Picture: BLOOMBERG/GEERT VANDEN WIJNGAERT
Picture: BLOOMBERG/GEERT VANDEN WIJNGAERT

The Competition Tribunal has approved SAB’s acquisition of the SA rights to Smirnoff’s ready-to-drink brands and Guinness-branded products from Diageo.

SAB is the local subsidiary of AB InBev, the world’s largest beer group. Diageo is the world’s largest producer of spirits, and owns brands such as Johnnie Walker, J&B and Captain Morgan. 

The tribunal has attached several conditions to its approval of the licensing agreement that are designed to prevent SAB from reducing competition in the alcoholic drinks market. In terms of the conditions, competitors must be given access to SAB and Diageo cooler facilities.

It has also instituted measures to regulate the flow of information between SAB and Diageo “to avoid inappropriate exchanges of competitively sensitive information”.

In addition, the tribunal has prohibited SAB from inducing its customers to buy any of the Smirnoff or Guinness brands on condition that they also purchase clear beer products from SAB.

“However SAB will still be able to have specific promotions in which the licensed brands and SAB brands can be sold and promoted as a combined offering for a limited duration,” the tribunal said on Thursday.

Through the deal, SAB will manufacture, market, distribute and sell Smirnoff Storm, Guarana, Spin, Pine Twist and Berry Twist.

SAB is already a major producer of flavoured alcohol brands, which are similar to ready-to-drink products, under the Brutal Fruit and Redds brands.

A number of the tribunal’s conditions appear to be designed to ensure that the Smirnoff and Guinness brands remain viable competitors in the market. To this end, SAB will be required to meet specific growth targets for the Smirnoff brands in line with the growth of other flavoured alcoholic beverages. 

“Diageo will retain creative oversight and ensure consistency in respect of Smirnoff brand innovations with its global and South African spirit brands,” the tribunal said.

In addition, SAB will begin local production of Guinness draught beer when local sales volumes reach a viable level. It will import 440ml cans until then, and will be required to spend a certain percentage of net sales value on promoting the Guinness brands.

Andrew Murray, vice-president for finance at SAB and AB InBev Africa, said the licensing agreement is a “great opportunity” that will allow the group’s “distribution capabilities to increase the availability of these brands for consumers and to drive profitable growth for these brands”.

crottya@businesslive.co.za