Amstel deal leaves SAB with a headache

By Chris Mercer

- Last updated on GMT

Related tags South africa Profit

Heineken has taken back its Amstel beer brand in South Africa,
leaving previous licence owner and rival brewer, SABMiller, facing
an uphill struggle to maintain sales in the country.

Heineken announced this week it had exercised its right to terminate SABMiller's contract to produce, market, sell and distribute Amstel in South Africa.

SAB said it was surprised by the move, which could now dent the brewer's profits and sales in a market that has been fairly sluggish of late.

Amstel has an eight per cent share in South Africa's premium beer sector, according to Heineken, adding that demand for premium beer in the country grew by more than 20 per cent last year.

The beer market as a whole only crept up one per cent.

SAB, which has already experienced a difficult period in South Africa, said it expected the loss of Amstel to knock $80m off its operating profit both this year and next.

But the group attempted to allay fears that losing Amstel would significantly damage its performance.

"SAB will consequently move to bolster its competitive position in the South African premium segment by drawing upon SABMiller's global portfolio of brands and the wealth of experience and expertise it has built up in the market."

The brewer said it was pursuing a number of initiatives, but gave no further details.

Heineken's swoop to claim back Amstel came after the BevCo company bought a 15 per cent share in SAB.

It claimed this represented a threat to Heineken's interests in South Africa.

Heineken said it would build a brewery in South Africa to supply Amstel to the premium market through the Brandhouse Beverages group.

"Regaining the Amstel brand…allows us to further strengthen the existing Brandhouse portfolio and it represents a significant step in building our business in this profitable beer market," said Tom de Man, Heineken's president for Africa and the Middle East.

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