South Africa’s beer battle

South African Breweries (SAB) currently has the edge over Heineken in South Africa, with brands such as Black Label and Castle remaining dominant. 

However, this can change as consumption habits shift towards the ‘beyond beer’ category of ready-to-drink alternatives – an area where Heineken has a significant edge. 

Euromonitor research on South Africa’s alcoholic drinks landscape revealed that alcohol consumption grew slowly in 2023 as consumers searched for value amid a rising cost of living. 

South Africa’s high unemployment rate continued to put pressure on disposable income, limiting growth in consumer spending. 

SAB and Heineken have shifted towards more cost-effective packaging and larger product sizes to combat this. 

For example, Heineken has launched a new 650 ml returnable bottle to make its premium product more affordable. 

One of the key trends Euromonitor highlighted was the shift away from premium beer brands towards mass-market alternatives. 

This has put Heineken under tremendous pressure in South Africa, with the Dutch giant writing down the value of its local business by R10 billion. 

In some cases, premium lager prices increased above inflation, deterring consumers from purchasing this option. 

Heineken’s beer brands are over-indexed towards the premium end of the market, with its namesake lager, Heineken Silver and Amstel, priced above mass-market competitors. 

Nevertheless, overall demand for beer continued to grow in 2023, driven in part by the rising popularity of flavoured lager, which recorded another year of double-digit volume growth. 

SAB has been a major beneficiary of this trend, cementing its position as the dominant player in this market and posting record volumes in the first half of 2024. 

Euromonitor’s research showed SAB gained market share in 2023 as Heineken’s premium lager brands recorded volume declines while Black Label and Castle grew strongly. 

The company said that this may mark an end to the premiumisation trend seen in the past few years. 

Heineken does have a significant opportunity to dominate South Africa’s growth beyond the beer category. 

The merger of Heineken South Africa, Distell and Namibia Breweries is now officially branded under the Heineken Beverages umbrella.

Euromonitor said this should allow the Heineken brand to gain leadership in Southern Africa and strengthen competition with SAB. 

In particular, the acquisition of the Savanna and Hunter’s brands gives the company a dominant position in this space. 

Remgro said this is the main driver of value in the new business unit. The investment holding company has an 18.8% stake in the South African unit. 

Heineken also views this segment of the business as very attractive, enabling the Dutch giant to capitalise on future growth opportunities as beer consumption declines globally. 

In its latest investor conference call, Heineken said its brands in this category continue to outperform their competitors. 

CEO Dolf van den Brink said the company is seeing strong momentum in sales of its Savanna brand and, encouragingly, its Bernini products. 

The company also said it would increase investment in brands with the greatest long-term potential growth opportunities – singling out its South African brands, among others. 

Euromonitor’s research shows that beer consumption is declining globally as populations age. If the same trend occurs in South Africa, then the beyond-beer category will become increasingly important to both SAB and Heineken. 

SAB has recently refreshed its Brutal Fruit range and introduced Black Crown, a pre-mixed gin and tonic range, to compete in this category. 

Its CEO, Richard Rivett-Carnac, previously ran Distell, and the company backs the expertise he gained from running the dominant player in the beyond beer category to grow its market share.

SAB has its own advantages. The 2016 merger of SAB and AB InBev created the world’s largest brewer, promising benefits from unprecedented scale. 

More importantly, it gave the South African unit access to AB InBev’s premium brands, such as Stella Artois and Corona, which it now sells under licence in the country. 

This has allowed it to gain ground against Heineken’s premium lagers and ride the premiumisation wave while dominating the mass market.