Heineken resolves Indian brewing conflict
The 2008 deal had given Heineken a 37.5 per cent stake in Indian brewer United Breweries Limited (UBL), maker of Kingfisher beer, creating a conflict with Tiger beer owner Asia Pacific Breweries (APB), which had been brewing and distributing Heineken in India since 1931. UBL head Vijay Mallya had sued Heineken demanding that the company give up its stake because of its partnership with rival brewer APB.
Resolution
To resolve the problem, the Dutch brewery has signed a deal with UBL for the Indian firm to brew and distribute the Heineken brand in India, and for Heineken to sell the Kingfisher brand internationally. Heineken will then buy the Indian unit of APB for an equity value of €25m and integrate it into UBL in 2010.
At the same time as buying the Indian unit of APB, Heineken has sold its stakes in Asia Pacific brewers Multi Bintang Indonesia and Grande Brasserie de Nouvelle-Caledonie to APB.
As a result of this deal making, Heineken will made a book gain of €145m and reduce its net debt by €175m.
In addition, the company said the new agreement with UBL will transform its ability to unlock the market potential in India.
Indian potential
“In the world of beer, there is no bigger or more exciting growth opportunity than India,” said Heineken CEO Jean-Francois van Boxmeer.
Beer consumption per capita is only 1.3 litres a year, but that figure has been growing fast, and has plenty more room to go before reaching developed market levels.
UBL experienced volume growth of 9 per cent to 6.4m hectolitres for the year starting in April 2008. This gives the company a significant share of the total Indian market, which Heineken said is expected to grow to 14.4m hectolitres for 2008.
By partnering with UBL to sell Heineken in India, the Dutch company hopes to firmly establish its brand in India and grow the premium segment, which is now only 6 per cent of the market.
“Our partnership and the combination of the Kingfisher and Heineken brands will transform our ability to unlock the market’s considerable potential and to shape the premium segment,” said van Boxmeer.
