Heralding tighter integration between United Breweries Limited (UBL) and Dutch brewer Heineken, the latter would start brewing UBL’s Kingfisher beer in the UK from October. The arrangement will come into effect after Kingfisher Beer Europe’s (KBEL) current UK agreement with another brewer, Shepherd Neame, expires.
With the brewing pact, UB Group also inked a loan pact for £1 million (Rs 8.3 crore) with Heineken. Under this pact, if the Indian partner defaulted on payment, the Dutch firm would gain rights to produce and sell Kingfisher beer in the UK for five years.
Heineken is an equal 37.5 per cent stake holder in UBL, which has been brewing ‘Heineken’ beer in Maharashtra for the past few quarters. In addition to brewing Kingfisher beer in the UK, Heineken will also handle sales and distribution of the brand to select national off-trade retail customers, said a KBEL statement.
Heineken will also make packaged Kingfisher beer available to its Star Pubs and Bars customers.
KBEL is a subsidiary of Nasdaq-listed Mendocino Brewing Company, owned by UB Group chairman Vijay Mallya.
KBEL will continue to take responsibility for the overall brand strategy and development of Kingfisher beer, marketing and promotion of the brand and support for its own directly supplied trade customers in the UK. Kingfisher beer has sales of under one million cases in Europe, with majority of the sales coming from the UK.
Damon Swarbrick, CEO of KBEL, said, “As India’s No. 1 brand, we are looking forward to working with Heineken to develop the significant opportunity that exists in the UK market. Kingfisher Beer Europe will remain a standalone brand-focussed business responsible for the sales and marketing of the brand. We have an exciting programme of consumer and customer initiatives, which we look forward to bringing to the market from October.”
Stefan Orlowski, UK managing director of Heineken, added: “We are delighted to have reached this important agreement with Kingfisher Beer Europe, allowing them to focus on the development of Kingfisher beer in the UK, while drawing on our well-established brewing, sales and distribution capability in the UK. It will enable us to expand our range of premium world beers that we can offer through our modern retail customers and Star Pub and Bars Estate and add further diversity and interest to the beer category.”
Along with the brewing pact, UB Group also inked a loan pact for £1million with Heineken. Under this pact, if the Indian partner defaulted on payment, the Dutch firm would gain rights to produce and sell Kingfisher beer in the UK for five years.
The company further said, “The brewing agreement will grant Heineken the exclusive right to manufacture, package and supply Kingfisher beer for sale in the UK and to manufacture and package Kingfisher beer for export by KBEL to Europe (excluding Germany) for a period of five years.”
“On April 18, 2013, KBEL entered into a loan agreement with Heineken pursuant to which Heineken agreed to provide KBEL with a secured term loan facility of £10,00,000 (approx. Rs 8.3 crore) to be made available and to be repaid in full by October 9, 2016,” a statement by Heineken said.
In addition, in exchange for royalty payments to KBEL, Heineken will receive the right to the sole and exclusive reseller of the product to certain customers, it added.
It further said such licence would expire on October 2018 or earlier if the Indian firm is able to repay the debt before the date.