Brewing in South Africa
Prior to incorporation in the year 1895, Castle Brewery had operations in Cape Town to serve the steady expansion of a settler community from the mid-17th century. The demand for beer prompted the first Dutch governor, Jan van Riebeeck, to establish a brewery at the Fort (later replaced by the Castle in central Cape Town) as early as 1658 - beating the first wine production by six months. In the same year, Pieter Visagie brewed the first beer from the waters of the Liesbeeck River. Over the next 200 years, brewing made its mark in the Cape and beyond. Noted brewers of the time included Cloete at the Newlands Brewery; Ohlsson at the Anneberg Brewery; Jacob Letterstedt at Mariendahl Brewery - also in Newlands: Hiddingh at Cannon Brewery; Martienssen at the Salt River Brewery, and a second Cloete in Kloof Street.
One of the key figures in the story of Newlands, and in the annals of South African beer manufacturing history, was Swede Anders Ohlsson, who sailed for Africa, aged 23, in 1864. Initially, he imported Swedish goods and timbers, and developed an extensive trade network and a solid business empire. Then he turned to brewing, basing himself at Newlands, where he produced Lion Lager.
In 1955, the South African government introduced a heavy tax on beer products causing many consumers to switch to spirits. However, the subsequent shock to the South African beer industry proved to be a blessing in disguise for SAB. A year later, the company purchased its two main competitors, Ohlsson's and Chandlers Union Breweries, both of whom were struggling under the depressed demand for beer, and the group was renamed South African Breweries.
After the acquisitions the new and larger SAB was able to rationalize operations, thereby reducing costs and increasing profitability. Donald Gordon's Liberty Life Strategic Investments (LIBSIL), which was associated with JSE-listed financial services and property holding company Liberty Holdings, maintained a large stake in the company for most of the 1990s. By 1998, SAB commanded approximately 98 per cent share of the South African beer market and was considered one of the lowest cost producers of beer in the world.
In 1999, after listing on the London Stock Exchange to raise capital for acquisitions, the group purchased the Miller Brewing Company in North America from the Altria Group in 2002, and changed its name to SABMiller.
Within South Africa, SAB distributes beer through its extensive network, augmented by a fleet of independent truck drivers (called owner-drivers) comprising mainly former employees, many of whom had received help from the group to start their own businesses. SAB has invested billions of rands in this owner-driver project since inception.
Although several international brewers, such as the UK's Whitbread, had tried to enter the South African market, all had thus far failed to gain significant market share. From time to time, new startups also tried to challenge SAB's monopoly, but these had either gone out of business, or been acquired by SAB. A case in point was National Sorghum Breweries (NSB), "a black business consortium" founded in 1990, and the first new player in the beer industry in more than 10 years. "SAB’s supremacy is under threat," observers said, and some thought that within a few years NSB could achieve 10 per cent market share. Instead, the company ran into financial difficulties and failed to gain any significant share of the market.
This does not mean that SAB's position could never be threatened. In 2004, a new company was established in South Africa known as Brandhouse through a joint venture of Diageo, Heineken and Namibian Breweries. Brandhouse started marketing, selling and distributing some of the world's top premium brands such as Heineken and Windhoek and in March 2007, the 40-year agreement between SABMiller plc and Heineken N.V. which allowed SAB Ltd to brew and distribute Amstel Lager in South Africa, was terminated, sparking a new era of competition for the industry. At the same time, Heineken announced its intention to build its own brewery in South Africa. SAB Ltd launched a new premium brand, Hansa Marzen Gold shortly thereafter and continued its expansion into premium brands with the launch of Dutch heritage beer, Grolsch, following SABMiller's acquisition of Koninklijke Grolsch N.V. in early 2008. Dreher Premium Lager was launched in South Africa the same year, and the company has made a number of innovations in the spirit cooler and apple-ale categories in recent years.
In October 2016, Anheuser-Busch InBev acquired the entire SABMiller company which then became a business division of Anheuser-Busch InBev SA/NV and ceased trading on the worldwide stock markets.[15][16] As a result, South African Breweries and Carlton & United are now owned by Anheuser-Busch InBev SA/NV.[30]
List of breweries
- Alrode Brewery, Gauteng, -26.31347°N, 28.13644°W
- Chamdor Brewery, Gauteng, -26.15339°N, 27.79453°W
- Ibhayi Brewery, Eastern Cape, -33.83772°N, 25.54192°W
- Newlands Brewery, Western Cape, -33.97319°N, 18.46581°W
- Polokwane Brewery, Limpopo, -23.86389°N, 29.47253°W
- Prospecton Brewery, KwaZulu-Natal, -29.99144°N, 30.92847°W
- Rosslyn Brewery, North West, -25.62389°N, 28.08997°W
Soft drinks
In 1925, SAB expanded into other beverages after purchasing a large share in Schweppes (soft drinks). In 1960, the group purchased a controlling interest in Stellenbosch Farmer's Winery, which, along with Distillers Corporation, contributed R98 million to group earnings in 1997.
1997, SAB subsidiary, Amalgamated Beverage Industries, purchased another Coca-Cola bottler, Suncrush, thereby doubling market share to approximately 60 per cent of South African soft drinks. PepsiCo, SAB's only competitor, withdrew from the market in 1997 resulting in the liquidation of Pepsi franchisees. Pepsi, however, re-entered the South African market in 2006.
In December 2004, SAB Ltd acquired 100% of Amalgamated Beverage Industries Limited (ABI), which became the soft drink division of SAB Ltd, and the largest beverage company in South Africa was created.
Plate glass
In 1917, the group began to venture into unrelated businesses when it agreed to take over a failed glass manufacturer, Union Glass, to counter the acute shortage of bottles during World War I. In 1954, Union Glass merged with Consolidated Glassworks and this business was sold off in 1960 to Anglovaal Industries. The company became an important player in international glass manufacturing when it acquired the Plate Glass Group in 1992.
The Plate Glass Group traced its roots to a British immigrant and entrepreneur who, in 1897, established a plate glass manufacturing operation in Cape Town, South Africa. Eventually the company became a leading producer of safety and bullet-proof glass for automobiles. In 1987 the company launched a new subsidiary in the United States in partnership with SAB and Anglo American. When Glass medic, a US-based windshield repair and replacement company, was acquired in 1990, the South African parent company merged the subsidiaries under the name Belron International. Belron became a base from which to launch further acquisitions. When SAB purchased Plate Glass in 1992, it was renamed Shatterprufe Limited.
Belron had by 1998 become the world's leading producer of automotive replacement glass, with some 1,865 retail outlets in North America, Europe, Australia, and Brazil. Growth had come mainly through acquisitions. In 1997, Belron acquired several leading brands, including Standard Autoglass in Canada, thereby becoming "the largest player in the North American Markets." Worldwide market share was on the order of 18%, and SAB envisioned further expansion in the coming years:
In Europe, Belron was opening an average of 12 new outlets per month. While sales had increased by five per cent in 1997, earnings had declined eight per cent to R255 million as a result of the borrowing costs associated with new acquisitions and expansion.
In 1997, recognising the need to enhance long-term shareholder value, SAB returned to its core beverage business, locally and internationally, selling off or closing non-core operations over the next few years.
Entertainment and hospitality
Although SAB (then called Castle Breweries) had established the first pub in South Africa in 1896, it did not begin to invest heavily in service industries until 1949 when an aggressive expansion thrust saw some £4.5 million invested in hotels and pubs, as well as additional brewing facilities.
In 1969, these interests were merged with a hotel chain owned by Sol Kerzner, to form a separate subsidiary known as Southern Sun Hotels. Kerzner remained with Southern Sun as its managing director for several years thereafter. In 1983 Kerzner left SAB, but remained a significant shareholder in the company.
Southern Sun eventually grew to become the leading hotel chain in South Africa, with franchises awarded by Holiday Inn and Inter Continental Hotels. By 1998, this subsidiary owned 74 hotels with 12,200 rooms, or about 22 per cent of industry capacity. Southern Sun also maintained a minority interest in an eco-tourism company.
Development of new hotels depended on securing licences from the government, "as the state still owned large tracts of land in both urban and rural areas." Suitable locations for hotel and resort development were very limited, and local government officials often did not have the training and expertise needed to make informed decisions about the granting of such licences. Resulting delays resulted in significant costs.
Several international hotel chains decided to enter South Africa after the lifting of economic sanctions. By 1998, numerous hotels were under construction by
Other manufacturing and retail
Further diversification came in 1967 with the establishment of a new subsidiary known as Food Corporation (coffee, tea, and food products). An even larger diversification push was undertaken in the 1970s and 1980s, when the SAB group of companies purchased or established numerous unrelated operations including grocers (OK Bazaars), furniture factories and stores (Associated Furniture Company), shoe factories and stores (Shoecorp), and clothing stores (Scotts Stores and Edgars Fashion Group). In 1996, more than 20% of SAB's workforce was employed in these companies.
Changes in consumer preferences towards less expensive goods had a negative effect on the premium retail market in the mid-1990s. SAB off-loaded the OK Bazaar grocery chain in 1997 for one rand, after losing nearly R20 million per month. And at the beginning of 1998, the Clothing and Footwear, as well as the furniture divisions were also sold. Later SAB also sold its 21% minority stake in Edgars Fashion Group in 2004.[31]
SAB no longer holds any manufacturing or retail assets.
International expansion
The company's earliest international venture was in 1910 when it founded Rhodesian Breweries in Southern Rhodesia, now Zimbabwe. This subsidiary spearheaded SAB's initial international expansion efforts, having established new breweries in Northern Rhodesia, now Zambia and Bulawayo, Southern Rhodesia, in the early 1950s. Further international expansion came in the 1970s and 1980s with the establishment of breweries in Botswana, Angola, and the buying of Compañía Cervezera de Canarias of the Canary Islands. Nevertheless, prior to 1990, SAB remained primarily focused on domestic opportunities.
In 1994, a formal Export Department consisting of 3 people (Neal & McLellan et al.) was established at Beer Division Central Office and was tasked with trading beer into Africa. This proved to be a masterstroke in strategy as it laid the foundations for a significant growth catalyst for brand and accordingly, market share establishment into African and Indian Ocean markets, as well as generated significant foreign currency for the group to allow for investment (South African Reserve Bank regulations at the time made raising foreign capital difficult). SAB was invited to revitalise the beer industry in Tanzania, a joint venture with that country's government in Tanzania Breweries Limited, and to re-enter the beer markets of Zambia, Mozambique and, later, Angola. This followed one of its first foreign investments into the Canary Islands. Expansion continued into Africa in the 1990s and on other continents into Hungary (1993), China (1995), Romania, Poland (1995–96), Slovakia (1997), and Russia (1998), the Czech Republic (1999), India (2000) and Central America in 2001.
