Heineken has joined forces with Bangalore-based United Breweries Limited (UBL), the maker of Kingfisher, in a deal that will allow the Dutch brewer to produce and distribute its brand of lager in one of the worldÔÇÖs fastest-growing beer markets.
Amsterdam-based Heineken and UBL have agreed on terms of brewing and distributing Heineken-branded beer in India.
The deal will give the Dutch firm increased exposure to high growth developing markets. It is keen to diversify beyond its core strategy of selling premium beers in western Europe and the US, where consumption is predicted to flatten or in some cases, decline.
Working with UBL, Heineken has said it hopes to accelerate growth of the Heineken brand in the growing premium beer segment, which is currently estimated at six per cent of the total beer market.
In turn, the Kingfisher brand will benefit from access to HeinekenÔÇÖs brewing and distribution channels in more than 60 countries. The Indian lager is already made in the UK, US and New Zealand.
In 2009 the Indian beer market is expected to grow to 14.4 million hectolitres. Current beer consumption per capita is estimated at 1.3 litres per year, Heineken said.
Commenting on the deal, Jean-Fran├ºois van Boxmeer, HeinekenÔÇÖs chairman and CEO said: ÔÇ£In the world of beer, there is no bigger or more exciting growth opportunity than India. We have long regarded a strong Indian presence as important in order to increase our exposure to and growth from developing markets.ÔÇØ
He went on to say: ÔÇ£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.
ÔÇ£We are now uniquely positioned to benefit from the highly favourable demographics and strong economic fundamentals in the Indian market.ÔÇØ
UBL chairman Dr Vijay Mallya said: ÔÇ£Led by United Breweries and its flagship brand Kingfisher, the Indian beer market has been a strong and exciting growth over the last several years. Given the young demographics of the country, I foresee many decades of strong and profitable growth to come.ÔÇØ
He added: ÔÇ£Heineken is among the most respected and recognized names among beers all over the world. The combination should help United Breweries to further its leadership position in the years to come.ÔÇØ
Last year, Heineken acquired a 37.5 per cent stake in UBL as part of its takeover of Scottish & Newcastle, which created a conflict of interests due to the Dutch firmÔÇÖs joint venture in India with Asia Pacific Breweries.
Under the terms of the new deal, Heineken will buy the Indian unit of Asia Pacific Breweries and bring it into the joint venture with UBL.
Heineken will also sell its stakes in brewers in Indonesia and New Caledonia to Asia Pacific, booking gains of Ôé¼145 million and reducing debt by Ôé¼175 million in 2010.
With the reduction in debt comes the possibility that Heineken could now go on to purchase Mexico-based Femsa SA's beer operations, which would give it access to the fast-growing Latin American market.
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