Johann Rupert’s investment holding company Remgro has admitted that its investment in Heineken SA’s business did not get off to a smooth start, saying the Dutch company committed “own goals” on pricing ahead of the tie-up, leading to market share losses.
Remgro said Heineken committed missteps ahead of the 2023 multibillion transaction, which saw the merger of Heineken SA, Distell and Namibia Breweries giving birth to an outfit called Heineken Beverages. The Competition Tribunal approved the sale of Remgro’s controlling stake in diversified liquor group Distell to Dutch brewing giant Heineken in March 2023.
Namibia Breweries, owner of beer brand Windhoek, formed the other leg of an enlarged and more imposing Heineken Beverages.
Remgro has about a 19% stake in Heineken Beverages. The leadership of the JSE-listed investment holding company on Monday took investors into their confidence about the turmoil they were confronted with after the deal was finalised.
We went through an 18-month dark period where we couldn’t exchange information, and we didn’t know what was happening in the business.
— Jannie Durand
Remgro CEO
Remgro CEO Jannie Durand said in the period preceding the transaction’s conclusion the parties could not exchange information, which disadvantaged Remgro.
“We went through an 18-month dark period where we couldn’t exchange information, and we didn’t know what was happening in the business. I am talking specifically about the Heineken beer side. They scored a few own goals,” Durand said.
“The first thing that happened is that they increased prices on some of their products ahead of the market. So they started losing market share. Secondly, what happened is that they had huge supply chain issues,” he said.
“If you put all these factors together, they had a huge impact on the business on the supply chain side and the market share side. The combination created huge losses in that 18-month period. So we were shocked when we came out of the dark period of what was actually happening.”
Durand said supply chain issues at Heineken Beverages have been sorted out but that there are still front-end challenges.
“It’s a market challenge. If you walk into a liquor store, you will see a lot of promotions happening at the moment. It’s a tough market.
“We need to be very astute on the pricing and promotion side, and we compete with AB InBev and smaller players on the wine, spirits and cider front. You’d rather be a consumer than a producer at this point in time, not just on the beer side but on the cider side as well. Across the portfolio, you see deep discounting happening on the front end.”
The merger between Heineken SA, Distell and Namibia Breweries brought household brands together, including Amstel, Savanna, Amarula, Windhoek Lager, Nederburg and Hunter’s.
At the time of the deal’s finalisation, Heineken said it expected the transaction to add more than €1bn in net revenue and €150m in operating profit to its African footprint.
The Dutch group also set an investment plan of more than €500m over five years. However, a year into the deal, Heineken impaired R10bn of the value of Heineken Beverages.
Heineken said on Monday the regional lead for Heineken’s Africa & Middle East operations, Roland Pirmez, will step down in July, with the group’s MD for Mexico, Guillaume Duverdier, set to replace him.
“During his 10-year tenure as regional president for AME, Roland led the business through major volatility, including the Covid pandemic and major currency devaluations,” the company said.
“Under his leadership, the AME region entered a new phase with the acquisition of Distell and Namibia Breweries Limited, creating Heineken Beverages in Southern Africa in 2022, and the announcement of the first major brewery in the Gulf region through the Sirocco joint venture.”
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