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Thursday, Jan 24, 2002

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UB banks on S&N's retail clout

Boby Kurian


THE Edinburgh-based Scottish & Newcastle (S&N), a perennial underdog, often ends up winning. And today was no different as United Breweries (UB) finally chose S&N as its minority partner in the beer business.

A fortnight back, the Belgian major Interbrew and South African Breweries (SAB) gave up hopes of sealing a deal with UB following information that the domestic major was seriously pursuing S&N.

For Interbrew, at least, the script was familiar.

Two years ago, S&N swooped in to snatch away another mega deal in France, when Danone decided to shed its beer business.

The deal with UB ranks among S&N's biggest forays outside continental Europe.

The major markets for S&N beyond Europe are the US, South Africa and China, where it either sells its brand under licencing arrangement or imports the products from its own breweries in the UK, France, Belgium and Ireland.

The S&N group comprises Scottish Courage, Britain's leading beer company, Brasseries Kronenbourg, France's leading beer company, Alken Maes, Belgium's second largest brewer, Central de Cervejas in Portugal and Scottish & Newcastle Retail, one of Britain's leading pub, bar and restaurant chains.

A string of recent acquisitions saw S&N quietly upstaging other heavyweight brewers to emerge as Europe's second largest brewing operation.

What clinched the deal with UB? Sources close to Mr Vijay Mallya, the UB Chairman, said that S&N's growing influence in many European markets and its retail clout were decisive factors.

S&N Retail is one of the leading pub companies in the UK, managing over 1,400 pubs and pub-restaurants with an annual turnover in excess of 900 million pounds.

It serves over three million customers per day and provides an ideal plank for UB's flagship Kingfisher beer to dabble in Europe's mainstream beer business.

Analysts said that UB chose S&N as strategic partner as it was perceived to pose less trouble for UB in managing and running its domestic beer operations.

It is known that both SAB and Interbrew were more demanding in their negotiations with UB, and were even looking at management control at a later stage, if not now.

Moreover, S&N, unlike SAB, has brands with relatively weak equity in the Indian market and is expected to go slow with the branding game in the country.

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