Signal Hill Products, the producer of Devil’s Peak, Striped Horse and Miller Genuine Draft beer brands, is building a R1bn brewery in Midrand that is set to start packing products in August.
The manufacturing facility, which will employ 250 people, will mainly produce a range of Signal Hill Products brands, with a key focus on Strongbow cider.
The company acquired Strongbow from Heineken as one of the conditions imposed by the competition authorities, which required the Dutch beer group to offload the cider brand, for its acquisition of Distell to be approved.
Signal Hill Products co-founder Derek Szabo told Business Times the company committed to building a brewery able to produce Strongbow and some of its other beverages, as part of the competition authorities’ conditions. It will also have the capacity to package third-party products. “It’ll produce all our brands, and have the capacity to make 200-million litres [a year],” he said.
Signal Hill Products has a licence to produce and distribute Miller and Bavaria, and other small local brands.
The new brewery will boost its share in the flavoured alcoholic beverages (FABS) market, as the company has mainly focused on beer. “We are a premium beer business; however, we have a FABS brand called KIX Spritzer, which is quite big now, as well as Strongbow, which make up the majority of our portfolio volume” said Szabo.
We built a small brewery in Somerset West where we did [about] 10 cases a batch. Then we increased to 100 cases a batch ... With the new brewery will be at 100,000 cases a batch. So it's been quite a journey of scale over 15 years
— Derek Szabo, co-founder of Signal Hill Products
The FABS market was “ growing faster than beer. It’s been growing at 10% plus per year for about 10 years now. So it’s a very attractive category. A lot of beer consumers are moving into that sort of sweet beer environment.”
The company also produces beer for others, such as rock band Fokofpolisiekar, whose brand is Fokof beer. “We have been producing the brand for seven, eight years now,” said Szabo.
Signal Hill Products also has a partnership with St Francis Brewing Company, a microbrewery based in the Eastern Cape, to make Beach Blonde Lager and Wildside Session IPA beers. “We partner with microbrewers and run the breweries for them to produce their branded products.”
The South African alcohol industry contributes around R226bn to the economy and supports 500,000 jobs.
Signal Hill Products, which has 500 employees, has about 2% of the total beer and FABS market, which is dominated by SAB and Heineken. Their brands are more prevalent in Gauteng and the Western Cape, and the company wants to gain traction in other provinces.
Signal Hill Products exports its brands to Botswana, Eswatini, Namibia, Lesotho, Zimbabwe and Zambia. This year, it entered into a joint venture with Dutch brewer Royal Swinkels to partner in their microbrewery in Nairobi, Kenya.
Royal Swinkels owns the Bavaria brand. “It [Kenya] is a tough market, and we haven’t taken off yet. The market is dominated by Diageo, but we’re still young, and we have aspirations to grow the business.”
The markets outside South Africa where Signal Hill has a presence are “very small compared to South Africa. But for a small player like us it's still an interesting scale, even where some big operators are dominant. If we can get a small share, it will be meaningful”.
Signal Hill Products was founded in 2011 after multiple trips to Europe and the US by Szabo and his co-founder Russell Boltman, where they noticed the wide variety of beers compared to the local market, which was dominated by the likes of Castle Lager. “So, we said, surely South African consumers want variety as well.
“And we partnered with someone who was brewing beer at home, and we built a small brewery in Somerset West, where we did 10 cases a batch. Then we increased to 100 cases a batch in our second brewery in Salt River, Cape Town, then 10,000 in our first scale brewery in Epping. With the new brewery will be at 100,000 cases a batch. So it's been quite a journey of scale over 15 years.”
Szabo and his partners self-funded the business for the first five years. After raising money for its first big brewery in Epping, Cape Town, in 2017, it attracted external shareholders who invested in the company. He said there have been some talks of takeover offers in the past years but shareholders decided that the company remain independent.
“At the moment, we’re happy with the scale that we’re growing. I love the fact that we keep growing and keep hiring more people and I think South Africa needs that. We've just got to keep fighting and staying alive and scaling. This industry is highly competitive and we have survived for 15 years. If we need a strategic partner to go to the next level, then we will assess it.”
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