International brewing giant Heineken is busy brewing a bold growth path in South Africa and Africa, and not just with its recent deal to acquire Distell.
In September, the Competition Commission recommended the deal, valued at more than more than R38 billion, get the green light from the Competition Tribunal, but imposed a number of tough public interest conditions.
It has to cough up R10bn in investments, including establishing a R400 million Supplier Development Fund among other measures.
Distell’s cider, ready-to-drink beverages, and spirits and wine business will be combined with Heineken’s interests in Southern Africa, including Namibia, and select export markets in east Africa.
The aim is for a world-class, unlisted, Southern-African focused, alcoholic beverages business with a leading international beer and cider portfolio, combining the complementary brands, talent and skills of Distell, Heineken and Namibia Breweries, and which will also have a significant presence in adjacent African markets.
Then at the end of October, the beer brewer, which houses a worldwide portfolio of more than 170 beer brands, announced that Heineken South Africa had taken “a bold step” in moving closer to reducing carbon emissions in all its operations, by launching a solar power plant at its Sedibeng, Midvaal brewery.
“The solar plant began producing power in May this year and is the largest freestanding solar plant powering a brewery in South Africa, and the largest within the Heineken group. The solar plant boasts 14000 panels with an energy capacity of over 6.5MW providing 30% of the brewery’s electricity demand. The 19ha project will generate 17000 MWh per annum, ” the company said in a statement earlier this month.
Richard Kriel, Heineken’s Engineering, Strategic Projects and sustainability manager said, “this project supports Heineken’s Brewing a Better World goal to reach net zero status in all its production sites by 2030.”
In an interview with Business Report, Heineken South Africa shed light around its infrastructural challenges as well as investment plans in South Africa.
While the solar plant is part of its lowering carbon emissions plan, it also helped mitigate some electricity costs, but did not protect it from loadshedding.
“Our priority when supplying the brewery is to first utilise as much solar energy as the solar plant can produce. The municipal feed is the second source, and this supplies whatever the balance is between brewery requirements and solar supply.
“The last resort is to use generators, and this is only during load shedding or outages. The solar plant is currently not tied into the generators, but only into the municipal feed. As a result, the solar plant does not supply any electricity during loadshedding and does not protect us from loadshedding outages.”
Heineken SA said the cost and impact of the power outages on its business were significant, and varied across the several load shedding stages and could as a result be difficult to mitigate.
When asked about other infrastructural challenges in South Africa, the brewer said, “Heineken is not an exception to the rising port issues that are affecting many FMCG (fast-moving consumer goods) companies in South Africa, particularly issues that are sector wide, for example the Transnet strike, as well as the sluggish container offloading procedures at the Durban harbour.”
Additionally, it said poor road conditions, road closures and protests have had a big impact on freight vehicles, not only for the company, but for businesses in general.
“These problems do affect our logistics and have an impact on our finished goods and raw materials being transported to and from the brewery. While we rely on our innovative measures to circumvent issues when this is not possible, we also rely on our ties with industry associations like the Consumer Goods Council to help us explore solutions,” it said.
And while the brewer has also been faced with glass shortages for its products,it hopes that these challenges post-Covid will be rectified without disrupting its customers.
To work around these headwinds, the business aimed to be intuitive, responsive, and agile.
“We understand the markets in which we operate. The environment necessitates that we maintain a constant state of agility to be as responsive in our planning as well as responsible as possible when we face obstacles. Heineken makes every effort to ensure that we have accurate information on potential interruptions,” the company said.
Prior to Covid and the Distell deal, Heineken had other plans fermenting.
Back in 2019, Heineken announced that it would be setting up a production facility on the North Coast with the aim of expanding its geographic footprint to KwaZulu-Natal (KZN) and had chosen the Inyaninga site near Dube TradePort to build a new R6bn brewery over the next two years.
But then Covid hit and South Africa, unlike the rest of the world, imposed strict booze bans amid nationwide lockdowns that cost alcohol firms operating in the country, billions in lost revenue.
In August 2021, Heineken announced it had put on ice its KZN investment plans following the second ban on alcohol sales.
And while Heineken SA said in the interview that the beer market was recovering, it had not reached pre-Covid levels.
“As demand grows, we will continue to assess the viability of a second brewery. For this reason, we are carefully examining the current set of circumstances and are having the necessary conversations with our key stakeholders. Our feasibility assessment takes into account the rise in demand and viable sites, and land availability of the required resources to build a Greenfield, environmentally sustainable brewery.”
Many companies, such as Calgro M3, have been faced with challenges in KZN ranging from labour unrest, to floods, to local government issues.
However, Heineken SA said: “The ongoing KZN challenges have not deterred our willingness to invest in the region at this stage. If we are to resume the project regarding an additional brewery in South Africa, we'll definitely consider KZN. However, a final decision will be informed by the due diligence on the feasibility of this. We would need to ensure the suitable land availability with required resources to build a brewery to meet our needs.”
Currently the brewer is waiting for the Competition Commission, which has approved its offer to purchase Distell Group, to finalise this step as it undergoes the necessary approval processes.
And as it eyes the future with its glass full and Distell nearly in hand, there is no shortage of consumers with a thirst for Heineken products, with core brands such as Heineken®, Strongbow, Amstel, and Windhoek amongst others.
BUSINESS REPORT