EAST AFRICA – Multinational brewing company Heineken is seeking to transfer its Eastern African distribution business to a new South African subsidiary called Sunside Acquisitions Limited, that it will jointly own with Distell.
The move is part of Heineken’s take over deal of Africa’s largest cider producer Distell and Namibia’s leading brewer Namibia Breweries forming a juggernaut in the region’s alcohol industry.
The distribution business in question includes operations in Tanzania, Uganda, Kenya, and South Sudan are valued at R885.5 million (US$58m).
Heineken, which currently fully owns the regional alcohol distribution businesses, will end up with a diluted but a controlling 65 percent stake in Sunside while Distell will hold the remaining 35 percent.
“In terms of this agreement, Heineken cedes its rights and delegates its obligations under all distribution agreements entered into by HBBV (Heineken Brouwerijen B.V.) in respect of the import, marketing, sale, and distribution of Heineken products in Uganda, Kenya, and South Sudan,” the Dutch multinational said.
As part of the transactions, Distell will also bring its interests in its subsidiaries including Kenya Wine Agencies Limited (Kwal) to Sunside which will be part of the bigger Newco entity.
Newco, the unlisted public company, will house Distell’s big portfolio of best-selling local brandy and whisky, as well as its cider brands, other ready-to-drink beverages and its big range of wine.
These portfolios will be combined with Namibia Breweries Limited and Heineken’s 75% shareholding in Heineken South Africa and certain other fully owned export operations in Africa.
“The transaction will create a world-class, Southern-African-focused, alcoholic beverages entity (Newco) with a leading beer and cider portfolio, combining the complementary brands, talent, and skills of Distell, Heineken, and NBL, to better serve consumers across the region,” Distell said.
“Newco will also have a significant presence in adjacent African markets. Newco will benefit from strengthened route-to-market and scale that is expected to unlock revenue and cost synergies, which will improve its ability to grow and compete with the other players in the region.”
Meanwhile, a second entity will be formed Capevin, to house Distell’s imported drinks i.e., Scotch whisky unit and Gordons gin business. The shares in this entity will be unbundled.
The ongoing transaction will result in a stronger operation for Heineken that will grow and compete more effectively against rivals such as Diageo who is a dominant player especially in the East African market through East Africa Breweries Plc.
Distell’s outside of home-markets are key
Distell’s operations outside South Africa are key even if the bigger chuck of its earnings come from its home market.
The group’s revenue in the half year ended December 2021 increased by 15.8% to R17.8 billion (US$1.15 billion) on 12.1% higher volumes, which is more than 20% higher than pre-pandemic levels.
Domestic revenues increased by 22.9%, with volumes up by 15.4% while focus markets on the continent, outside the Southern African Customs Union, grew revenue by 5.3%.
This was largely driven by Mozambique, Zambia and Tanzania as a result of our accelerated route-to-market (RTM) investments.
Kenya posted a resilient performance, particularly over the peak season, despite prolonged domestic channel closures due to government-imposed restrictions for the majority of the trading period.
The Africa region contributed 65.3% to foreign revenue, with its contribution to Group revenue comprising 15.9% in the current period.