Heineken, the Dutch brewer, has terminated its licensing agreement with South African Breweries for the Heineken brand in South Africa, the company announced yesterday.
"It is important for Heineken to have control of its brand in such a large beer market as South Africa, where the premium segment is expected to grow in the coming years. Taking full control will enable Heineken to grow the brand's volume and market share overtime," the brewer said in a brief statement.
Heineken is currently working on a sales force and distribution network and expects to have these ready in a matter of weeks. In order to serve consumers and customers, Heineken and SAB have agreed that SAB will continue to sell and distribute Heineken beer until the end of April 2003.
The decision to drop SAB as its local partner may in fact have more to do with the fact that SAB is now a major competitor of Heineken after its acquisition of the Miller Brewing business from Philip Morris last year. It follows the winding up of similar agreements with European rival Interbrew after the acquisition of the Bass and Whitbread businesses in the UK which meant that Heineken's beer was being brewed by one of its chief rivals.
The expansion of the SAB portfolio with the acquisition of the Miller business means that the company now has its own international premium brands to add to its core Castle lage business in South Africa. As well as the US brand Miller Genuine Draft, the South African market will also see SABMiller's premium Czech beer brand, Pilsner Urquell, for the first time.
Peter McLoughlin, marketing director of SAB in South Africa, said: "Following the transaction to acquire Miller in 2002, it was inevitable that there would be certain changes. Today I am very excited to be able to announce the introduction of two of our world-renowned brands, Pilsner Urquell, the world's original golden beer, and Miller Genuine Draft, the icon US beer brand, to the South African market. Both these brands will extend further the quality and choice of beers available to South African consumers in the growing premium market."
It is unclear whether SAB's decision to add its own brands to its South African portfolio was the reason for the winding up of the Heineken agreement or whether SAB extended its portfolio only after the Dutch group had decided to take back its own brand rights. Either way, South African beer drinkers will have a wider choice of brands to choose from, and both companies clearly hope to build sales of their own brands now that they have direct control of their distribution.