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India: Heineken & Tiger to be distributed by UB

Beer giant Heineken and Vijay Mallya’s United Breweries (UB) have settled their differences over the former’s role in the
Indian company, more than a year after Heineken bought Scottish and Newcastle’s (S&N) stake and gained an entry into UB.
Under the terms of the deal, UB, India’s largest beer company with a 50% market share, will bottle and distribute Heineken brands in the country. It will be paid a one-time fee of Rs 300 crore. ET first reported on this possibility in December last year.

The deal will also lead to consolidation of UB and the Heineken group’s existing beer operations in the country. The local operations of Asia Pacific Breweries (APB), Heineken’s Singapore affiliate, is likely to be brought under the UB fold.

This will see UB adding two premium international beers — Heineken and Tiger — to its portfolio. The entry of Heineken and its brands to the UB fold will help Mr Mallya weather increasing competition from international beer makers. The operational aspects of APB in India will be merged with UB initially, and this will be followed by an entity-level merger at a later date.

Mr Mallya will also be merging Chennai-based Balaji Breweries with UB, giving the company complete control over a key asset in the country’s second-largest beer market, Tamil Nadu.

A top UB official declined to comment on the matter. A Heineken spokesperson said: “We don’t comment on market speculation.” A person close to the talks said a draft agreement has been signed and that a final deal will happen in a month’s time.

The development is beneficial to both partners. Heineken will gain access to UB’s extensive distribution network and get to sell its iconic brands in a fast-growing market. UB gets a one-time fee, will be able to consolidate its operations and also takes APB’s Tiger beer brand into its fold.

The row between the two was sparked off when Heineken and Danish firm Carlsberg bought out S&N, the UK-based brewer which held 37.5% in UB. Mr Mallya, who was suddenly faced with the prospect of an equal partner in one of the world’s biggest brewers, objected saying the rights given to S&N could not be given to Heineken.

He also criticised Heineken’s association with APB, which had launched Tiger beer in the country. Heineken is a major shareholder of APB Singapore with 42%. Mr Mallya had told ET on an earlier occasion that his opposition to APB’s independent existence in India “is non-negotiable”.

Last year, UB moved the Mumbai High Court to restrain Heineken from exercising management rights that were accorded to S&N citing that the Dutch brewer was part of a rival firm APB India in the market.

APB, which has a local shareholder in CK Jaipuria Group, has been putting up a fight against merging its operations with UB. It is not clear what APB has to say about Heineken’s deal with Mr Mallya.

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Saturday, January 20, 1:02 am

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