Heineken seeks to harness growth in Africa with two deals

The world’s second-largest wine maker said on Monday it would take over control of Distel Group Holdings Ltd, which makes cider, wine and spirits, in a deal worth about 2.2 billion euros, which is equivalent to $2.52 billion . Heineken also said it would buy the remainder of Namibia Breweries Ltd., the largest brewer in Namibia, which it does not already own.

Heineken said it plans to bundle the businesses with its South African operations to form a new entity. The deal puts the Dutch company to better compete with global liquor companies Diageo plc and Budweiser owner Anheuser-Busch InBev SA, both of which sell beer in Africa. Heineken also has large footprints in Nigeria, Rwanda and Burundi.

The move comes as Heineken’s chief executive, Dolph van den Brink, seeks to cut costs and accelerate growth at the brewer, of which he took the reins last year. The pandemic has hit Heineken’s business, like its rivals, in several major markets. The company’s third-quarter sales, released last month, were hit hard by restrictions in Vietnam due to COVID-19, although sales in Africa grew strongly after a ban on the sale of alcohol in South Africa from June to July.

Mr van den Brink said on Monday that the new business would be well positioned to capture significant growth opportunities across southern Africa.

The company said the new business will sell Heineken beer as well as other major brands such as Savannah Cider, Windhoek Beer, 4th Street Wine and Amarula Liqueur, as well as strengthen Heineken’s distribution network and bargaining power in the region.

Many in the booze industry see Africa as a promising growth market due to its growing population and low per capita alcohol consumption.

“Africa has the highest long-term potential for beer consumption,” Bernstein analyst Trevor Sterling said in a report earlier this year. Barring South Africa and Angola, two relatively prosperous countries, the rest of Africa drinks about 12 liters of beer per capita, compared to 73 liters per capita in North America, he said.

“We think there is no doubt that Africa will be one of the growth engines for the beer category in the coming decades, with rising incomes and a demographic boom that will increase the drinking age population by more than 30% over the next decade. . alone,” wrote Mr. Sterling. Before the deal, he estimated that Africa made up about 7% of Heineken’s profit.

Monday’s deal, which will cost Heineken €2.5 billion in total, also gives the company exposure to other types of alcohol beyond beer.

Jefferies analyst Edward Mundy said buying the wine and spirits business isn’t inherently suitable for Heineken, but Distel’s deal underscores Mr. van de Brink’s appetite for growth and openness to explore new categories.

This story has been published without modification in text from a wire agency feed