E-Malt.com News article: UK: InBev buys back Beck's UK for EUR 97.7 million from Scottish & Newcastle

InBev and Scottish & Newcastle (S&N) announced on May 27 that they have reached an agreement that will enable InBev to sell, market and distribute the Beck’s brand in the UK, seven years earlier than allowed under the terms of the existing licensing arrangement.

InBev said that it got back the distribution rights for Beck’s® in the U.K., for a price or net present value of 97.7 million euro. This agreement will bring forward the date on which the Beck’s® brand will be fully integrated into the InBev portfolio in the U.K., InBev said. Scottish & Newcastle said the new agreement will generate royalties to S&N from InBev of around £77m. This sum will be paid in agreed annual rates up to the end of the original licence period to 2012.

Beck’s® annual volumes sold in the U.K. in 2004 amounted to approximately 600,000 hectoliters in on-and off-trade, combined. InBev is confident that this brand will be a great asset to Interbrew UK’s portfolio. The unique positioning of Beck’s®, based on its quality and tradition, will certainly create value for Interbrew’s U.K. operations.

Scottish & Newcastle entered into an exclusive distribution agreement for the Beck’s® brand in 1987, which at the time was owned by Brauerei Beck GmbH & Co. In 2001, InBev acquired the German brewery, Beck & Co and, as part of this transaction, it took over the agreement with Scottish & Newcastle for the distribution of Beck’s® in the UK. The distribution agreement was scheduled to run until May 2012.

“We firmly believe that Beck’s®, one of our global flagship brands, will enhance InBev’s portfolio of brands in the UK and will further strengthen our position in this key market for InBev.” Stewart Gilliland, InBev Zone President Western Europe

It is expected that this transaction will become accretive from 2006 onwards. Return on Invested Capital is expected to meet Weighted Average Cost of Capital by 2007.

The transaction is expected to close shortly.

S&N said: “This move will allow S&N’s business in the UK, which is the market leader, to follow its stated strategy of increasing focus and marketing investment on the key brands of Foster’s, Kronenbourg 1664, John Smith’s and Strongbow. These four brands grew sales volumes by 4.5% in 2004. When Beck’s is excluded from S&N’s numbers for 2004 these four brands represented 80% of UK beer and cider volumes.”

InBev is a publicly traded company (Euronext: INB) based in Leuven, Belgium. The company's origins date back to 1366, and today it is the leading global brewer by volume. InBev’s strategy is to strengthen its local platforms by building significant positions in the world's major beer markets through organic growth, world-class efficiency, targeted acquisitions, and by putting consumers first. InBev has a portfolio of more than 200 brands, including Stella Artois®, BRAHMA®, Beck’s®, Skol®—the third-largest selling beer brand in the world—Leffe®, Hoegaarden®, Staropramen® and Bass®. InBev employs some 77,000 people, running operations in over 30 countries across the Americas, Europe and Asia Pacific. In 2004, InBev realized a net turnover of 8.57 billion euro (including four months of AmBev). For further information visit www.inbev.com.
Interbrew UK is an affiliate of InBev.

S&N has been the exclusive importer and distributor for Beck’s Beer in the UK from August 1987. S&N is market leader in the UK with a 27% market share. In 2004, UK operating profit increased by 11.4% to £176million and S&N ‘s beer and cider volumes were up by 1.0% ahead of the UK beer and cider market at +0.4%. S&N’s top 4 brands in the UK continued to perform strongly with volumes up 4.5% in 2004. S&N UK increased A&P investment by 20% in 2004.


27 May, 2005