merged entity in South African operations
- to establish a R400 million (USD 23m) supplier development fund to invest in small businesses, while R200 million (USD 12m) contribution will be made to promote localisation and growth initiatives within the country.
- to maintain employee headcount for a period of five years following the merger and not to retrench any employees below specified managerial grades.