Beating about the Busch

Budweiser, owned by Anheuser-Busch, bought the sponsorship rights to the soccer tournament for US$100m. The deal means soccer fans will be able to drink only Budweiser beer in and around SA stadiums during the tournament.

Brandhouse, a joint venture between Namibian Breweries, Heineken and Diageo, is building a new brewery at Sedibeng, south of Johannesburg, capable of producing 3mhl — or 300ml — of beer annually. The brewery, which will cost R3,3bn, is due for completion no later than November 2009.

At this stage, Brandhouse is saying nothing about Budweiser. “What we can confirm is that we will be brewing brands that we now distribute through Brandhouse, namely Heineken and Amstel,” says Véronique Schyns, media relations manager at Heineken International.

Analysts say it would make sense to also brew Budweiser, if only around the World Cup. Heineken, which owns 75% of Brandhouse's new brewery, has brewed Budweiser in Europe and Latin America for Anheuser-Busch on a contract basis.

It's not a foregone conclusion. Belgium based InBev, which recently acquired Anheuser-Busch, may prefer to ship in Budweiser, as Pepsi did with its product during the 2003 cricket World Cup.

“InBev is notorious for cutting costs, and it depends whether it's cheaper to brew locally or to import,” says Barnard Jacobs Mellet analyst Grant Swanepoel

SA is not a big market for Budweiser, or indeed for any American beers. Budweiser relaunched in SA in 2003, after its previous importer ceased trading in 2001. At that stage it was brewed in the UK and imported by Xtreme Brands, a distribution arm of Weitnauer Africa.

Swanepoel says it's unlikely Brandhouse would brew Budweiser long-term for the local market. “If it does brew Bud, it would be on a one-off basis for the duration of the World Cup only,” he says. “Otherwise it would mean Heineken opening the door for a competing premium brand into the SA market.”

Heineken is likely to have learnt its lesson from its experience with Amstel. The company had licensed SABMiller to brew Amstel in SA. SABMiller was producing about 2mhl of the beer annually. But as the two brewers began competing globally, Heineken wanted a premium brand in the SA market and decided to produce and distribute the brand itself.

Brandhouse took over distribution of Amstel in March last year. With no local brewing capacity it has had to import Amstel from the Netherlands. That has hurt profit margins as oil prices increased and the rand weakened, just as the company was trying to rebuild market share after an absence of seven months.

Swanepoel says that under SABMiller, Amstel had about 10% of the premium beer market. In January this year it was down to 3,9% and by September to 3%. “There's been an explosion of brands in the premium segment and they've flooded Amstel out of the market.”

SABMiller has launched two new premium brands in the past few months, Grolsch and Dreher. These are in addition to its existing premium beers, Peroni, Miller and Pilsner Urquell.

Swanepoel suggests that if Amstel loses much more ground, Brandhouse may be tempted to bring in additional mainstream beer brands. However, Brandhouse beer portfolio manager John Fitzgerald says the company does not want to enter the mainstream market. “We're intent on growing and leading the premium category.”

He says Brandhouse didn't expect volumes of Amstel to recover overnight, but that the brand is responding to marketing efforts.

SABMiller CEO Graham McKay says beer volumes in SA — traditionally one of the group's most profitable markets — were down 1% for the six months to September, mainly due to the return of Amstel. He says SAB's premium beers, notably Hansa Marzen Gold and Castle Lite, took a hit.

Fitzgerald says Brandhouse expects sales of Amstel to reach about 1mhl for this financial year — more than half of what SABMiller was selling before Brandhouse took over. Even allowing for growth between now and 2010, that leaves plenty of spare capacity for Bud at the new brewery.

The beer may have failed to excite SA tastebuds before, but who knows what an extended soccer related sales blitz could do? Despite this, SABMiller insists it is unperturbed about a potential rival having unfettered access to the market.

“SABMiller does not have any international beer brands linked to football. It wasn't appropriate for us,” says spokesman Nigel Fairbrass.

Source: Financial Mail

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