‘Alcohol monopoly’ knocks at the door

The Namibian liquor market could soon turn into a monopoly, following the proposed merger involving Heineken International, Namibia Breweries Limited (NBL) and Distell Namibia Ltd.

The proposed transaction entails Heineken International acquiring a controlling interest in NBL, and NBL acquiring the Namibian operations of Distell Group Holdings (DGH).

Therefore, if approved, Heineken will have control over NBL and DGH.

According to the Namibian Competition Commission (NaCC) at a stakeholder’s engagement yesterday, the merging parties are dominant in their respective markets.

Even though there are other suppliers, they are not dominant as they have a very small market share. Therefore, the competition ‘watchdog’ is of the view that the merger will lessen competition and strengthen dominance in the market.

In a detailed presentation, the merging parties outlined some of the opportunities that the transaction will present should it materialise.

The transaction will see N$10 billion of foreign direct investment (FDI) flowing into the Namibia economy through the shareholders as 96% of the NBL shareholder base are Namibian.

In addition, the transaction will expand the manufacturing base by locally producing Distell’s products which are currently imported from South Africa.

Distell currently does not have a production plant in Namibia due to lack of capacity in terms of infrastructure, a Distell representative said.

The production and packaging of Distell’s products locally will ensure a continuous smooth supply of goods as there will be no disruptions, which is a challenge at the moment.

“This will be good for competition, create new opportunities for input suppliers and other stakeholders,” the merging parties said. They also highlighted that employment will not be negatively affected.

Impact

Market Watch caught up with local independent analyst Josef Sheehama to share his views on the possible impact of the transaction on the market and consumers.

“Heineken International is a very large multinational brewery and a well-recognized brand worldwide. Distell Namibia and NBL are dominating in Namibia. The merger will unlock opportunities for Distell Namibia and NBL as they are operating in the same industry. Such mergers happen to increase synergies, supply chain control, and efficiency. The opportunities for NBL to access global platforms come with being part of a trusted international company,” Sheehama said.

“The transaction will exacerbate market power and impact competition. I am of the opinion that this merger will negatively influence the market if they apply the strategy of monopoly. A monopolist can raise the price of a product without worrying about the actions of competitors.”

The merger reduces competition and could lead to higher prices for consumers. They can set their prices because no other companies can compete against the conglomeration.

Although mergers are highly company specific, it is clear that the economic climate has an influence. Favourable legislation and a healthy economic climate inspire confidence in both parties, which increases the chance of success, he added.

The NaCC is open for submissions from the public and will have more engagements in order to make appropriate recommendations on whether or not the proposed transaction should be approved.