Heineken is betting R1 billion that more South Africans will switch to its beer – and so far it hasn’t been wrong
- Dutch beer company Heineken and its Namibian partner are increasing the brewing capacity of its Sebideng plant outside Johannesburg by 25% – at a cost of R1 billion.
- Some of the beer brewed there will be going to neighbouring countries, but Heineken says it likes the looks of the South African market.
- The global company's most recent results show SA as a strong driver of its international growth.
- For more stories go to the Business Insider South Africa homepage.
South Africans are drinking more and more Heineken, as well as beer from sister brands such as Amstel, and the Dutch company is taking a rather large bet that trend will continue.
A project to increase capacity at its Sedibeng brewery outside Johannesburg, launched in 2010, will come at a cost of €65 million the company confirmed this week – the equivalent of a little over R1 billion at current exchange rates.
That will increase the brewery's capacity by 25%, said Gerrit van Loo, MD of Heineken South Africa, the joint venture with Namibia Breweries that operates the 9-year-old Sedibeng plant.
Eventually, says Van Loo, the ambition is to reach an annual output of seven million hectolitres, though that veritable ocean of beer will also be intended for export to neighbouring countries and as far afield as Zambia and Malawi.
Heineken says it has a South African market share of 18%, and is still a "challenger company" – with room to grow.
"We are hugely optimistic about South Africa based on our performance in the last three years," said Van Loo. "South Africa is identified as a country that can play a role in our international growth strategy. Our brands, both in beer and cider, are enjoying a high level of acceptance by South African consumers."
Heineken does not provide exact numbers for each of the countries it operates in, but in the Dutch parent company's most recent financial results South Africa featured among the top performers. The flagship Heineken brand grew by double digits in SA, it said, while Amstel "grew strongly". Its cider business, which is headlined by Strongbow Apple Ciders, likewise reported strong growth in South Africa.
Besides the direct investment in brewing Heineken said it is also working with South African suppliers to expand its malting capacity, so that it can use more locally processed barley.
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