Despite my wife averring that whisky, gin, and red and white wine constitute the four basic food groups, there are actually five important drinks in the world: beer, coffee, rum, tea and Coke. I say this with great authority based on being considered by my friends to be an excellent drinker. My tipple of choice is wine, and I decide which wine to drink on a case-by-case basis. Ba-dum-tiss.

The reason these five drinks are so important is not only because they are fabulously popular, but because they changed history. Beer, invented and brewed first, we think, in the Mesopotamian Empire, encouraged the development of farming, and therefore the movement from hunter-gatherer societies to settled communities. Cuneiform documents dating from 3000 BCE talk about at least nine different types of beer.

Wine is important because it’s associated with the rise of Greek and Roman civilisations. The ancient Greeks considered beer kinda low, so the societal elite began drinking wine, partly because the alcohol content tended to reduce the impurities in the water. Wine’s primacy even governed their literary metaphors; think Homer’s “wine-dark sea”…

Coffee has arguably the most significant history, because early coffeehouses became meeting places for the privileged, in part, because they were more genteel than bars. Coffeehouses were places where serious conversation was held, including the burning topics of politics and business (plus ça change, plus c’est la même chose). They were also where coups were planned and international trade initiated. The London Stock Exchange, for one, developed out of a coffee house.

Tea was associated with the British Empire and gradually outclassed coffee, becoming a royalty-endorsed favourite in the 17th century, partly because the British controlled a bigger slice of the tea trade than it did of the coffee trade. Once again, a drink was associated with global prowess, which increased its market size and tradability.

Rum changed the world for different reasons. It is associated with the European colonisation of large swathes of the world as European powers sought places with the climate to grow sugarcane. Silver and gold were the jackpots in the voyages of discovery, but sugar was a crucial ingredient of global expansionism, and, as it happens, the slave trade. And the alcohol associated with that expansion was rum.

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And then there is Coca-Cola, forever associated with US global dominance. It spread with US soldiers during World War 2 and became arguably the first truly global brand. Coke is still the most consumed soda in the world, with a staggering 1.9 billion of the drinks sold every day in 200 countries around the world.

This brings us to Distell. And in case you think that introduction is irrelevant, it is not, because the world has a severe case of drink fragmentation. The dominance of a drink is associated with the dominance of a culture, and we live in an age when global cultural dominance isn’t what it used to be.

What has happened, if you have been following the news, is that the Dutch beer brewer Heineken has made a bid which seems now almost certain to succeed for the South African drinks group Distell. It’s a small acquisition for Heineken; the bid is valued at around R14-billion and Heineken’s market capitalisation is about $50-billion.

Why would a company which is almost entirely focused on brewing beer buy a small and very diversified drinks company in SA? Some of the reasons are obvious, some less so. Heineken has a big range of ciders and so does Distell.

But the larger story is that while, globally, beer holds its own, it is not particularly a growing market. You can slightly see this in Heineken’s share price, which has been remarkably strong in the current downturn, but is more or less where it was in 2016. That’s actually good compared with the global giant AB InBev, which is still about 50% down following its purchase of SABMiller in 2016.

Some of that is a consequence of the Covid pandemic and the decline of the drinks and restaurant industries, but compare the performance of the beer companies with the drinks companies, which would also have been hit by Covid, and the comparison is stark. The leader in the drinks industry, Diageo, is up by 60% over the past five years, just to take one example.

Fragmentation is leading Heineken to dip its toe in, well, the “waters” of a new focus. You can tell how keen Heineken is about the potential acquisition by what it has agreed to in order to pass muster with the Competition Commission. The commission agreed to the merger on condition of a R10-billion investment in SA over a five-year period. This includes a R400-million supplier development fund to invest in small businesses and a R200-million contribution to promote localisation and growth initiatives within the country. This is in addition to a moratorium on the reduction of employees for five years, and the sale of one of the cider brands, Strongbow.

This is just bizarre; there are no real competition issues here. Heineken has a very small slice of the South African beer market. But this is the kind of buy-out leverage that our government now indulges in, and you know, in this case, at least, they played their cards right because Heineken agreed.

Something about the deal still worries me though. If you look at Distell’s brands, you can see quite a lot of innovation in the group. It’s not just Amarula, but also Vawter, Bain’s, Savanna, and even the old faithfuls, Klipdrift and its extensive wine collections.

My experience of many corporate acquisitions is that a company is often bought for its innovative prowess, and immediately on acquisition, that disappears. Takeovers are easy — post-takeovers are hard. Just think, if you are the brand manager of Pushkin vodka or Paarl Perle wine, how much support are you going to get for your brand in an organisation that produces 200 million hectolitres of beer a year?

I hope this acquisition goes well, but like so many drinks, they often come with a twist. DM/BM