Emerald Emerging Markets Case Studies

Mitchell’s Brewery: entrepreneurship challenges in the South African craft beer industry
Geoff Bick, Fezile Sidubi,
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Geoff Bick, Fezile Sidubi, (2018) "Mitchell’s Brewery: entrepreneurship challenges in the South African craft beer industry",
Emerald Emerging Markets Case Studies, Vol. 8 Issue: 4, pp.1-35, https://doi.org/10.1108/EEMCS-06-2018-0101
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 Mitchell’s Brewery: entrepreneurship
challenges in the South African craft
beer industry
Geoff Bick and Fezile Sidubi
Downloaded by Auckland University of Technology At 21:29 28 January 2019 (PT)

It was the morning of 27 October 2017, and Hein Swart, the managing director of Mitchell’s Geoff Bick and Fezile
Brewery, was on his way to Cape Town from Knysna, the founding home and head office Sidubi are both based at
of Mitchell’s, for a potentially critical meeting. Although Cape Town was in desperate need the Graduate School of
of the rain, it could not have come at a worse time for Hein. For some strange and unknown Business, University of
Cape Town, Cape Town,
reason, Capetonians seemed to forget how to drive when it rained, and this created havoc
South Africa.
on the roads. The traffic was backed up and moving at a snail’s pace, and Hein began to
wonder if he would make it in time for the meeting. It was a struggle to schedule this
meeting owing to everyone’s busy calendars and the last thing he wanted was to miss it.
As he stared at the long traffic queue, Hein’s mind started to wander off. The past few years
had been quite tough for the brewery and the craft brewing community, especially with
ever-rising operating costs as the US$–Rand exchange rate kept plummeting. The
economy was also struggling to recover from the 2007 to 2008 global recession and the
political uncertainty in the country was not helping the situation either. That said, rumours
of an SABMiller merger were also in the air. Being taken over would be quite the
showstopper if it happened. These developments were enough to unsettle Hein. The future
was not certain, and it was enough to make life uncomfortable. As if the existing challenges
were not enough, the brewery was also facing new challenges coupled with new risks and
opportunities. It was Hein’s task to come up with a solid strategy that would see them
through this rough patch. As he drifted back to the present, Hein nodded his head in
acknowledgement that this was not going to be a straightforward task to achieve.

1. Background: origins of a South African craft beer icon

1.1 The birth of foresters
When Lex Mitchell resigned from South African Breweries (SAB), he only had one goal in
mind and that was to do something different and unique. Being a brewer at heart, he
enjoyed his after-work beer with colleagues and wanted to keep that spirit alive. Tired of the The authors would like to
thank Mitchell’s Brewery for
mainstream beer brands of SAB that tasted similar to each other and lacked character, their assistance and insight
Lex’s dream was to create something better and differentiable. He wanted to create a beer into the company.
Disclaimer. This case is written
with charisma, style and one that represented something people could associate and solely for educational
connect with. With those requirements in mind and inspired by the scenic timber forests of purposes and is not intended
to represent successful or
Knysna, Forester’s Lager was born[1][2] (Figure 1). unsuccessful managerial
decision-making. The authors
The delicate balance of the hops and maturation process resulted in a slightly bitter, dry may have disguised names;
financial and other
style and yet had a characteristic refreshing feeling that gave Forester’s Lager its charm. recognizable information to
Not long after its unveiling in the sweltering summer of 1983, Forester’s Lager became very protect confidentiality.

DOI 10.1108/EEMCS-06-2018-0101 VOL. 8 NO. 4 2018, pp. 1-35, © Emerald Publishing Limited, ISSN 2045-0621 EMERALD EMERGING MARKETS CASE STUDIES PAGE 1
 Figure 1 Forester’s Lager
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popular with the local Knysna community. It was a particular favourite with the local
lumberjacks who worked the forests and enjoyed a nice large glass of cold, flavoursome
beer after a long day’s work. It quickly became clear that Lex and the new Mitchell’s
Brewery had presented a superior product – one that appealed to his consumers and was
embraced by the community. This marked the beginning of the “taste revolution”. It would
seem as if Lex had delivered on his task, marking the start of Mitchell’s Brewery’s success
journey.

1.2 Early growth

News of the locally brewed and unique-tasting Forester’s Lager soon spread through the
small town of Knysna. Inspired by the market acceptance and growing demand for orders
and intrigued by the famous shipwreck stories of the Knysna Heads[3], Lex’s next project
was the Bosun’s Pale Ale[4] (Figure 2). Keeping true to being creative, different,
charismatic, and associated with the local community and its surroundings, Bosun’s Pale
Ale was the first known pale ale to be brewed in South Africa[5]. It paid homage to the
shipwreck stories of the 19th century that were associated with the town of Knysna and
which were a result of conceited captains who failed to listen to the bosun[6], or “right-hand
man”.
Bosun’s Pale Ale was well received, and the business was proving to be lucrative and
growing in popularity. This point marked the trend that Mitchell’s Brewery would follow in
the next few years with their new product development and growth strategy for the
business. Lex’s objective was to target and service the local Knysna community and create
a brand that would foster and create a personal connection between Mitchell’s Brewery
and these customers. He saw an opportunity to be part of a growing community that came
with a business opportunity to introduce and provide customers with craft beer.

1.3 The beer wars

During the late 1990s and early 2000s, there was significant growth in the South African
mainstream beer industry and numerous acquisitions of small breweries in Zambia,
Tanzania, Mozambique and later Angola by SAB. This was the beginning of SAB’s
globalisation quest, which arguably was triggered by Heineken’s decision in early 2003 not

PAGE 2 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

 Figure 2 Bosun’s Pale Ale
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to renew SAB’s licence to brew its flagship brand, Heineken[7]. This signalled the start of
the next beer war[8], with the then Heineken spokesperson, Manel Frejenhoek, stating:
Taking it [Heineken] back into our own hands offers great growth opportunities because there
are still such great growth opportunities in the premium sector in South Africa[9].

Not long after, SAB acquired Miller Brewing Company in the USA and formed SABMiller.
This catapulted the new organisation to the global number two position, sending a
strong message of its global presence[10]. This was soon followed by the joint
purchase of a 28.89 per cent stake in Namibian Breweries in the mid-2000s by the
competition, Heineken and Diageo[11]. This further fuelled speculation that Heineken
and Namibian Breweries were making headway in their plans to tackle SAB on their
home turf. A beer war was at play and to fuel the tension in the beer industry further,
Heineken announced in 2007 that the company would not renew SAB’s 30-year-old
licence to brew and distribute Amstel Lager[12]. In addition, Heineken undertook a joint
venture with Diageo to form Brandhouse Beverages[13]. The joint venture intended to
set up brewing operations as well as market and distribute their products in South
Africa. Emphasising their intentions further, Heineken’s regional president, Tom de
Man, went on to declare that:
Regaining the Amstel brand is an important development for both the Heineken and
Brandhouse businesses[14].

The loss of the Amstel licence was significant to SABMiller. From 2006 to 2007, Amstel
Lager was the largest-selling premium beer with a market share of over 9 per cent of the
total South African beer market and was contributing close to USA$80 million of SABMiller’s
earnings before interest, tax and appreciation[15]. SABMiller issued the following
statement after the outcome of the International Chamber of Commerce arbitration on
Heineken’s right to end the Amstel contract:
SAB will consequently move to bolster its competitive position in the South African premium
segment by drawing upon SABMiller’s global portfolio of brands and the wealth of experience
and expertise it has built up in the market. The company is already pursuing a number of
initiatives which will mitigate the impact of the licence termination, including extending SAB’s
reach into direct distribution and broadening its premium offerings[16].

VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 3

 So SABMiller continued with their global acquisition task while driving organic growth within
the existing South African and global operations in line with their mission statement: “To
own and nurture local and international brands that are the first choice of consumers –
building locally, winning globally, delighting consumers”[17].
In the meantime, while all this was playing out, the number of craft breweries being
established was growing at a substantial rate. SABMiller, famously known for crushing any
local competition it faced, had other priorities as it preferred to challenge Brandhouse
rather than the craft brewers. This was much to the relief of the management of Mitchell’s
Brewery and the rest of the craft brewers. SAB’s approach towards the new and emerging
craft beer segment in South Africa was to support this segment[18]. The support was in the
form of mentoring up-and-coming craft brewers, hosting craft beer competitions and
sponsoring beer festivals. According to the chief brewmaster at the time, Martin Brooks:
Craft beer is a growing trend all over the world and South Africa is no exception. We have been
sponsoring craft brewing festivals in the country for as long as they have been around because
we believe they are the perfect platform to expose the public to the many different styles of beer
available in the country[19].
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This facilitated the successful growth of the South African craft beer industry without much
intimidation from the mainstream brewers. However, in 2015, AB InBev announced its
intention to take over SABMiller and concluded the acquisition at the end of 2016[20]. This
made AB InBev the monopoly and largest brewer globally. This merger rattled the entire
industry not just locally but globally too. Not only was AB InBev known for being cut-throat,
attacking and crushing its competition, they also directly targeted craft breweries in the
USA when they entered that market. Consequently, there were concerns from both
Heineken[21] and South African craft brewers of AB InBev’s powerful and anti-competitive
distribution network. The most recent example was investigation by the European Union,
where the Commissioner for the competition policy, Margrethe Vestager, issued out the
following statement:
Belgian consumers may have had to pay more for their favourite beers. Our preliminary finding
is that AB InBev may have deliberately prevented cheaper beer imports out of France and The
Netherlands from reaching consumers in Belgium. Such practices would breach EU
competition rules, because they deny consumers the benefits of the EU Single Market – choice
and lower prices.

The greatest concern amongst the South African craft brewers was whether AB InBev was
going to take the same approach as it did in the USA and Europe.

2. The growth of the craft beer industry

The traffic did not seem to be getting any better and as Hein looked in his rear-view mirror,
he saw a taxi[22] approaching on the yellow lane at a substantial and concerning speed
given the wet roads. He wondered whether he should join and follow behind the taxi.
Besides, if the traffic police were going to stop anyone, there was a high probability it would
be the taxi driver and not himself. At least he would make it in time for the meeting, he
thought to himself, but quickly dismissed this as a bad idea. With that, Hein shifted himself
comfortably on the seat, sat back, and took a moment to reflect.
Mitchell’s Brewery, just like the rest, had enjoyed the fruits of the exponential growth trends
that the industry had been experiencing over the past decade. This was owing to the fact
that the South African craft beer industry was relatively new and untapped compared to
other global craft beer markets. For example, in the USA, the craft beer segment had seen
growth rates of up to 9 per cent year on year, while the USA mainstream beer sales had
been declining by 1-2 per cent[23]. One of the things that gave Hein a decent night’s sleep
was the comforting knowledge that the South African craft beer segment was expected to
follow a similar growth trajectory to that of the USA. The craft beer segment in South Africa

PAGE 4 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

 was projected to grow at over 30 per cent year on year[24]. Craft beer occupied 0.3 per
cent of the total South African premium and “lite” segment in 2011 and was projected to
exceed 2 per cent market share by the end of 2017, producing over 140 million litres in
terms of annual capacity[25]. However craft beer penetration was limited by production
capacity and the price premium where craft beers typically sold at around twice the price
of mainstream beers. Hein and the team knew all too well that if Mitchell’s Brewery was to
succeed in the coming years, the brewery had to maximise on this fact.
Making a note in his head, one of the aspects that Hein and the team could take advantage
of was the concept that within the South African market, craft beer had become
representative of a certain lifestyle and person. Its growing popularity went hand-in-hand
with cultivating this lifestyle which was becoming symbolic of individuality and
sophistication through a demand for differentiated products. Within this social grouping,
the aesthetic of “craft”, as being something more unique and handmade, had grown into an
acquired element of status and identification[26]. Hein realised that the Mitchell’s brand
had to become synonymous with this “craft lifestyle” to ensure the growing popularity of the
brand and ultimately the success of the business.
Although Mitchell’s brewery had been in existence since 1984, the number of craft
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breweries started mushrooming over the past five or so years, with craft breweries popping
up everywhere[27]. Influenced by globalisation, an increase in the middle-income group,
and exposure of the South African consumer to distinctive styles of craft beers, these craft
breweries were offering and claiming a better proposition than the previous craft
brewer[28]. Although good for any sector, this growth meant increasing competition.
However, this was the least of Hein’s worries. Besides, Mitchell’s Brewery had the luxury of
perfecting the art of craft brewing and that was evident in the quality of their beers and
cider. Unlike the newer craft brewers, Mitchell’s had built and maintained their reputation of
consistency, bespoke quality and mastery. After all, they were “the craft beer that started
craft beer”[29].

2.1 Building the Mitchell’s brand (differentiation strategy)

Hein and the Mitchell’s Brewery team knew that building a successful craft beer brand like
Mitchell’s was a step-by-step structured process that needed to consider several factors.
For Mitchell’s Brewery, these were quality and consistency of beers, competitive pricing,
availability in the market, marketing and promotions[30]. Ultimately, the focus had always
been and continued to be on the consumers and their interests, and the company had
strategically aligned the brands to meet those interests.
Mitchell’s Brewery’s vision was to provide consumers with bespoke products that they
could connect to and that reflected their Knysna heritage, craftmanship and mastery of
their craft brewing skills. Staying true to this vision, their product formulation used 100 per
cent natural raw materials, some of which were sourced locally, and were brewed using
traditional brewing methods and styles that they had perfected over the past 34 years[31].
Hein, the operations and sales teams knew that their middle income-earning customer
constantly looked for a “taste revolution” at an affordable price. Horizontal differentiation
had enabled Mitchell’s to produce distinctive-flavoured products with a unique taste in
addition to ensuring product consistency. This was reflected in the number of awards that
Mitchell’s Brewery had received in the past, including the most recent gold and silver
medals at the 2017 South Africa National Beer Trophy (Figure 3 and Exhibit 7)[32].
Understanding the importance of branding, in the past two years, the Mitchell’s team had
put in a substantial financial investment into revamping and modernising the look and feel
of the primary and secondary packaging[33]. The Mitchell’s Brewery brand and branding
had a concise, clear and appealing message – “the craft beer that started craft beer” – and
that aligned to the vision of the organisation and resonated with the consumers (Exhibit

VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 5

 Figure 3 SA National Beer Trophy awards
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4)[34]. To ensure that this message echoed with everyone who touched their products in
the value chain right through to the consumer, this message was re-iterated on some of the
packaging and accessory materials.
The Mitchell’s product branding was unique and was adaptable to the product name
without losing the core logo, as illustrated in Figure 4. This branding and message reflected
Mitchell’s mastery of the craft, strong connection to the heritage and sense of community.
In the true sense of community, Hein and the team rolled up their sleeves during the
devastating 2016 Knysna fires and committed to raising funds to rebuild Knysna by
donating 50c for every bottle or draught of Forester’s Lager sold (Exhibit 5). Mitchell’s
Brewery’s involvement in the Knysna community helped build their reputation and created
a sense of connection and attachment between the brand and their customers. In addition,
the creative naming and packaging of some of their beer products, such as Old Wobbly,
also brought some light-heartedness to the brand that resonated within the Mitchell’s team
and Knysna community.
Making sure that all Mitchell’s Brewery products were available in the market had been a
significant challenge but was one the team had managed to overcome through improving

Figure 4 Adaptive branding

PAGE 6 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

 operations, establishing an effective route to market, and innovative tap management
system. In 2013, Mitchell’s Brewery expanded their operations to ensure product
availability for the market and increased the brewing capacity by up to 2 million litres as well
as added pasteurisation and keg-washing and filling capabilities. Mitchell’s Brewery’s route
to market spanned across South Africa with a well-established primary and secondary
national distribution network. Significant effort had been put into strengthening the
distribution channels and growing of sales. This ensured that Mitchell’s Brewery products
were available on tap in the Southern and Western Cape and Gauteng. The brand was
available in NRB (non-refundable bottles) at the liquor stores of major retailers such as Pick
n Pay and Checkers. Unlike most craft breweries who rented taps from a third-party
supplier, Mitchell’s Brewery installed, maintained, serviced and sanitised their own taps
across the country. For Hein, this guaranteed that the customer received a perfect product
and that was important for Mitchell’s Brewery’s brand integrity and reputation.

3. The South African craft brewing industry

As Hein stared at his watch, he wondered what had happened to the time. He began to
make peace with the likelihood that he would not make it on time for the meeting. He
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decided to send Nonjabulo a WhatsApp message, apologising and notifying her that he
would be delayed. Nonjabulo had extensive experience in the commercial brewing industry
and was considering business opportunities in the craft beer industry. For Hein, not only
could she be a valuable resource for the Mitchell’s team because of her operational and
brewing knowledge, but she also had access to funding through a national development
finance institution. This meeting with her was of the utmost importance and had to happen.
She responded immediately, letting Hein know that it was not a problem and she could wait.
Hein gave out a loud sigh of relief and sat back in his seat, relaxing and appreciating the
challenges and the adrenaline rush that being in the craft beer industry provided him. He
would not give it up for anything, and having worked in corporate for over two decades, he
was more than happy where he was.

3.1 External challenges

Although the craft beer segment was one of the few rapidly growing sectors in South Africa,
there were several external factors that craft brewer entrepreneurs needed to overcome.
These included a retracting economy in terms of percentage GDP; political uncertainty;
high unemployment rates, which were currently over 27.1 per cent; and increasing poverty
rates (Figure 5).
Accordingly, crime and corruption had been on the increase over the past several
years[35]. The lack of strong government institutions resulted in insufficient transportation
and underdeveloped telecommunication infrastructure[36]. Additionally, skills
development was either ineffective or non-existent in certain sectors, and this was not
necessarily due to lack of access to education but rather the inadequate quality of
education[37]. Because of this, coupled with the consequences of the atrocities of the past
apartheid regime, South Africa had a growing unskilled labour force along with inflated
labour costs in comparison to similar emerging economies[38].
South Africa also presented a highly regulated business environment. Organisations risked
being heavily fined, restricted access to certain resources, or, depending on the type of
operation, closure of the business if they did not comply. In addition, owing to the role that
alcohol played in South Africa’s history, alcohol abuse remained a socio-economic
challenge, and the liquor industry had become one of the most regulated in the country. For
example, between 1997 and 2009, there had been approximately over 20 significant
legislative actions related to the alcohol policy (Exhibit 6).
Being a dual economy there was also a strong informal alcohol sector in the form of legal
and illegal shebeens and other illicit alcohol establishments that continued to grow. To curb

VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 7

 Figure 5 SA economic statistics
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the effects of abuse and minimise the growth of illicit alcohol trading, the Liquor Act of 2003
(Act No. 59 of 2003) and other policies had been applied. These included legislation
around alcohol taxation by the National Treasury, control of retail sales of alcohol,
restrictions on alcohol advertising, and controls and restrictions on alcohol packaging.
Furthermore, the National Liquor Regulations of 2004 required that licence holders for the
manufacturing, distribution and trading of any form of alcohol or liquor product comply to
and keep up to date with the different legislations[39].

3.2 Internal challenges

As an entrepreneur running an SME, some of the challenges that Hein had to manage
included limited access to funding. Lack of funding resulted in insufficient investment in
brewing and packaging equipment as well as information technology infrastructure[40]. In
addition, due to the industry being highly regulated and the lack of appropriate knowledge
or skills, compliance to legislation and legal requirements by several craft breweries did not
completely happen[41]. Another challenge that Hein faced was limited managerial
competencies within the craft beer sector[42]. Particularly, the lack of operations
management and technical problem-solving skills restricted the potential of breweries to
maximise on efficiencies and minimise losses. Hein viewed this as one of Mitchell’s
Brewery’s previous challenges and as a result the company was in financial difficulty.
Despite these challenges, one of the things that Hein appreciated about the South African
craft beer industry was the intense sense of community that existed amongst the craft
brewers. Therefore, while in competition with each other, there was extensive networking,
collaboration and teamwork that existed in the industry[43]. Characteristic of craft brewer
entrepreneurs, it was all about the passion for the art and the craft[44]. This community of
craft brewers not only prioritised product enjoyment and the experience but also sought
growth through networking opportunities.

3.3 Competition
Over the past decade, the South African craft beer industry had seen the emergence of
new craft breweries and therefore an increase in competition. This growth consisted of a
mixture of small garage operations run by beer enthusiasts to fully licenced establishments

PAGE 8 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

 producing anything from 100 litres per annum to over a million litres per annum. The
number of established and licenced craft breweries had grown exponentially as illustrated
in Figure 6[45].
The significant shift first happened in the early 2000s, which saw the entry of new and
significant craft beer challengers such as Boston Breweries followed by the likes of Cape
Brewing Company and Jack Black in the mid- to later 2000s. Before then only a handful of
craft breweries such as Mitchell’s Brewery and Nottingham Road Brewery enjoyed the
luxury of being the only established and recognised players in the craft beer market.
Although, there were several other craft breweries established in the same timeline, Table I
illustrates the growth of noteworthy competition whose establishments had grown to be
some of the biggest craft beer operations in the country when compared to the rest of the
industry. The competition between these craft breweries and their value proposition was
centred on product quality, taste, freshness and consistency. The actual increase in
competition had been facilitated by the various differentiation strategies used by these
players, which included promotional tactics and marketing strategies, distribution costs,
retail presence and price[46].
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Consequently, the continued market acceptance and growth of the market had created
more opportunities in terms of gaps left behind by these breweries. For example, some of
the windows of opportunity that had been created ranged from distribution facilities and

Figure 6 South African craft breweries by province and year

Table I Establishment timeline for some of the bigger craft breweries

1983 Mitchell’s Knysna
1996 Notthingham Road Brewing Company
2000 Boston
2004-2008 Cape Brewing Company; Jack Black
2010-2012 Darling Brew; Devil’s Peak; Soweto Gold

VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 9

 raw material sourcing to the need or preference for more African craft beer styles for certain
groups of consumers. The identification and closure of these gaps by entrepreneurs had
created further differentiation and competitiveness, especially in the acquisition of retail
shelf space and on-premise consumption tap space. Alcohol was a low-margin product
which required craft brewers to sell high volumes to be profitable and so competition for tap
space had become a priority. In addition, the shorter shelf life of craft beer compared to that
of commercial beer meant that it had a shorter turnaround time which added to the
competition for space and sales. For most of the bigger craft breweries, their competitive
advantage, other than their product, was based on the size of their footprint in the
on-premise consumption outlets. This was normally facilitated by a third-party distributor
who had their own distribution networks and had relationships with the outlets. Accordingly,
these third parties would substantially charge the craft breweries for these services.

3.4 A new form of competition

Hein’s moment of relaxation was short-lived. As he rested his chin on the back of his hand
and leant against the driver’s window, he wondered what the future held for Mitchell’s
Brewery. He thought out loudly to himself:
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We have come too far for us to surrender now. The storm is coming and it will leave a lot of
causalities in its trail.

Hein was thinking about the recent SABMiller acquisition by AB InBev.

It’s going to be a blood bath.

Like the rest of the craft brewers, he was fully aware of the reality. This global giant, AB
InBev, was on a mission to conquer the African market and had not made any secret that
the South African market was its top priority.
On the morning of 16 September 2015, the world came to a standstill when SABMiller
issued a press release of a potential takeover by AB InBev[47]. This confirmed the
speculations of market analysts over the past 48 hours. Not long after, on 13 October, both
companies issued a statement that an agreement had been reached[48]. The markets went
wild at the news. The world’s second-largest brewer by volume was being taken over by its
biggest rival in what looked like a hostile takeover. South Africa’s most successful story and
the legacy “that had stood the test of time” had laid down its armour and was going to
cease to exist.
To Hein, this meant that he needed to go back to the drawing board and review Mitchell’s
Brewery’s business strategy and ensure that the organisation would be prepared for the
new competition. If AB InBev could take over SABMiller, he could only imagine what it could
do to the craft brewers. Interestingly, and not surprisingly, Hein was fully aware that he was
not the only one shifting into gear. His counterparts in the sector were doing the same,
including the mainstream brewer Heineken, who had started consolidating the business by
buying out two South African craft brewers in 2017[49]. They too were fully aware of AB
InBev’s significant craft beer portfolio and the strong distribution channel that SABMiller
had developed in South Africa and the rest of Africa. With a smirk on his face, he repeated:
It’s going to be a blood bath.
Over the previous months, Hein and the team had been working diligently on the strategy
and the execution of it had been good. It had required significant investment to ensure that
Mitchell’s Brewery had superior-quality beers that were well presented to the market and
would remain relevant. Critical to this was ensuring that Mitchell’s Brewery captured as
much of the market through the diversified product line and strategic partnerships with
outlets and distributors. Hein had also made it clear to the sales and marketing teams that
Mitchell’s Brewery would continue to be involved in promotional events and sponsorships

PAGE 10 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

 with the deliberate intention of expanding these activities. Hein acknowledged the effort
that the operations team had put in on operational efficiency and quality consistency. It was
apparent to Hein that this would play a notable role in ensuring that they met and delivered
all orders in full and within the required time. He felt he had every right to be proud of the
team and nodded his head, thinking to himself:
Everyone has pulled through and is aligned on what the priorities are and are working hard.

4. Conclusion
The rain had slowed down and traffic was now moving faster. As he sat up, Hein glanced
at his watch. He was almost an hour late. He decided to send another quick WhatsApp
message, apologising profusely and promising that he would arrive within the next 15 min.
He was grateful that Nonjabulo had not yet cancelled the meeting.
Although the financial reports for the last three years did not look good and were a matter
of concern, Hein was confident that this picture would turn around. The strategy was clear
and solid and as he shook his head, he did not think he had missed any opportunities. He
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had taken all the critical factors into account and mitigated them as far as possible. If there
was anyone who was keeping a close eye on the developments in the market and industry,
it was him.
It’s just a matter of time, he reassured himself.

The company was well positioned in the market and had a well-established and
recognisable brand in addition to a loyal following.
The reality, though, was that the brewery needed some equipment upgrades if it was to
keep up with the future demand. The challenge was trying to convince potential investors
and funders to invest. He needed a very compelling story. How was he going to show that
the significant investment done on the branding revamp would pay off? After all, this was
an industry that required significant capital in addition to the high alcohol tax. It also
required enormous patience and with time the returns would eventually come through.
Furthermore, it was a low-margin, high-volume sector and hence the focus was on
strengthening sales and customer service delivery.
Another question was, if there was indeed someone he could convince to invest in the
business to provide the capital necessary, how would it work? Would it be a joint venture,
an acquisition or a merger? Could there be some synergies that could be leveraged
between Mitchell’s Brewery and the current potential partner? Or could it be another craft
brewer for that matter? The bottom line was, whoever was going to invest at this point would
most probably want to get involved in the running of the business to ensure that they got
their returns. Hein suddenly got a chill and aggressively shook his head with a frown on his
face and wrote off the potential of a business buyout. Surely, there was a better way of
getting funding while still protecting the 34-year legacy of the business and the integrity of
the Mitchell’s Brewery brand.
That cannot happen,” he thought to himself. “Mitchell’s Brewery is and must remain the craft beer
that started craft beer[50].

With that thought, Hein finally arrived at the Waterfront where Nonjabulo had been
waiting patiently. As he entered the parking lot he immediately spotted an empty
parking bay and quickly accelerated as he went through the boom. He parked the car,
switched off the engine, picked up his cellphone and sent Nonjabulo a WhatsApp
message:
Have arrived and just found parking, will be there in 2 mins.

VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 11

 Notes
1. The story of Forester’s Lager (Mitchell’s Brewery, 2017).
2. Mitchell’s Brewery, 2017
3. The Knysna Heads are two large sand headlands at the mouth of the Knysna Lagoon, and are
infamous for their rocky, treacherous and unpredictable waters that caused several shipwrecks.
4. The story of Bosun’s Pale Ale (Mitchell’s Brewery, 2017).
5. Mitchell’s Brewery, 2017
6. “Bosun” comes from the term “boatswain.” A bosun is the ship’s Chief Officer/Captain’s right-hand
man, responsible for maintaining equipment, anchoring and the supervision of the crew.
7. Thomson, 2003
8. A beer war refers to the increased rivalry between competing brewing organisations and strategies
on acquiring/stealing market share from the competition are intensified. A few beer wars had
happened prior the 1900’s and the next beer war was expected.
9. Thomson, 2003
10. Thomson, 2003
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11. Bourban, 2017

12. Business Report, 2007; Staff Reporter, 2007; Windhoek Beer, 2015.
13. “Brandhouse is a (50% - 50%) joint between Diageo and DHN that was first established in 2004.
DHN is owned by Diageo (42.25%), Heineken International (42.25%) and Ohlthaver and List Group
of Companies, the majority shareholder of Namibian Breweries Limited (15.5 per cent)” (Windhoek
Beer, 2017).
14. Dickinson, 2015; Staff Reporter, 2007.
15. Thomson, 2003
16. Johannesburg Stock Exchange, 2007
17. SABMiller, 2016
18. Dickinson, 2015; Media Update, 2013.
19. Dickinson, 2015; SABMiller, 2016.
20. Bourban, 2017; Buckley, 2016; Dludla, 2016; fin24, 2016; Nurin, 2016.
21. The Brandhouse Beverages (Pty) Ltd joint venture was ended and dissolved on 28 July 2015 to
pursue growth opportunities separately. Heineken has since established Heineken South Africa in
partnership with Namibian Breweries.
22. Minibuses are referred to as taxi’s in South Africa and is the major form of transport for most
low-medium income groups. Taxi drivers are infamous for breaking traffic and road rules and for
reckless driving.
23. Elzinga, Tremblay and Tremblay, 2015; D. W. Murray and O’Neill, 2012; Roderick, 2017.
24. Oosthuizen, 2015; Shand, 2016.
25. Brown, 2016; Euromonitor International, 2017; Foulds, 2015; Oosthuizen, 2015; Rogerson and
Collins, 2015; Shand, 2016.
26. Grant Troxler, 2015, “Factors that Influence Consumer Purchasing Behaviour of Craft Beer in South
Africa”, UCT Graduate School of Business.
27. Corne, 2016; CraftBru, 2017.
28. Herrera, 2016; Rogerson and Collins, 2015.
29. Mitchell’s Brewery, 2017
30. Kleban and Nickerson, 2012; Mitchell’s Brewery, 2017.
31. Mitchell’s Brewery, 2017
32. Corne, 2016; Mitchell’s Brewery, 2017.
33. Primary packaging is the packaging that comes into direct contact with the product, for example

PAGE 12 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

 a bottle. Secondary packaging is the packaging use to pack the already packed product, for
example shrink wrap (Mouradian, 2017).
34. Mitchell’s Brewery, 2017
35. Besada, Tok, and Winters, 2013; United Nations Educational Scientific and Cultural Organization
(UNESCO), 2014; Wolf, 2002.
36. Brown, 2001; Fatoki and Chindoga, 2011; Olawale and Garwe, 2010.
37. Akoojee and Nkomo, 2007; Cloete, 2014; Spaull, 2013; Spaull and Kotze, 2015; van der Berg,
2008.
38. Parry, 2010
39. Department of Trade and Industry, 2015; Parry, 2010.
40. BusinessTech, 2016; Fatoki and Chindoga, 2011; Moore et al., 2014; Ungerer, Kruger, Vorster,
and Mansfield, 2015.
41. Herrington et al., 2010
42. Allen et al., 2007; Bruton et al., 2008; Malone et al., 2016; Oseifuah, 2010.
43. Watne and Hakala, 2013
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44. Brewers Association, 2017; Watne and Hakala, 2013.

45. Corne, 2016 Keywords:
Entrepreneurship,
46. Aquilani, Laureti, Poponi and Secondi, 2015; Kleban and Nickerson, 2012; Poponi et al., 2013.
Decision-making,
47. fin24, 2016; Laing, 2017.
Strategy,
48. Nurin, 2016 Small medium enterprises,
49. In 2017, Heineken South Africa acquired Stellenbrau Brewery and Soweto Gold (MadMead Strategic management,
Brewing Company. Business in Africa,
50. Mitchell’s Brewery, 2017 Emerging markets.

VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 13

 Exhibit 1. Mitchell’s Brewery logo

Figure E1
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PAGE 14 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

 Exhibit 2. Mitchell’s Brewery revenue growth rates

Figure E2
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VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 15

 Exhibit 3. Mitchell’s Brewery brand portfolio

Figure E3
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Exhibit 4. Mitchell’s Brewery brand messaging

Figure E4 Brand messaging poster

PAGE 16 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

 Figure E5 Examples of Mitchell’s Brewery branding images
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Figure E6 Bosun’s Pale Ale secondary packaging

VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 17

 Figure E7 Secondary packaging – box
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Exhibit 5. Rebuild Knysna campaign

Figure E8 Rebuild Knysna campaign (A)

PAGE 18 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

 Figure E9 Rebuild Knysna campaign (B)
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Figure E10 Rebuild Knysna campaign (C)

VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 19

 Exhibit 6. Legislative and other alcohol policy activity South Africa (1997-2009)

Table EI
Year Month Event

(a) Restrictions on alcohol advertising (Department of Health/DoH)

1997 May Health minister indicates she is considering measures to require warnings on alcoholic
drinks
1997 October DoH hosts workshop on advertising of alcohol products and warning labels
2001 October Central Drug Authority puts out a press release supporting greater restrictions on
alcohol marketing
2002 June Minister of Health’s budget speech indicates that legislation to restrain the marketing of
alcohol similar to tobacco could soon be considered
2004 February Minister of Health announces that she will introduce regulations to limit alcohol
advertising and requiring warning labels
2005 February DoH invites comments on regulations relating to labelling of alcoholic beverages
2007 August Minister of Health announces that regulations relating to health messages on container
labels of alcoholic beverages will come into being in 18 months (February 2009)
(b) Developing a coherent liquor outlet policy–better controls on retail sales (Department of Trade and Industry (dti) and provincial
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Departments of Economic Affairs)

1997 July dti releases Draft Liquor Policy Document and Bill and Western Cape (provincial)
Department of Economic Affairs holds hearings on policy options
2000 May Western Cape Department of Economic Affairs appoints members to a Liquor Policy
Development Panel
2001 November National Liquor Bill challenged as being unconstitutional
2003 March Minister of Trade and Industry introduces a revised National Liquor Bill. Manufacturers
must indicate how they will contribute to combating alcohol abuse and whether they
subscribe to any industry code of conduct. Includes default provincial legislation
regarding retail sales of alcohol for those provinces not passing their own legislation
2003 August Western Cape government releases “A proposed liquor policy for the Western Cape”.
Many positive aspects including training of liquor sellers, information at point of sale,
bringing shebeens into regulated market
2004 April National Liquor Bill enacted (Act 59 of 2003)
2005 March Western Cape Liquor Bill [B8-2005] released for comment
2007 March Western Cape Liquor Bill [B8-2005] approved by legislature, but National Minister of
Trade and Industry indicates that consultation is needed before being approved again
2008 November Western Cape Liquor Act assented to by the premier
2008 December Western Cape Liquor Regulations are gazetted. Several important sections of the
provincial legislation which had been held back finally came into operation
(c) Legislation around alcohol taxation (National Treasury)
2001 December National Treasury hosts consultative meeting on alcohol taxation
2003 February Minister of Finance after two-year-long consultation period reports in his budget speech
on new benchmarks for taxation on alcoholic beverages (43 per cent of retail sales
price for spirits, 33 per cent for clear beer, and 23 per cent for wine). Over time excise
tax levels have been increased towards these targets
(d) Legislation around alcohol packaging (Department of Agriculture)
2002 June National Agricultural Marketing Council (NAMC) initiates study on the impact of the
production and sale of cheap wine. Report concluded in November 2002
2002 August Western Cape Provincial Liquor Board asks police to establish the impact of budget-
priced liquor packaged in plastic containers on communities. Also asks the Department
of Agriculture to look into the quality of the packaging and its effect on health
2003 March Workshop to review NAMC report on impact of cheap wine
2004 October Completion of Dopstop report on impact of bulk wine on communities in Western Cape
2005 May Dopstop completes draft report on contaminants in wine sold in papsakke
2007 September Amendments to Liquor Products Act of 1989 gazetted

PAGE 20 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

 Exhibit 7. 2017 South Africa National Beer Trophy award list
Table EII
Gold medal winners
Brauhaus am Damm Brauhaus
Dunkel
Cape Brewing Co. Pale Ale
Cape Brewing Co. Pilsner
Clockwork Brewhouse
Schwarzbier
Darling Brewery Bonecrusher
Darling Brewery Gypsy Mask
Devil’s Peak Brewing Co. Juicy
Lucy NEIPA
Devil’s Peak Brewing Co. Pale Ale
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Devil’s Peak Brewing Co. Vannie
Hout Farmhouse Ale
Fraser’s Folly Moer Koffie Stout
Hermanus Brewery Old Harbour
Lager
Mad Giant Killer Hop APA
Mitchell’s Bosun’s Pale Ale
Mitchell’s Old Wobbly Strong
Lager
Riot Beer Valve IPA
Robertson Brewing Co. Rhythm &
Blues Blonde Ale
Stellenbosch Brewing Co.
Hoenderhok Bock
Triggerfish Brewing Apocalypse
Tuk Microbrewery Pale Ale
Urban Brewing Co. Judas Peak
Blonde Ale
Woodstock Brewery Hazy Daze
Wit
Woodstock Brewery Sugarman
Silver medal winners
Afro Caribbean Brewing ACBC Porter
Atlantic Storm Black Tempest
Barking Dog Fetch Lager
Berg River Brewing Weizenbock (Dunkel)
Berg River Brewing Munich Helles
Black Eagle Brewing Fisker: Belgian Pale
Ale
Black Eagle Brewing Hoppy In Love:Red
IPA
Brauhaus am Damm Brauhaus Weizen
Cape Brewing Co CBC Lager
Cape Brewing Co CBC Mandarina Bavaria
IPA
Cape Brewing Co CBC Krystal Weiss
Cape Brewing Co CBC Amber Weiss
Citizen Beer Patriot
Citizen Beer Pacifist
Citizen Beer Diplomat
Darling Brewery Slow Beer
Darling Brewery Godfather
Devil’s Peak Imperial Café Racer
Devil’s Peak First Light Golden Ale
Devil’s Peak Grapefruit Express IPA
Dissident Brewing Golden Ale
Franschhoek Beer Co The Stout
Franschhoek Beer Co Three Oaks
Hazeldean/Frontier The Haymaker
Helderberg Breweries Smoked Golden Ale
Hoghouse Brewing Company Haybale
Saison
Karoo Craft Breweries Kudu Lager
Karoo Craft Breweries Jackal India Pale Ale
Kings Craft Brewing Lionheart Lager
Little Wolf Brewery American Wheat
Long Beach Brewery Green Room IPA
VOL. 8 NO. 4 2018
Mad Giant Urban Legend
Metal Lane Brewery American
Pale Ale
Mitchell’s 90 Shilling Ale
Mitchell’s Milk and Honey Ale
Mountain Brewing Co English IPA
Mountain Brewing Co Loadshed
Lager
Mountain Brewing Co Madala’s
Gold
Newlands Spring Passionate
Blond
Newlands Spring Jacobs Pale Ale
Red Sky Brewing Vampire Robust
Porter
Redrock Brewing Rusty Trigger
Lager
Redrock Brewing Storm Rider
Pilsner
Robertson Brewing Celtic Stout
Robertson Brewing Reggae
Spilhaus Brewery Lager then life
St Francis Beach Blonde Ale
Stellar Brewery No RIS no fun
Stellenbosch Brewing Mass
Hoppiness IPA
Stickman Brewery Indoda Pale Ale
Stickman Brewery G-Man Amber
Ale
Striped Horse Pilsner
Striped Horse Lager
The Italian Job Famiglia
The Italian Job Amore
The Kennel Brewery Maltyeast
Poodle
Triggerfish Brewing Black Marlin
Triggerfish Brewing Empowered
Stout
Tuk Microbrewery Dunkel
Urban Brewing Co Monkeys Paw
Woodstock Brewery Happy Pills
Zwakala Brewery Naked Ale
EMERALD EMERGING MARKETS CASE STUDIES PAGE 21
 Exhibit 8. Termination of Amstel Brand License announcement
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VOL. 8 NO. 4 2018

EMERALD EMERGING MARKETS CASE STUDIES
PAGE 23
 About the authors
Professor Geoff Bick is an Emeritus Professor of Marketing at the UCT Graduate School of
Business, where he was formerly an Academic Director and Acting Director. He has
extensive industry experience as a marketer prior to becoming an academic, and
researches and teaches in the field of Marketing to MBA students and Executive Education
delegates. He has published extensively locally and in international marketing journals.
Geoff Bick is the corresponding author and can be contacted at: geoff.bick@gsb.uct.ac.za
Fezile Sidubi is an MBA graduate of the UCT Graduate School of Business. Prior to
embarking on the MBA in 2017, Fezile worked in the food and beverage industry and has
extensive manufacturing experience in the commercial beer industry. She has been
featured in local newspapers and a leading magazine.
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PAGE 24 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018