Heineken and Namibian Breweries (NBL), that are running together a brewery in Sedibeng outside Johannesburg/South Africa, have announced to invest ZAR 952 million (USD 66.51 million) in its plant to enlarge it from 5.3 million hectoliters to 7.5 million hectoliters by 2020.
The company has already started construction works in its 9-year-old brewery, which was erected as a joint venture between Heineken, Diageo and NBL.
In 2004, the three companies established DHN Drinks, as a distribution company for the combined beer, RTDs and cider portfolio of Heineken, Diageo and NBL. NBL owned 15.5% of DHN Drinks with the rest split between Heineken and Diageo. The company sourced beer from NBL’s facility in Windhoek/Namibia and later also from the Sedibeng Brewery in Johannesburg/South Africa. The latter was co-owned by Heineken (75%) and Diageo (25%).
Following a transaction announced in 2015, DHN Drinks’ beer and spirits portfolio was split, with Diageo taking full ownership of the spirits portfolio. NBL now holds a 25% stake in DHN Drinks and a 25% stake in Sedibeng with Heineken holding a 75% stake in both entities.
Just two weeks ago, it became known that South Africa’s Competition Commission has recommend the sale of Diageo’s Smirnoff ready-to-drink (RTD) range of products to Heinekens competitor South African Breweries, which is part of AB InBev (inside.beer, 25.7.2019). The deal also includes the production of brand including Smirnoff Storm, Guarana, Spin, Pine Twist and Berry Twist which are currently manufactured at Heineken’s Sedibeng plant.
Sedibeng Brewery was built in 2009 and had originally a capacity of 4.5 million hectoliters. As part of the new agreement with Heineken, NBL has migrated the agreed volumes of beer to Sedibeng.
"We are hugely optimistic about South Africa based on our performance in the last three years," said Gerrit van Loo, Managing Director of Heineken South Africa. "South Africa is identified as a country that can play a role in our international growth strategy. Our brands, both in beer and cider, are enjoying a high level of acceptance by South African consumers."
However, Heineken’s market share in South Africa is still small compared to AB InBev and is only accounting for 18% of the local beer market. We are no longer a small mouse. We have been able to compete with the elephant which is AB InBev," he said, adding that competing with the company had been "extremely difficult" due to its scale.