SABMiller has a fight on its hands in the premium beer market and the battle was intensified this week with the official opening of the Sedibeng brewery.
Sedibeng, with a capacity of three-million hectolitres, is a joint venture between Heineken and Diageo Holdings, and cost R3,5-billion to construct.
While it is running at full capacity, volume is expected to be increased to four-million hectoliters by September 2010.
It will be responsible for brewing Amstel, Heineken and Namibian Breweries’ popular Windhoek brand as well as Smirnoff Spin, Smirnoff Storm and Strongbow Cider.
In March 2007, Heineken took on SABMiller on its home turf by winning back the right to brew and distribute Amstel in South Africa, which had previously been held by SABMiller.
This was followed by the announcement that it would be building the Sedibeng brewery, south of Johannesburg.
Absa analyst Chris Gilmour said the loss of Amstel had hit local subsidiary SAB SA hard in the premium beer market, which has a nice fat margin compared to the non-premium beer market.
However, he stressed that we had yet to see a major face-off between Heineken and SAB in the country.
SAB SA has been in decline of late, with margins being squeezed from 25,8% in 2007 to 19,3% in 2009. With the increase in competition, these margins will come under even more strain.
Market figures from September 2009 revealed that Brandhouse — a joint venture between Heineken, Diageo and Namibian Breweries — had managed to raise its share of the premium beer segment to 55%.
Heineken’s share of the premium segment was 12,98% at the end of September, up from 8,73% in 2007.
Johan Doyer, managing director of Sedibeng, said the new brewery had been completed three months ahead of schedule, with the brewing of Amstel, Windhoek and Heineken beginning in September, October and December 2009 respectively.
Sedibeng has also introduced a returnable bottle for Amstel.
Gerald Mahinda, managing director of Brandhouse, said that the returnable quart segment comprised the overwhelming share of the local beer market.
“Our ability to offer our customers our premium product in this format will enhance our capacity to meet consumer demand,” said Mahinda.
Diageo’s CEO Paul Walsh signified the joint ventures intentions by claiming that it aimed to be the best premium drinks company in South Africa, while Heineken’s CEO Jean-Francois Van Boxmeer said the new brewery was all about competing with the 800-pound gorilla – SABMiller.