Posted March 09
Real men smarten up
Beer in South Africa | REAL
MEN don’t eat Quiche, they don’t wear pyjama trousers in bed and
they certainly don’t drink beer out of a glass. That’s what
longneck bottles are there for. Ms Manners may have been
offended by the sight of REAL MAN glugging his beer straight
from the bottle, but since the two hardly ever move in the same
circles, REAL MAN tended to get away with his less than posh
nosh table manners. Not for much longer, apparently. South
African Breweries is spending good money on TV commercials that
have only one message: Eh dude, drink your Peroni out of a
Johannesburg last week – I
have always wanted to write that sentence. Because I can now
claim to have survived a weekend of watching South African
telly. I still get the frisson of excitement at the thought of
television in South Africa. South Africa must have been one of
the last countries on this planet to get television. That was in
1976. Hard to imagine, but South Africa’s fortysomethings grew
up without the box. Friends have told me that as a (admittedly,
white) adolescent in those days you were stuffed on a weekend if
you did not have friends with a pool or a tennis court.
I don’t really know what kind
of programmes I was expecting. Nigerian soaps with convoluted
plots or heated political debates, perhaps. However, no one
prepared me for the tedium tediosum of South African weekend TV.
In retrospect, I cannot imagine what was worse: no telly – or
REAL MEN’s telly.
Ok, I know a thing or two of
macho telly. There is the Italian variety with endless chat
shows, where elderly man with clothes too tight and too gaudy
for their age make eyes at scantily-clad busty blondes, who
dance or just look pretty.
Then there is the whacky
Japanese version of late night game shows, where a contest might
entail having to slide (grope?) across 30 young bikini babes
covered in some sort of lubricant. Weird, isn’t it?
But nothing, really nothing,
can beat the South African type of endless sports matches. On
Friday they start out with rugby, on Saturday they move on to
cricket and on Sunday they round it all off with nonstop
football. That way, REAL MEN manage to while away the weekend
with their coach potato friends, glued to the box, nibbling
biltong and swilling copious amounts of Castle Lager.
Yeah, I know all the clichés
why women don’t like watching sports programmes. Rugby is too
complicated. Cricket is too dreary. And golf is played by people
without a love-life. Fortunately, there is football. It is easy
to understand, some players look cute and if they score, they
take off their kit. As matches go, football flows nicely. Even
better, it is played the world over.
That must be one of the
reasons why brewers like to air their beer commercials during
football matches. Actually, it was a good enough reason for me
to suffer through a weekend of sports programmes. I did it for
purely educational purposes. There was nothing edifying to it
and after two days, I began to wonder why there are so few
desperate housewives in South Africa who have taken to breeding
Rottweilers? Wouldn’t it be nice if the puppies knew some tricks
like salivating into hubby’s briefcase or chewing his bedroom
The answer to my useless
musing is of course that many South African households now have
cable TV and a second TV set.
Watching South Africa’s beer
commercials was an altogether puzzling experience. Perhaps I am
mistaken, but if the beer commercials are anything to go by,
REAL MEN have become an endangered species. REAL MEN who sport a
mullet, wear shades at night, drive cars real hard, never read a
manual or ask for directions and hence have no clue why women
always need more shoes – these men now seem to be given over to
self-doubt and fear.
Or why would South African
Breweries dish out funds on promoting its international Dreher
and Peroni brands with commercials which are mind-boggingly
boring? In the case of Dreher, you get to see a bottle that is
emptied into a glass, in the case of Peroni they show you a
glass that is filled with beer from a bottle. The message?
Geddit? Both beers have to be drunk from a glass.
Obviously, Dreher in South
Africa is not the cool metropolitan Dreher brand that you would
know from Hungary. SAB brew it locally so it is marketed as a
domestic premium brand – like Castle Lite and Hansa Marzen Gold.
But what has possessed SAB to give Peroni, its über-cool,
high-design brand, the Dreher-bottle-to-glass-makeover is beyond
me. The Peroni commercial is naff and a serious let-down if you
have seen the “La Dolce Vita” video that SABMiller had produced
for the re-launch of Peroni some years ago and which you can
still find on YouTube.
Real men wear pink
If you ask me, the funniest
beer commercial at the moment happens to be the one for Windhoek
Lager. It has the Afro-American actor Louis Gossett star as some
chap’s conscience personified. Just as the young bloke is about
to take a sip from a frilly pink cocktail which a lady across
the bar has stood him, Mr Gossett asks him: “Are you leading la
vida loca? Are we in Vegas? No. We don’t drink pink drinks.” Mr
Gossett passes him a Windhoek lager with the tag line: Always
keep it real.
If we accept that
advertisements are created to appeal to the irrational aspects
of men’s psyche by playing on their anxieties and their need to
belong, then South Africa’s beer drinkers appear to worry deeply
about turning into ridiculous cissies. Otherwise, why would beer
ads tell them to “butch up” or refine their table manners?
Beer in South Africa is still
very much a man’s beverage. Never mind that women are said to
contribute 25 percent of the beer volume. Evidently, so
ingrained is still the stereotype that men braai (i.e. barbeque)
and women make salads that beer advertising targets only the
all-important core black males, also known as “Regular Joes”,
young adults (“Kwaito Kids”) and trendy white males (“the
Funnily, even marketers with
South African Breweries (SAB), the ur-cell of SABMiller, have
been unable or unwilling to turn this insight to their
advantage. Unless, they said to themselves: “If women chose our
beers without much ado, we can put all our marketing rands where
the results are.” Into REAL MEN.
This is not to say that SAB
have resisted change when it comes to advertising beers and
creating brand identities. Far from it. It has been SAB’s forte
to know when to abandon strategies and formulas which had
outlived their usefulness and when to adjust to changing market
For decades, SAB brewed a
portfolio of mainstream beers such as Castle, Hansa, Carling
Black Label and Castle Milk Stout. They may have all been
mainstream beers – all 25 million hl of them – yet they were
carefully targeted at different consumer groups. The same
applied to Amstel, brewed under license since 1964, and
Guinness, SAB’s two erstwhile premium brands, which were meant
to appeal to a more discerning clientele.
South Africa’s beer market has
known little internal competition. At SAB, they even joked: “We
are not a monopoly. We are just a temporary sole supplier”.
Meaning: “come in and compete against us if you think you stand
a chance.“ Many international brewers must have weighed their
options. In the end, they all dropped the idea because SAB are
such a formidable opponent. SAB do not just brew beer. They also
have a Coca-Cola license (PepsiCo withdrew from the market in
1997) and cover the wine, cider and ready-to-drink segments
through a 30 percent stake in South Africa’s Distell Group.
Without any competition to
speak of, the two-digit growth rates that SAB enjoyed during the
1980s could have turned the brewer into a complacent giant,
content with improving their economies of scale. But the good
times were not to last. Since the late 1990s, SAB’s brand
portfolio has experienced a massive shake-up against a backdrop
of stagnating beer sales. SAB’s mainstay brand, Castle Lager,
which in 1998 represented over 50 percent of SAB’s sales, began
its dramatic decline, as did the Lion brand. Today, Castle’s
volumes are less than half of what they used to be and Lion,
SAB’s oldest brand and victim of a failed re-branding, is no
Fortunately, SAB managed to
raise the volumes of their Hansa and Carling Black Label brands
at the same time, the latter through its association with black
pride, so that the losses and gains eventually balanced out –
and before the South African media could ask the pertinent
question as to what had caused this reversal in sales.
Market research shows that the
South African beer market has remained more or less flat for the
past ten years. But that did not rule out internal shifts and
swings. With South Africa’s economy booming many consumers have
traded up. Hence, the premium segment has grown to the detriment
of the mainstream brands: 25 percent between 1998 and 2007. The
main beneficiaries were Windhoek lager, imported from Namibia,
Friend or foe
That must have been a really
worrisome development for SAB, especially since in 2003 their
Amstel licensor, Heineken, together with Diageo, bought
Interbrew’s stake in Namibia Breweries, the producer of Windhoek
Lager. With Heineken setting up shop in neighbouring Namibia,
SAB’s dealings with Heineken turned awkward. Right under their
very eyes, Heineken gradually morphed from partner to competitor
whose long-term intentions could not have been to SAB’s liking.
SAB’s managers were not daft.
They could see what Heineken was getting up to. The only way out
was to acquire an international beer brand themselves and to
bring it into South Africa. The first opportunity arose when
they bought Miller Brewing in the United States in 2002. The
following year Miller Genuine Draft (MGD) was launched.
Interestingly, SAB had
acquired the Czech breweries Plzensky Prazdroj – maker of
Pilsner Urquell – and Pivovar Radegast as early as 1999, yet the
regional barons did not seem to think that Pilsner Urquell would
resonate well with South African consumers. After all, what’s
sexy about a central European beer brand? What can it mean to
high-earning consumers who, with a beer glass in hand, want to
show off to their peers? Why should these status-flashers be
prepared to pay a 40 percent premium to a Castle beer if they
cannot impress anyone with their knack to pronounce the “qu” in
Urquell with bravado and confidence? Why indeed?
SAB’s worry-mongers and
hand-wringers have been proven right. Pilsner Urquell was first
brought into the country in 2004. Even today, its sales volume
lags far behind MGD’s.
If some of SAB’s top brass
thought that a central European brand like Pilsner Urquell was
dowdy, what did they make of the Italian Peroni brand, which
SABMiller bought in 2003? Did they think it frumpy? Heavens, no.
In SAB’s cultural iconography, Italy was not associated with
fast food pizza, spaghetti and bulging Chianti bottles. In the
minds of SAB’s executives, Italy was style, design, classy cars
and a temptress led astray in Rome’s Fontana di Trevi. “Guardi,
una birra Peroni è cool.”
Admittedly, the Peroni brand
concept may take some time to sink in with South Africa’s beer
drinkers. But you couldn’t say the same about Grolsch. Buying
Grolsch in 2007 was an act of pure genius. Grolsch is the next
best thing you can have to a Heineken. It is a good beer, its
name almost sounds Germanic (not bad for a beer’s pedigree) and
it comes in an iconic swing-top bottle.
Through cunning, patience and
perseverance, SAB, in only a few years, got themselves a nice
portfolio of international beer brands, which they could play
around with and see which ones would fly. Still, it must have
been hair-tearingly frustrating for them that, despite all their
money and effort spent on attracting consumers to their new beer
offerings, they never succeeded in establishing all of them as
true premium brands. So all the while they toiled and slaved,
the sales of Amstel and Windhoek just continued to climb.
Don’t mention “Windhoek Lager”
to any SAB executives. That will have them reach for their
anti-acid pills. Out to spite SAB, Heineken and Diageo did not
change Windhoek’s pro-Reinheitsgebot sales tactics. They would
probably defend themselves by saying “never change a winning
team”. Or some such platitude.
Originally, when the local
white Namibians and Beck’s still called the shots at Namibia
Breweries, it was just a petty-minded, knee-jerk reflex against
SAB to sell Windhoek Lager as an all pure beer, implying that
SAB brewed “chemical beers” (whatever that is). But under the
new owners the “100 percent pure” claim began to sound truly
bizarre – since neither Heineken nor Diageo are known as
A blow to their system
SABMiller’s "big ego, big
talent"-strategists would have known that matters between them
and Heineken were slowly coming to a head. That’s why, contrary
to their public statement, they cannot have been all that
surprised when Heineken took them to the court of arbitration –
and won – over some legal quibble to do with SABMiller buying
the Colombian brewer Bavaria in 2005.
To the rest of the world, the
news of the termination of the Amstel licence dropped like a
bomb. In March 2007, SAB were forced to stop the production of
Amstel following Heineken cancelling SAB's licence.
Whether SABMiller’s Colombian
deal only served as a pretext for Heineken to get out of the
licensing agreement with SAB or not – at the end of the day
Heineken succeeded in extracting the Amstel brand from SAB’s
embrace, thus making sure that they would now get all of the
profits and not just some paltry licensing fee from the 2.3
million hl of Amstel SAB brewed and sold.
Without doubt, the loss of
Amstel represented more than a financial loss to SAB. The annual
sales of the Amstel brand constituted revenues of approximately
USD 300 million and earnings (EBITA) of USD 80 million.
The cancellation of the
licence meant above all that SAB finally had to learn
“competition”. In 2007, Amstel accounted for 9 percent of the
South African beer market. Without the Amstel volume, SAB’s
market share dropped to 87 percent.
Many brewers the world over
would have thought that sort of market share rather comfortable.
Not so SAB. For one, Heineken is a competitor who also knows how
to play rough. For another, the action was to shift to the
premium segment (2008: 17% of total), where SAB suddenly found
themselves stripped of their long-time top-seller.
At the time of break-up,
visitors to SAB’s headquarters in Johannesburg could feel some
apprehension wafting through the executive suites. Competition
had suddenly become the new rule of the game. Competition! Just
imagine! Competition can lead to price wars, costly promotions,
packaging proliferation, higher marketing spends – the full
nightmare scenario, which has the guys from finance scream in
their sleep. South Africa is SABMiller’s single most profitable
market. In 2008, the market contributed only 17 percent to the
company’s global volume – including the less profitable soft
drinks volumes – but 25 percent to EBIT. In other words, one
dollar out of four SABMiller earn in South Africa.
For a while, luck was on SAB’s
side. SAB were granted a respite. The cancellation of the
licence did not mean that Heineken was capable of satisfying
demand for Amstel immediately. The Windhoek brewery was already
running at full capacity. Moreover, a multi-million hl expansion
there did not make any economic sense if planning for the
long-term left no alternative to a production base in South
Heineken must have had plans
for a brewery in Johannesburg in a drawer for some time. All the
same, Heineken’s and Diageo’s local subsidiary, Brandhouse
Beverages, a Cape Town-based company, has had to import Amstel
for more than two years. Only in late August this year will
Heineken have its own 3 million hl brewery up and running at a
cost of EUR 260 million – probably just in time for the 2010
football world cup.
Although Heineken has had to
grapple with the disadvantage of having to bring in Amstel from
as far away as Europe, the brewer has managed already to reclaim
about a third of the Amstel volume last brewed by SAB. Even SAB,
at a recent investor conference on South Africa (March 2009) had
to admit that this had been no small achievement.
Bring in the troubleshooter
If you think that turbulence
is your friend and that crisis presents a fantastic business
opportunity, then you might dare swap seats with Norman Adami.
Mr Adami is the sort of hands-on operator, who epitomises the
undeterring can-do attitude. Remember: “when the going gets
tough, the tough get going”? That must be his life’s motto.
Nonetheless, Mr Adami is not to be envied. His is the task to
lead SAB into the “era of competition” while improving their
economic performance. That’s easier written than done.
Mr Adami is not a novice to
the South African beer market. He ran SAB’s show there in the
1990s before he was sent to the U.S. to sort out Miller Brewing.
But even Mr Adami, with all his operational skills and
expertise, failed to turn around Miller Brewing. Despite his
best efforts, Miller’s market share would not climb back above
Therefore, after his departure
in the summer of 2007 (for very sad but noble personal reasons),
SABMiller did the only logical thing: in October 2007, SABMiller
and Molson Coors said they would combine their U.S. operations
to create a business that would be the second-largest U.S.
market player behind Anheuser-Busch.
Back home in South Africa,
Tony van Kralingen in 2003 took over an operation that was in
good shape. Helped by a strengthening rand, he nudged up
profitability and launched all these new international brands.
But SAB found it impossible to ignore the fact that these
launches and rising input costs meant operating margins fells.
At the South Africa investor conference in March 2009, SABMiller
confessed that EBIT margins begun to slide in the financial year
Perhaps the re-appointment of
Mr Adami as Managing Director and Chairman of SAB in October
2008 – after Mr van Kralingen had been whisked off to a global
corporate position in London – helps shed light on how critical
SABMiller’s bosses view the situation in South Africa. The
business has “not over-performed in years” in the words of a
former SABMiller executive, the competition is heating up, and
the economy is heading for a nose-dive. GDP growth this year is
estimated to drop to 1.3 percent from 3.2 percent in 2008. As if
this were not enough, the country is gearing up to host the 2010
football world championship.
Mindful of the fact that
analysts and investors are breathing down their necks, Mr Adami
and his team will have the words of departed MD Mr van Kralingen
ringing in their ears: “Because of SAB’s enormous dominance of
the local beer and soft drink market, the company and the
country are a bit joined at the hip. SAB’s success and the
country’s success are highly correlated.”
The heavy promotional activity
for the June 2010 FIFA World Cup notwithstanding, South Africans
seem to be in two minds about it. Many South Africans are not
that keen on football, being ardent cricket and rugby
supporters; others say they cannot afford the tickets, which
will be pricey for the average South African; some worry that
the huge infrastructure schemes will not be ready in time, while
others fret that numbers of visitors from abroad will not be
anywhere near as high as expected because of the global economic
“I have a team”
Take it for granted that most
South Africans have more serious problems to agonize over,
including a general election on 22 April, than getting worked up
over a series of football matches more than a year away.
However, there is a trifle
matter to deal with, ahem, that this report has not yet touched
upon and which is of great interest to South Africa’s brewers:
namely what are Anheuser-Busch InBev planning to do as the
“official beer” sponsor of the FIFA World Cup? The deal means
soccer fans will be able to drink only Budweiser beer in and
around the stadiums during the tournament.
In 2003, Anheuser-Busch had
teamed up with a local importer to re-introduce their
best-selling beer into South Africa’s upscale bars, trendy
restaurants, five-star hotels and select liquor stores, after
their former importer ceased trading in 2001. At that stage it
was brewed in the UK and imported by Xtreme Brands, a
distribution arm of Weitnauer Africa.
But no matter how hard I
looked, I could not find the beer in the trendy restaurants that
I visited during my stay.
A rumour that has been going
round for some time suggests that Brandhouse could brew
Budweiser if only around the World Cup. Heineken has brewed
Budweiser in Europe and Latin America for Anheuser-Busch on a
It's not a foregone
conclusion. A-B InBev may prefer to ship in Budweiser, as
PepsiCo did with their product during the 2003 Cricket World
When I approached A-B InBev’s
press office for some clues as to what they are planning to do I
received this statement from their spokesperson.
“Anheuser-Busch InBev is the
‘official beer’ sponsor of the 2010 FIFA World Cup in South
Africa, and of the 2014 FIFA World Cup in Brazil. We are working
hard to partner with FIFA, both globally and locally, to
translate the passion for the Game among millions of adult beer
drinkers into increased volume and brand equity, and into deeper
I am afraid we are not able to
provide you with more information at this point in time.”
Now, go figure.