Heineken and Diageo end joint ventures in South Africa and Namibia | Southern

The move brings to an end partnerships with both Heineken and the Ohlthaver & List group, which holds a majority stake in Namibian Breweries.

Diageo and Heineken have agreed to dissolve their joint ventures in South Africa and Namibia, so the British spirits maker and Dutch brewer can pursue their own growth strategies in the countries. All associated shareholder loans will also pass to Heineken.

Diageo will receive about £128m from a series of transactions with Heineken and Namibia Breweries, the London-based company said on Tuesday.

“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.

Indeed, Diageo noted “a significant opportunity for our brands
given how they have outperformed beer brands despite being under-weight in terms of numerical distribution in main market”. “The read through is that spirits in South Africa is growing well”.

When contacted by just-drinks today, a spokesperson for Diageo said the firm remains committed to beer, highlighting that South Africa is the company’s fifth-largest spirits market in volume terms.

Diageo, whose brands include Johnnie Walker, Smirnoff and Guinness, said it had become market leader in spirits in South Africa with a 40-percent share and felt it had the necessary scale to go it alone.

“Diageo has the necessary scale to move to the next stage of growth”, Chief Executive Officer Ivan Menezes said in the statement.

Diageo has then agreed to acquire the remaining shares it does not already own in the sales and marketing joint venture – brandhouse Beverages Limited – making it a wholly owned subsidiary of Diageo.

Nevertheless, despite speculation about how easily Diageo’s beer interests sit with its burgeoning spirits empire, the company clearly views beer as an important route into the wider African drinks market, where branded offerings are rising in tandem with the continent’s expanding middle class.

Jean-François van Boxmeer, Heineken’s CEO & chairman, added: “We have benefitted enormously from our close collaboration with Diageo”.

Diageo said the joint venture has allowed all parties to gain “critical mass” in South Africa, allowing them to “move forward with their respective commercial agendas”.