Heineken writes down SA operation by R10bn as beer sales drop

Motheo Khoaripe interviews investment analyst and market commentator Chris Gilmour on The Money Show.

Heineken has written down the value of its South African beverage business by around R10 billion (€491 million).

The Dutch brewer completed its acquisition of Distell and Namibia Breweries in 2023, combining them with Heineken SA to form the new business Heineken Beverages.

Heineken Beverages is the owner of brands including Amstel, Amarula and Savanna.

Reporting its 2023 full-year results, Heineken N.V. said the higher cost of capital and a competitive local beer market led to about a 16% loss in value.

Investment analyst and market commentator Chris Gilmour says much of its problems are really an impairment relating to Distell.

"They paid up because they wanted Distell. They particularly wanted those cider brands because I think they can see that beer itself doesn't really have that much left in it, and realised that cider was the growing component... And they've actually done very well out of that..." 

"....but it is a huge huge impairment, R10 billion out of a total consideration of around R40 billion is massive in anyone's terms. We don't have the granular  details to make a proper analysis, but it seems that the market generally for beer is a bit depressed. This will apply to South African Breweries (SAB) as well."

Chris Gilmour, Investment Analyst

While the finer details like market share figures aren't available from the two brands, Gilmour notes that, up until a few years ago, Heineken was certainly making inroads into SAB's market share.

"They don't have mainstream brands - only Heineken and Amstel I think; nothing to take on Castle and Castle Light... SAB has got the edge when it comes to mainstream product."

"It's not only Distell though; they've got a few problems in places like Vietnam and Nigeria and of course they took a huge impairment in Russia when they couldn't operate there anymore."

Chris Gilmour, Investment Analyst

Heineken is betting on single digit growth for this financial year.

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