The hangover at Heineken Beverages (HeinBev) has finally lifted and no-one will be cheering louder than investment company Remgro, which is a significant shareholder.
HeinBev was created in April 2023 when the Dutch beer giant acquired control of South African liquor group Distell and Namibia Breweries. The enlarged entity was touted as a real contender to challenge the dominance of AB InBev (which includes the old South African Breweries) in South Africa and other African markets.
It was a great idea, on paper, with HeinBev playing beyond the beer market thanks to Distell’s strong position in ciders, wine, ready-to-drink options and selected spirits. Of course, older investors remembered the painful outcome when Remgro’s predecessor, Rembrandt, dared to take on the might of South African Breweries in the mid-1970s.
HeinBev did suffer several nasty headaches in the first 18 months of integration. The 2024 financial year showed HeinBev posting a loss of R316m, with a highly disruptive period of integration affecting underlying performance.
At that time HeinBev’s key beer segment (including Heineken, Windhoek, Amstel, Tafel and Sol) strained under volume pressure in a “continued challenging competitive environment”. The key Distell brands, particularly the Savanna and Hunter’s cider brands, proved reassuringly resilient.
The latest performance figures, courtesy of Remgro’s investment presentation for the year to end-June, show that the enlarged liquor venture managed to swing from a R268m loss in 2025 to a R589m profit. Revenue was up a smidgen to R55.3bn (previously R55.2bn) as growth in beers, ready-to-drink and ciders was offset by a flat performance in wine and spirits.
While HeinBev’s performance over the first three years has not been as frothy as expected, the latest performance is encouraging. Remgro, as an 18.8% shareholder, will be delighted at a headline earnings contribution of R111m (R215m if amortisation and depreciation charges are set aside).
Remgro increased the valuation of its HeinBev holding by only 6%, to R7.15bn. The group attributed this mainly to a lower cost of capital. Remgro FD Neville Williams said that while headline earnings improved and the South African business maintained positive momentum, forecasts and terminal growth rate assumptions were tempered in the context of continued consumer pressure and competitive market dynamics.
HeinBev, for the record, carries an implied valuation of 8.8 times ebitda in Remgro’s books. The group indicates that this “compares favourably to global peers”.
There is, however, still plenty of work to be done for Remgro to properly celebrate its decision to back the HeinBev arrangement. It’s worth remembering that five years ago, Remgro valued a strongly performing Distell at close to R12bn. It owned best-selling brands such as Savanna, Hunter’s, Klipdrift, 4th Street and Nederburg.
Admittedly the international liquor market has changed markedly since then, and most liquor group valuations carry more sober valuations in line with lower consumption and pricing power pressure (especially in premium brands).
Fortifying margins
While the broader drinks market looks anything but festive, HeinBev has a few opportunities to grab market share without necessarily having to sacrifice margin.
HeinBev MD Jordi Borrut pointed out that HeinBev has less than 25% market share in South Africa, which in the past financial year accounted for three-quarters of the group’s revenue. “This supports disciplined share gain opportunities.”
HeinBev’s markets elsewhere in Africa are even bigger: a collective market of about 200-million people that is growing at 2%–3% a year. Borrut cautions that volumes will not be pursued at any cost. Rather, the group will “build equity and pricing power”.
HeinBev’s beer and cider brands continue to fare well. And Klipdrift brandy managed double-digit growth over the past few years in a dour spirits market.
The immediate challenge for HeinBev is to fortify its profit margins. If this is executed swiftly and effectively it can further ramp up profits. Borrut noted: “Our operating margin still remains well below our ambition and the Heineken Group average. There is still substantial work ahead in productivity, simplification and margin improvement.”
Borrut disclosed a mid-single-digit revenue growth target for HeinBev, coupled with margin improvement from the current high single digit to a double digit.
AB InBev’s second-quarter earnings release indicated that disciplined revenue management and margin expansion drove top- and bottom-line growth in the mid-single digits. That sounds like a beer war is not yet brewing. But it’s worth noting that AB InBev recently indicated that its premium and super-premium beers led the local performance, “delivering high-20s volume growth and estimated to have gained share of the segment”.
The bottom line is that HeinBev is still lagging behind its ambitious plans to move from “challenger to champion”. The campaign is still in the early rounds, but at least HeinBev is off the ropes and can hopefully continue to jab for market share points without drawing any violent retaliation from its larger rival.
