S & N passes control of Becks to InBev
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.
27/05/2005 Scottish & Newcastle (S&N) today announces that it is entering into 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. 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.
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.
The new agreement recognises that the strategic value of the brand has now passed to Inbev, since their purchase of Beck’s in 2001. S&N UK will continue to sell Beck’s to its Independent Free Trade customers for the remainder of the term of the original agreement to 2012.
This deal will be earnings enhancing to S&N, particularly in the early years. In the first 3 years of the agreement the payments will result in a £6m surplus per annum over the lost income, of which the majority will be invested in incremental advertising & promotion (A&P).
It is anticipated that there will be a transition period of around 10 weeks to allow transfer of sales, marketing and distribution activities to InBev.
