Beer in Africa news roundup: Heineken invests in South Africa to take on AB InBev; Rwandan MPs change their tax regime to incentivise brewers to source raw materials locally. Nigerian Breweries’ profits tank as it blames the operating environment and higher excise duties.
South Africa
Heineken will invest R952 m ($66.5m) expanding its Sedibeng brewery, south of Johannesburg, to increase annual production capacity from 5.3m hectolitres to 7.5m hectolitres by the end of H1 2020. The Sedibeng brewery, which also makes beer for export to Namibia and Botswana, is Heineken’s largest brewery outside Europe. Heineken’s market share is around 18% in South Africa and it wants to expand to meet the growing domestic demand for beer and be able to compete with market leader AB InBev (owner of South African Breweries). South Africa is 3% of Heineken’s global production and a key growth market for the brewer. As well as increasing capacity, it has also acquired brands including Soweto Gold and craft beer Stellenbrau in 2017, and taking a 49% stake in Jack Black Beer.
Meanwhile South African Breweries (SAB) has revealed it is increasing innovation in low and non-alcoholic beers, albeit more with a focus on European and US markets. In South Africa, the low and non-alcoholic beer market is still fairly small, but SAB does market the Castle Free and Becks’ Blue non-alcoholic beers and the Hansa Golden Crisp, Flying Fish CHILL LITE, Castle Lite and Lion Lager low alcohol beers.
Rwanda
MPs in Rwanda have approved a draft law in reduce taxes on beer and wine made using local materials. Previously, consumption tax in Rwanda was applied to wine and beer irrespective of origin. The new lower tax rate will apply to products in which 70% of the raw material content by weight (excluding water) is locally produced.
In effect, the excise rate for beer and wine will halve from 60% to 30% for products meeting the local material criteria. It will particularly benefit the two big brewers in Rwanda, Bralirwa (Heineken) and Skol (Unibra).
Nigeria
Nigerian Breweries’ net profits for the six months to end June 2019 have fallen by 41.3% compared to the same period in 2018, down from N18.8bn ($51.8m) to N13.3bn ($36.7m). The company, which is owned by Heineken, is blaming a challenging operating environment and another increase in the excise duty rate that came into effect at the beginning of June 2019. Nigerian Breweries’ net finance cost increased by 24.2% to N5bn ($13.9m) during the six months period, while the finance cost increase accelerated in the second quarter alone by 48%.
Revenues also fell: Nigerian Breweries achieved N170.2bn ($469.2m) for the six months to end June 2019, a 1.4% drop from the N173bn ($476.9m) recorded in the same period in 2018. The only positive is that net revenue has grown 4.4% quarter-on-quarter, buoyed by strong performance in the premium and mainstream segments.
