Fitch Ratings forecasts intensified competition for Lion Brewery (Ceylon) PLC, the dominant force in Sri Lanka’s beer market, following the acquisition of Heineken Lanka Limited by Distilleries Company of Sri Lanka PLC (DIST). Despite Heineken currently ranking second, DIST’s acquisition is expected to significantly enhance Heineken’s operations and challenge Lion Brewery’s market share. This expansion, projected to take two-to-three years with considerable investment, is seen as feasible given DIST’s robust financial standing and its status as the country’s leading spirits manufacturer.
However, Fitch notes challenges for DIST, particularly in brand building due to government restrictions on alcohol advertising. Lion Brewery, with its strong brand presence, affordable pricing, and local appeal, is well-positioned to maintain its market lead. DIST’s acquisition, though, is seen as a strategic move to consolidate its presence in both the hard and soft liquor sectors, potentially capitalizing on the shift from hard liquor to beer amidst rising excise duties and the resurgence of tourism in Sri Lanka.
Despite the undisclosed transaction value, Fitch believes this acquisition will not significantly impact the financial health of DIST or its parent company, Melstacorp PLC, which maintain strong balance-sheet positions.
