South Africa: Competition Tribunal conditionally approves SAB and Diageo licensing agreement
The Competition Tribunal of South Africa has conditionally approved South African Breweries’ (SAB) acquisition of licensing agreements with Diageo South Africa (Diageo SA), the Drinks Insight Network reported on September 6.
SAB will manufacture, distribute, market and sell the Smirnoff and Guinness-branded products in South Africa and other territories in exchange for royalty fees, as the exclusive licensee.
Additionally, Diageo SA will transfer nearly 11,000 of its Smirnoff-branded coolers to SAB at fair market value.
Under the conditions set by the Tribunal, both companies must follow ‘information barriers provisions’ for the duration of the licensing agreements.
SAB must continue to provide a proportion of its refrigerator / cooler space to competitors and should not encourage customers to purchase Smirnoff or Guinness brands.
The company will begin the production of Guinness draught and continue to import 440ml cans until they reach the threshold when local sales volumes reach a level where production becomes viable.
To help Guinness brands reach minimum volume targets, SAB must spend a certain percentage from its net sales value to promote the brand.
SAB has an option to import Guinness Foreign Extra Stout and Guinness Malt variants brands for the duration of the agreements.
Concerning Smirnoff brands, SAB will be responsible for the marketing, as well as promotional activities of the brand and will also spend a portion of its net sales value to help the brand meet its growth targets.
Diageo will retain creative oversight and ensure consistency in respect of Smirnoff brand innovations with its global and South African spirit brands.
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