CHAPTER 3: NAMIBIA BREWERIES LIMITED: RESPONDING TO 21 sT
3.7 Competition
SAB and has focused on promoting and increasing its distribution network in South Africa's premium beer segment while continuously exploring other export markets.
NBL faces aggressive competition in Southern African markets, but in particular from its main rival, SABMiller.
3.7.1 SABMiller- NBL's main rival
South African Breweries (SAB) acquired The Miller Company in 2002, and was consequently renamed SABMiller. The group then made a bold entry into the hard- nosed US market in 2002, integrated its new Central American beer and soft drinks operations, and continued its expansion in Europe, China, India and certain African countries.
The company now is one of the world's largest brewers with a brewing presence in more than 40 countries across four continents. It has more beer brands in the world's top 50 than any other brewer and it ranks among the top three brewers in more than 30 countries.
SABMiller has cheap products and as a result has a hold on the Namibian market.
Their products are; Castle Lager, Castle Lite, Castle Milk Stout, Hansa Pilsener, Carling Black Label, Sterling Light, Brutal Fruit, Redds, Miller Genuine Draft, Amstel, and Pilsner Urquell.
The company has a distinct hold on the volume driven mainstream market. It holds about 98% of the SA beer market and 57% of alcohol consumption in SA. The proportion of premium brands in its product mix is now about 10%. SABMiller has always enjoyed a competitive advantage on brewing in Southern Africa from ownership of the raw materials used in brewing, to a distribution network second to none, due to its large regional mainstream market presence.
For the nine months to the end of December 2004, SABMiller reported a 4% rise in its beer sales volumes in South Africa.
The company is attempting to enter into Namibia, setting up a bottling plant and brewery, with the aim of tapping into the larger Angolan and Democratic Republic of Congo markets. The SAB investment foreseen is worth ofRlOO million.
Hitherto, the Namibian government has been able to keep SABMiller away, maintaining that it would not support any foreign monopoly at the expense of a local competitor. NBL claims that the market is too small to accommodate another brewery and that should SABMiller succeed, it would be forced to close one brewery with a loss of200 jobs, as well as loss of revenues.
The Namibian government also accuses SABMiller of trying to take over the region, by squeezing out small competitors. Furthermore, SABMiller is accused of wanting to liquidate NBL with the aim of entrenching its monopoly in Southern Africa. So far, SABMiller had established itself in Botswana, Swaziland, Lesotho, Tanzania, Uganda, Mozambique, Zambia, Angola, Ghana, Malawi, Zimbabwe and the Seychelles. They have done this by either taking over the local brewers through mergers or by taking control of management. It has a market share of some 97% in the Southern African Customs Union (SACU) region and 70% in Africa. It thus holds the position of market dominance, and with the fact that NBL is commonly acknowledged as the only remaining competitor of SABMiller in SACU, it is said that SABMiller's intention is to undermine NBL in Namibia and drive it to closure. Meyer Kahn, SABMiller's Chief Executive is reported as having declared in no uncertain terms: 'The beer market is ours and everybody (had) better understand this'.
On the other hand, the Namibian Government has been accused of not upholding the principles of a free market economy. Namibia forms part of a free-trade area according to the (SACU) agreement and SABMiller insists that they should be a free market. In addition, SABMiller had claimed that the N amibian Government is trying to protect NBL and accused it of using unfair business practices. NBL, however, maintains that even though Namibia belongs to a free trade area, the agreement works in favor of South Africa and would crush smaller markets such as Namibia.
3.7.2 SAB-NBL "war" continues
The NBL's opposition to SAB's expansion into Namibia has been backed by the Namibian Economic Policy Research Unit (Nepru) which said the SA brewer's proposed investments was contentious and criticized the company for being anti- competitive. The research unit said while increased competition in the Namibian market should be welcomed, the overwhelming size of SAB and the aggressive tactics it used in other countries provided an indication of anti-competitive behavior.
According to the Namibian breweries, SAB, through their anti competitive tactics, continues to aggressively pursue its stated mission of eliminating any form of substantive competition to its position of unrivaled dominance in the Sub-Saharan African beer market.
Further, NBL accused SAB of offering its products on the Namibian market at
"dumping prices". It said the Namibian beer market was well served and had reached a stage of saturation.
NBL used certain criteria to justify their claim that it faces unfair competition from SAB on the Namibian market through dumping and has suffered material injury as a result thereof.
Some ofthese criteria are:
• There has been an increase in imports of SAB beer into Namibia.
• SAB is consistently undercutting NBL's prices in Namibia
• NBL has been suffering price suppression, as NBL is not able to recover cost increases through price increases
• NBL's sales volume of beer packed in 750ml bottles ('quarts'), the subject product, have decreased over the period under consideration
• Production of 'quarts' have decreased over the period concerned