In 2020, Delta Corporation completed the acquisition of United National Breweries (UNB) from Diageo Plc, a deal that had been in the pipeline since 2018. According to various reports, Diageo acquired UNB after purchasing the remaining 50% of the business for US$36 million in 2013 and alluded to a c.US$41 million aggregate exceptional loss upon the sale of the business in 2020.
UNB started on a depressed note under Delta’s control as it was impacted by South Africa’s ban on alcohol sales which was part of the Covid-19 lockdown restrictions that came into effect in March 2020. UNB manufactures sorghum-based alcoholic and non-alcoholic beverages. The company’s major sorghum beer brands include Chibuku, Ijuba, Leopard and Tlokwe. The brewer also manufactures non-alcoholic sorghum-based beverages under the Mageu and City Jive brands.
The acquisition of UNB extends Delta’s footprint into South Africa. The southern African economy is among the largest consumers of alcohol on the continent. According to Statista, the country is ranked third in Africa after Nigeria and Eswatini, with an alcohol consumption per capita of 9,3 litres.
The global alcohol consumption per capita, in comparison, was 6,2 litres in 2018. In a report on South Africa by the World Health Organisation, beer accounted for the largest share in alcohol consumption (56%), followed by wines and spirits with 18% apiece. Other types of alcohol (fortified wines, rice wine, palm wine and other fermented beverages made of banana, sorghum, millet or maize) constituted the remaining 8%.
The sorghum beer market in South Africa comprises three main players, namely UNB, Awethu Breweries and Tiger Brands’ King Food Corporation. UNB is estimated to have a market share of around 90%, with the remaining competitors accounting for the remaining 10%. The sorghum beer market, however, has been struggling to grow as consumer preferences shift from opaque to clear beer brands. This is made evident by the increasing per capita consumption of clear beer and a corresponding decline in the per capita consumption of traditional beer in South Africa between 1961 and 2016.
Further, prices of traditional beer have remained constant at R0,0782/litre since 2013 while other alcoholic beverages have registered significant price growth over the same period. According to South African Wine Industry Statistics (SAWIS), prices of wines grew by an average of 78% and spirits by an average of 87% between 2013 and 2021.
Based on these trends in South Africa’s alcoholic beverages markets, the opaque beer market is […]