UB Group chairman Vijay Mallya on Monday made peace with Heineken and took control

RELATED ARTICLES United Breweries Q3 net marginally down to Rs 28.62 cr Starbucks expanding beer, wine sales this year

of making and marketing Heineken brand of beers, after the Dutch beer maker said it is ready to merge the Indian assets of Singapore-based Asia Pacific Breweries (APB) with Mallya's United Breweries (UB).

The Dutch company holds 42 per cent stake in APB India. Heineken, which holds 37.5 per cent in United Breweries, had been demanding equal representation on UB board.

Heineken will buy the remaining part of the Indian assets of APB for Rs 175 crore and transfer them to UB after the first quarter of next year.

Early last year, Heineken took over Scottish and Newcastle’s 37.5 per cent stake in UB when Heineken along with another Dutch beer company Carlsberg bought the UK-based Scottish and Newcastle.

UB’s shareholding remains unchanged. Heineken and UB each own 37.5 per cent in UB, the balance 25 per cent is held by public.

“There were certain disagreements on inherent rights but we will withdraw all litigation. The objective is to promote sales of Kingfisher globally,” said Mallya.

Kingfisher is UB’s flagship beer brand.

“In the world of beer, there is no bigger or more exciting growth opportunity than in India. We have long regarded a strong Indian presence as important to increase our exposure to, and growth from developing markets, ” said Jean-François van Boxmeer, chairman of Heineken’s executive board and chief executive.

Both Mallya and Boxmeer were speaking on a conference call with journalists after the announcement from London.

With this deal, Heineken will get access to UB’s strong distribution network in the country, while Kingfisher will be also brewed at Heineken controlled breweries in 67 countries across the globe.

“I don’t want competitors to know my pricing (for Heineken) tactics in advance,” Mallya said. A pint of Heineken beer costs Rs 100 in Delhi. UB is mapping as to when it will roll out the first locally produced Dutch beer.

Kingfisher beer is sold in 55 countries. Apart from India, it is brewed in the US, the UK and New Zealand. UB’s biggest overseas market for the beer is the UK, where it sells one million cases a year.

UB’s portfolio of beers together account for 48 per cent of India’s beer market. “We are growing at 19 per cent, where as the industry growth rate is 6 per cent,” Mallya said.

APB sells the Tiger, Cannon 10,000 and Baron’s brand of beers here and has a share of 5 per cent in India’s beer market. However, UB has not yet got a license to retail Tiger and Baron’s, for which their management will take a call soon.

“We have appointed a committee on the UB board as to how APB’s assets in India are dealt with,” Mallya said. APB has two breweries in India with a total capacity of producing 460,000 hectoliters per year.

“The opportunity to licence the Tiger brand to sell in India still exists,” Boxmeer said.

The Heineken beer brand presently sells 10,000 hectoliters per year in India.

After the UB board meeting on Monday, the company appointed René Hooft Graafland, member of executive board and chief financial officer of Heineken along with Siep Hiemstra, regional president, Heineken Asia Pacific, to the board of directors of UB as Heineken’s non-executive directors. Guido de Boer has been appointed as chief financial officer and executive director of the company.

Millennium Alcobev, which was a joint venture between Scottish and Newcastle and UB when the former first entered India, is also set to merge in to UB, Mallya said.