South Africa

Heineken feels the pain in South Africa

Heineken has written down the value of its South African businesses by €491 million (R10 billion) due to higher inflation in the country and lower sales. 

This has resulted in the company having to spend more money on promotional activities to try to pick up volumes. 

Heineken revealed this in their results for the 2023 financial year, which ended on 31 December 2023. 

On 26 April, Heineken completed the acquisition of Distell and Namibia Breweries, which have been combined with Heineken South Africa into Heineken Beverages. 

The Dutch giant said the reason for this acquisition was to access significant future growth opportunities in southern Africa and expand its non-beer business. 

Buying Distell gave Heineken ownership of some of the largest ready-to-drink brands in the world, including Savanna and Hunter’s, as well as other brands such as Amarula. 

The purchase of Distell boosted Heineken’s cider business substantially, with this unit producing over 7 million hectolitres. 

Heineken said its cider portfolio outperformed in South Africa, and Savanana’s position as a market leader was enhanced. 

However, this was not enough to make up for declining beer volumes in the country. The new Heineken Beverages unit saw its revenue decline by low single digits. 

The declining sales of its beer brands in South Africa were part of the reason for Heineken significantly writing down the value of the Heineken Beverages business. 

As of 31 December 2023, the company said an impairment of €491 million (R10 billion) had been recorded in relation to Heineken Beverages or 16% of the total value of the business. 

The lower current valuation of the business reflects an increase in the cost of capital over this time period used for impairment testing due to high interest rates in South Africa. 

Inflationary pressures and higher promotional activity to address a more challenging competitive environment also played a part, Heineken said. 

The world’s second-largest brewer said it gained or held volume market share in more than half of its markets in 2023, while net profit still fell about 14% to €2.3 billion (R46.9 billion).

Shares in the Amsterdam-listed company declined 6% on Wednesday, just prior to the close of the market. 

“After a strong 2022, 2023 proved to be challenging,” CEO Dolf van den Brink said in the results.

“Strong pricing to offset very high input and energy cost inflation and volatile macro-economic conditions in some key markets affected our volume momentum,” he said.

“Notwithstanding these difficult conditions, we continued investing in our brands and capabilities.”


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