Africa. Heineken “satisfied” with ownership mix – analyst

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Heineken appears to be happy with its mix of business models in Africa and has little interest in entering the local beer segment, according to an analyst.

In a note on Heineken’s investor day in Lagos yesterday (13 November), Nomura said that the group “continues to appear happy to have different business models across the region”. These include majority control in Nigerian operations, a partnership with Diageo in South Africa, and Coca-Cola/beer combinations in Central Africa.

The major difference to its competitors in the region is its focus on international premium brands, especially Heineken, Nomura said. As a result, the brewer has “no interest in entering the local opaque beer segment,” the note said.

It flagged that, with the brewer’s Asia Pacific Breweries acquisition, emerging markets are set to account for 55% of EBIT and 62% of consolidation beer volumes. Within that, Africa (19% of EBIT) has been “a key driver accounting for 42% of group profit growth in the 2007-11 period”, Nomura said.

Nigeria, the analyst estimates, accounts for around half of Heineken’s African earnings. The country has recognised growth drivers, including strong population growth, a middle-class boom and urbanisation. But, it noted: “Half the population is Muslim, mainly based in the north, which restricts consumption of beer, but provides an opportunity for malt-based drinks”.

Heineken is focussing on high-end on-trade accounts in Nigeria as it looks to compete against spirits, the note said. Around 65% of the country’s beer volumes are from the on-trade, especially in “beer parlours” accounting for 40%, it noted. However, the off-trade is growing faster, with some growth of modern retail from low levels.