July 2022

As Namibia’s competition watchdog chews over Heineken’s takeover of drinks group Distell and Namibia Breweries, it is important to remind ourselves why the continent is so attractive for brewers. Beer is all about demographics, and Africa’s are among the most promising. By one estimate, its combined population will be larger than either China’s or India’s by 2050. Provided population growth goes hand in hand with economic growth and political stability, global brewers would be daft not to invest in Africa. Beer consumption rose 33 percent between 2010 and 2019, according to Kirin Holdings. Whether it continues to rise at a fast clip, depends on job creation. Otherwise, Africa’s demographic boom risks turning from an asset into a liability.

Namibian watchdog is likely to approve Heineken-led consolidation. A ruling is expected for the end of August. A member of Namibia’s competition authority already hinted in June that the deal could receive the green light. This is despite concerns that the transaction, which includes Distell Namibia, will give Heineken a mighty monopoly.

Namibia Breweries is the market leader in beverage manufacturing. It has an 80 percent beer market share, compared with some 20 percent for AB-InBev. AB-InBev has operated a brewery in Okahandja since 2015.

Heineken plans to buy the 50,01 percent interest of Ohlthaver & List (O&L) in NBL Investment Holdings, which holds 59.4 percent of Namibia Breweries. The remaining 40.6 percent is publicly held. The deal values Namibia Breweries at almost NAD 8 billion (USD 470 million).

O&L is a privately-owned Namibian conglomerate. Its executive chairman, Sven Thieme, said the decision to sell a controlling stake in Namibia Breweries was emotional and tough, but important for the growth of the family empire. He explained that the group is planning to use the proceeds from the sale to invest in a meat business.

Many think the official reason for the sale sounds a bit weak. The beer business has long been O&L’s major profit spinner. Estimates put the brewery’s EBIT contribution to O&L’s profit in excess of 50 percent. So, why sell it now?

The South African competition authorities are still assessing the deal, as it will inevitably lead to greater concentration in the alcohol market.

(Photo by John Rodenn Castillo on Unsplash)

After several decades, Castel and Coke have terminated their licensing contract at the end of June 2022. Rumour has it that Castel wanted a better deal and Coke said no. Rivals were quick to step in, not least Portuguese beverage group Refriango in Angola, where Castel has since hammered out a contract to bottle Pepsi products. Being the major brewer in Angola, Castel may succeed at switching Coke drinkers to Pepsi.

Putting a positive spin on the end of the Castel-Coke partnership, media said this would give the privately-owned French group the opportunity to reorganize its African business. Castel is the number two brewer in Africa, behind AB-InBev, and a major beverage producer. It enjoys several monopolies, particularly in French-speaking regions.

Meanwhile, French prosecutors opened a war crime probe linked to Groupe Castel in Central African Republic. The allegations that a local unit of Africa’s second-ranked brewer made payments to local militia were made by The Sentry, an American NGO, in an August 2021 report. The prosecutor will follow all leads, Reuters reported.

The Sentry’s report accuses a subsidiary of Castel of paying bribes to a militia, UPC, in order to secure the firm’s factory and sugar cane fields, plus the free movement on key roadways necessary for the provision of supplies.

The Central African Republic is a vast, but sparsely populated country of some 5 million people. After decades of internal strife, it has deteriorated to a phantom state. Although there is a government, it has little power outside the capital Bangui. Armed rebel groups – 14 by the World Bank’s count, plus the Wagner Group – control two-thirds of the country, including access to mining sites.

Therefore, it really depends on your point of view – the moralist’s versus the realist’s – if you regard the alleged payments as “bribes” or as “coerced protection money”. In any case, those who do not pay up will likely see their investments go up in flames, literally and metaphorically.

Diageo to sell Guinness Cameroon to Castel for USD 470 million.

“Natural” monopolies may be sneered at, but they are nice to have. Once France’s Castel takes over Guinness Cameroon, it will be home alone in this important African beer market. Going forward, Castel will brew Guinness under licence.

Explaining the sale, Diageo said that sales of Guinness are on a roll, leaving its brewery in Douala to face serious capacity constraints. Hiking output would have required a huge investment, not just in a new brewery but also in logistics and sales. Diageo deemed the risks too high, since Castel has long been the market leader in Cameroon. In the end it was simply: “if you cannot beat them, join them.”

(Photo by Joshua Anand on Unsplash)

There are two things Nigerian media really get passionate about: politics and beer. So, you can imagine the outcry after the Minister of the Federal Capital Territory (FCT), Mohammed Bello, in early July 2022, prohibited the sale of roasted fish and alcoholic drinks in parks and gardens in Nigeria’s capital, Abuja, after 6pm. This is to prevent “criminality” in the parks.

Located between Nigeria’s Muslim north and its Christian south, Abuja was planned in the 1970s as a garden city, to provide its mostly civil servant citizens with pleasant greenery. Quickly these parks were dotted with bars and eateries for Abuja’s 3 million inhabitants to relax after work.

Vendors and publicans protested against the ban and filed a suit against the Minister, calling his action “undemocratic” and “unconstitutional”. If the ban were upheld, vendors would lose their livelihoods, as punters mostly visit those bars at night.

Beer is important to Nigerian life and its economy. The beer sector contributed USD 2.3 billion to Nigeria’s GDP, generated 309,200 jobs, and flushed USD 526 million into the government’s coffers in 2019 (our last “normal” year). In 2019, Nigeria ranked 30th out of 70 top beer markets in the world.

Nigeria’s beer market is dominated by three stock market-listed breweries: Nigeria Breweries (Heineken), Guinness Nigeria (Diageo) and International Breweries (AB-InBev). In 2021, Guinness overtook International Breweries and became number two brewer in the country, behind Nigeria Breweries.

AB-InBev and Ukraine: do-gooders in a quandary. To support Ukraine, AB-InBev launched its Ukrainian beer brand Chernigivske in several markets around the world in May. The brewer promised to donate at least USD 5 million from this initiative to humanitarian relief efforts. But Ukrainian staff, who were offered to come to Belgium for shelter, could soon find themselves stranded in Brussels. AB-InBev decided, on 1 July, to withdraw paying for the Ukrainians’ accommodation at the end of August, The Brussels Times newspaper said.

AB-InBev’s three breweries in Ukraine are shuttered because of the war. To support its 1,800 Ukrainian staff, most of whom continue to be internally displaced, AB-InBev gave them the choice of either remaining in the west of Ukraine or fleeing to the Czech Republic and Belgium.

The offer would have been only partly charitable. AB-InBev’s Ukrainian staff is highly qualified, and many will speak English. Letting them go because of the war would have been self-defeating.

Not only will AB-InBev need to plan for after the war. In the meantime, it has plenty of positions to fill elsewhere in Europe. Europe’s labour market is swept clean. Unemployment across the EU was 6.1 percent in May, though much lower in Germany (2.7 percent) and the Czech Republic (2.4 percent).

(Photo: Brauwelt)

After more than a year of legal wrangling, Japan’s Kirin exits Myanmar. Kirin will sell its stake in Myanmar brewery (MBL), a joint venture with military-owned Myanma Economic Holdings (MEHL), to the brewery for USD 164 million.

Human Rights groups had put pressure on Kirin to exit the country after the military toppled the elected government, led by Nobel Peace Prize laureate Aung San Suu Kyi, in February 2021.

Kirin holds a 51 percent stake in MBL and MEHL 49 percent. The Japanese company had set up a plan to sell shares to MBL directly rather than to MEHL, to avoid potential criticism. However, the transaction – a share buyback – will still give MEHL 100 percent control of the company, media say.

Archive