Heineken fights back over Strongbow as black-owned buyer says the brand was run down
The brewer disputes a preliminary Competition Commission finding that it weakened Strongbow after being ordered to sell it to Cider House Investments, while the buyer and its commercial partner point to halved advertising, short stock and a 28.5% price rise.
Heineken South Africa has rejected allegations that it weakened the Strongbow cider brand while handing it to a new owner, saying it went to “extraordinary lengths” to support the brand and that it complied with the conditions attached to its takeover of Distell.
The brewer is answering a preliminary finding by the Competition Commission, which issued a Notice of Apparent Breach on 31 August raising concerns about Strongbow’s marketing support, its allocation of retail fridge space and the supply of product. The finding is preliminary and is not a final ruling.
The complaint behind it comes from the two parties meant to make Strongbow a genuine rival to Savanna and Hunter’s. Cider House Investments (CHI), a majority black-owned joint venture, was selected to acquire the brand. Signal Hill Products was appointed to commercialise it and grow its share of the market.
As Sunday World reported on 1 November, Heineken disputes the commission’s preliminary finding and says it is engaging with the regulator.
Signal Hill co-founder and director Derek Szabo set out the buyers’ case. He said Strongbow’s advertising budget was cut by more than half and the brand received no advertising support during the key 2022 summer season. He said customers received only about two-thirds of the stock they ordered, and that Strongbow’s retail fridge allocation fell below the 12% threshold the agreement required.
Szabo and CHI also allege that the price of Strongbow’s 660ml returnable bottle rose 28.5%, against increases of about 22% for Savanna and 19% for Hunter’s. Further concerns relate to a reduction in the cider’s stated shelf life and to production costs the companies say were higher than presented.
The background matters to anyone who buys cider in South Africa. Heineken’s acquisition of Distell brought the country’s two biggest cider brands, Savanna and Hunter’s, under the same ownership as Strongbow. Competition authorities allowed the merger on condition that Strongbow be sold to an independent owner, so that it could keep competing against the two market leaders rather than sit inside the same stable.
“Heineken’s acquisition of Distell would have put South Africa’s three biggest cider brands under one owner,” Szabo said. “A merger like that could be approved only if competition was preserved. The solution was to divest Strongbow to an independent, black-owned operator so that it could continue competing with Savanna and Hunter’s.”
Heineken has declined to comment on the specifics while the regulatory process runs, but rejects any suggestion that it deliberately undermined the brand. It says CHI’s offer was chosen because the brewer believed the company, with Signal Hill behind it, was best placed to grow Strongbow while advancing competition and transformation in the industry.
“On the contrary, Heineken has gone to extraordinary lengths to support the Strongbow brand,” the company said. “Heineken is also confident that it will establish that it acted in good faith.. and remains committed to compliance with the merger conditions.”
What the commission does next will decide whether the divestiture conditions held. Its notice is a statement of apparent breach, not a finding of guilt, and Heineken has the right to answer it. For CHI and Signal Hill, the question is whether a brand sold on a promise of independence was given a fair chance to compete. For South African drinkers, it is whether the cider shelf has three real choices or two.
