Heineken expands South African brewery as demand grows

South Africa | Heineken has embarked on a USD 70 million expansion of its Sedibeng brewery in a bid to ramp up capacity to meet the growing demand for its products. The expansion will take Sedibeng’s annual capacity from over 5 million hl to 8.5 million hl by 2020.

Construction is already underway at Sedibeng, southwest of Johannesburg, where the company is producing ciders and beers such as Heineken, Amstel, Windhoek and Strongbow cider. South Africa is the biggest beer market in Africa, with a considerable cider market.

Heineken has decided to shift some of its production volume from Namibia (where it owns a stake in Namibia Breweries, the brewer of Windhoek Lager) to South Africa, where the beers are ultimately sold. But that is not the only reason why the firm needs to increase capacity: Sales of the Heineken brand are currently rising in the two-digits and Strongbow is believed to soon reach a sales volume of 1 million hl.

Most likely, Heineken has been able to eat into sales of Peroni, which was a focus brand for its previous owner SABMiller. After SABMiller’s sale to AB-InBev, Peroni was transferred to the local distributor, Brand 2 Consumer Premium Drinks Company (B2C).

Heineken’s South African chief, Gerrit van Loo, was quoted as saying that Heineken has enjoyed good growth over the past few years and that its brands now account for 18 percent of the domestic beer market.

Referring to its rival, AB-InBev, the domestic market leader, he said: “We are no longer a small mouse. We have been able to compete with the elephant which is AB-InBev.” He added that competing with the company had been “extremely difficult” due to its scale.

South Africa contributes about 3 percent to the Heineken group’s global sales. Beers and beverages brewed at Sedibeng are exported to neighbouring countries like Namibia and Botswana.

Heineken has managed to diversify its portfolio through the acquisition of a few local beer brands, such as Soweto Gold, which it bought in 2017, as well as a 49 percent stake in Cape Town’s craft brewer Jack Black. In March 2017, Heineken fully acquired the Stellenbosch-based craft brewery Stellenbrau.

From what we hear on the grapevine, Heineken is planning to build a brewery in Durban with a capacity of 3 million hl, which is expected to come on stream in 2021.