Diageo dissolves Heineken venture to go solo in SA
by Agency Staff,
2015-07-28 14:07:05.0
DIAGEO said it’s dissolving a joint venture with Heineken NV in SA and neighbouring Namibia three years earlier than planned so the world’s largest distiller can fully own its operations in those countries.
Diageo will receive about £128m from a series of transactions with Heineken and Namibia Breweries, the London-based company said on Tuesday.
The Smirnoff vodka maker will buy out the Dutch brewer’s stake in Brandhouse, a sales and marketing entity, while Heineken will focus on beer, ending a joint venture with Diageo that began in 2004 to sell spirits, beer and cider in Africa.
"Diageo does not want to continue sharing profits with their joint venture partners as their spirits products are growing faster than beer," De Wet Schutte, an analyst at Avior Capital Markets, said by phone.
"The read-through is that spirits in SA are growing well."
SA is Diageo’s fifth-largest spirits market by units sold, and its share of the market has increased from 26% to 40% over the past nine years, the company said. The region is central to CEO Ivan Menezes’ goal to boost the company’s sales from the African continent to 20% of revenue, from about 13% now.
‘Positive move’
"This is a positive move for Diageo," Mr Schutte said.
"For Heineken, it leaves them hanging in a sense. As a smaller player Heineken may find it hard to grow market share."
The joint venture began in 2004, and was reconfigured in 2008 for a 10-year term as the companies sought to counter the dominance in the region of SABMiller, which controls more than 90% of the South African beer market.
Diageo was little changed at 1,820 pence at 9.30am in London, while Heineken rose 0.2% to €70.84 in Amsterdam.
Under the deal, Diageo is selling a 42% stake in DHN Drinks and a 15% stake in Namibia Breweries to Heineken. Diageo will also sell a 25% stake in a brewery in Gauteng, SA to the Namibian beer maker.
"Diageo has the necessary scale to move to the next stage of growth," Mr Menezes said in the statement.
Bloomberg
Picture: THE TIMES
DIAGEO said it’s dissolving a joint venture with Heineken NV in SA and neighbouring Namibia three years earlier than planned so the world’s largest distiller can fully own its operations in those countries.
Diageo will receive about £128m from a series of transactions with Heineken and Namibia Breweries, the London-based company said on Tuesday.
The Smirnoff vodka maker will buy out the Dutch brewer’s stake in Brandhouse, a sales and marketing entity, while Heineken will focus on beer, ending a joint venture with Diageo that began in 2004 to sell spirits, beer and cider in Africa.
"Diageo does not want to continue sharing profits with their joint venture partners as their spirits products are growing faster than beer," De Wet Schutte, an analyst at Avior Capital Markets, said by phone.
"The read-through is that spirits in SA are growing well."
SA is Diageo’s fifth-largest spirits market by units sold, and its share of the market has increased from 26% to 40% over the past nine years, the company said. The region is central to CEO Ivan Menezes’ goal to boost the company’s sales from the African continent to 20% of revenue, from about 13% now.
‘Positive move’
"This is a positive move for Diageo," Mr Schutte said.
"For Heineken, it leaves them hanging in a sense. As a smaller player Heineken may find it hard to grow market share."
The joint venture began in 2004, and was reconfigured in 2008 for a 10-year term as the companies sought to counter the dominance in the region of SABMiller, which controls more than 90% of the South African beer market.
Diageo was little changed at 1,820 pence at 9.30am in London, while Heineken rose 0.2% to €70.84 in Amsterdam.
Under the deal, Diageo is selling a 42% stake in DHN Drinks and a 15% stake in Namibia Breweries to Heineken. Diageo will also sell a 25% stake in a brewery in Gauteng, SA to the Namibian beer maker.
"Diageo has the necessary scale to move to the next stage of growth," Mr Menezes said in the statement.
Bloomberg
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