Diageo sells sorghum brewer to Zimbabwe’s Delta Corp

South Africa | Zimbabwe’ listed beer and beverage company, Delta Corp, in which AB-InBev is a major shareholder with a 38.2 percent stake, will buy Diageo’s South African sorghum beer-brewer, United National Breweries (UNB).

The transaction, announced on 21 December 2018, will be Delta’s first acquisition in South Africa and its second outside Zimbabwe. Delta bought Zambia’s National Breweries, also a brewer of sorghum beer, in January 2018. Financial details have not been disclosed. Diageo only said that sale proceeds are “not material”.

Sorghum beer is a lower cost product than lager, or clear beer. It is a traditional African drink, brewed from sorghum and fermented with lactic acid, which can contain up to 8 percent ABV. Commercial sorghum beer is often sold with the fermentation process still ongoing.

Delta’s sorghum beer products sell under the Chibuku label. In its 2018 year (ended 31 March 2018) Delta sold 3.8 million hl of sorghum beer, with a turnover of USD 205 million, and 1.5 million hl of clear beer, according to its annual report.

It is interesting to note that the sale proceeds are deemed insignificant by Diageo. Because Diageo reportedly paid over USD 70 million in two tranches (2013 and 2015) to Pestello, a company owned by India’s flamboyant drinks baron VJ Mallya, for full control of UNB.

In 2016, Indian authorities launched an investigation into these transactions because they thought that they were linked to Diageo’s 2012 purchase of Mr Mallya’s United Spirits company in India. Allegedly, the money for UNB was paid into Mr Mallya’s offshore accounts. Investigators are still looking for proof that Diageo helped Mr Mallya shift assets offshore through side deals connected to the sale of United Spirits before his empire collapsed.