Strongbow battle intensifies as Heineken disputes Competition Commission findings

Beer brewer Heineken South Africa has rejected allegations that it breached competition conditions by weakening the Strongbow cider brand during its transfer to a new owner.

It says it went to “extraordinary lengths” to support Strongbow during its divestiture to Cider House Investments (CHI), disputing a preliminary finding by the Competition Commission. Heineken says it complied with the divestiture requirements and is engaging with the commission to address the concerns. The company says it remains confident the process will vindicate its conduct.

Agreement conditions

The dispute stems from Heineken’s acquisition of Distell, which brought South Africa’s two largest cider brands, Savanna and Hunter’s, under the same ownership as Strongbow. To preserve competition in the cider market, competition authorities required Heineken to divest Strongbow to an independent owner.

CHI, a majority black-owned joint venture, was selected to acquire the brand, while Signal Hill Products was appointed to commercialise it and expand its presence in the market.

Alleged breach

However, CHI and Signal Hill have accused Heineken of weakening Strongbow’s competitive position. Signal Hill co-founder and director Derek Szabo 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 required 12% threshold.

Signal Hill and CHI also allege that the price of Strongbow’s 660ml returnable bottle increased by 28.5%, compared with increases of about 22% for Savanna and 19% for Hunter’s.

Additional concerns relate to a reduction in the cider’s stated shelf life, as well as production costs that the companies claim were higher than presented.

“Heineken’s acquisition of Distell would have put South Africa’s three biggest cider brands under one owner,” said Szabo.

“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.”

CHI and Signal Hill said the commission’s Notice of Apparent Breach, issued on August 31, raised concerns about Strongbow’s marketing support, allocation of fridge space and product supply. However, the findings are preliminary and do not constitute a final ruling.

Heineken rejects claims

Heineken has declined to comment on the specifics of the allegations while the regulatory process continues but rejected any suggestion that it deliberately undermined the brand.

“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.”

The brewer said CHI’s offer was chosen because Heineken believed the company, supported by Signal Hill, was best positioned to grow Strongbow while advancing competition and transformation objectives in the industry.