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Heineken looks to tap growth in Africa with duo of deals

Heineken NV has agreed to buy two African alcohol companies, broadening the beer giant’s exposure to a region considered among the world’s most attractive growth markets for booze.

The world’s second-largest brewer said Monday it would take control of Distell Group Holdings Ltd., which makes cider, wine and spirits, in a roughly 2.2 billion euro deal, equivalent to $2.52 billion. Heineken also said it would buy the remainder of Namibia’s largest brewer, Namibia Breweries Ltd., that it doesn’t already own.

Heineken said it plans to bundle the businesses together with its South African operations to form a new entity. The deal positions the Dutch company to better compete with global liquor companies Diageo PLC and Budweiser owner Anheuser-Busch InBev SA, both of whom sell beer in Africa. Heineken also has large footprints in Nigeria, Rwanda and Burundi.

The move comes as Heineken’s chief executive, Dolf van den Brink, seeks to cut costs and accelerate growth at the brewer, of which he took the reins last year. The pandemic has affected Heineken’s business, like that of its rivals, in several big markets. The company’s third-quarter sales, released last month, were badly hit by restrictions in Vietnam because of Covid-19, though sales in Africa grew strongly following a ban on booze sales in South Africa from June into July.

Mr. van den Brink said Monday the new business would be well positioned to capture significant growth opportunities across southern Africa.

The company said the new business would sell Heineken beer as well as other major brands such as Savanna cider, Windhoek beer, 4th Street wine and Amarula liqueur, as well as strengthen Heineken’s distribution network and bargaining power in the region.

Africa is seen by many in the booze industry as a promising growth market because of its growing population and low per-capita alcohol consumption.

Africa has “the highest long-term potential upside to beer consumption,” Bernstein analyst Trevor Stirling said in a report earlier this year. Excluding South Africa and Angola, two relatively rich countries, the rest of Africa drinks about 12 liters of beer per capita, compared with 73 liters per capita in North America, he said.

“We think there is little doubt that Africa will be one of the engines of growth for the beer category in the decades to come, given rising incomes and a demographic boom that will increase the drinking-age population by over 30% in the next decade alone,” wrote Mr. Stirling. Before the deal, he estimated Africa made up about 7% of Heineken’s profit.

Monday’s deal, which will cost Heineken €2.5 billion in total, also gives the company exposure to other types of alcohol beyond beer.

Jefferies analyst Edward Mundy said that while buying a wine and spirits business isn’t a natural fit for Heineken, the deal for Distell underscored Mr. van de Brink’s appetite for growth and openness to explore new categories.

This story has been published from a wire agency feed without modifications to the text

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