Lion/Heineken deal costs DB

By SIMON HENDERY AND AGENCIES

Transtasman brewer Lion Nathan has struck a deal with international brewer Heineken to produce and market the Dutch beer giant's flagship global brand in Australia.

The joint venture comes at a cost to Lion's major rival in the New Zealand beer market, DB Breweries.

While DB, which is part-owned by Heineken, will continue to brew and sell Heineken's product in New Zealand, the deal with Lion means DB loses a small but lucrative export venture.

Last year, DB made about $800,000 in earnings before interest and tax from shipping kegs of Heineken to Australia, a business it has been involved in for five years.

DB's total pre-tax earnings were $35.7 million last year and the company said yesterday that Heineken keg sales to Australia were just one part of its export business.

"It's very small in the scheme of things", said managing director Brian Blake.

Export volumes of other DB brands continue to grow in Australia and other markets, DB said in a statement.

The company said that although exact timing had still to be confirmed, it was likely that DB would continue supplying Heineken kegs to Australia until the end of this year.

DB is 76 per cent owned by Singapore-based Asia Pacific Breweries (APB) Group, which in turn is 42.5 per cent owned by Heineken.

Until now, bottled Heineken sold in Australia has been imported from Europe.

The joint venture with Lion Nathan gives the Sydney-based company a strong brand in the lucrative and fast-growing premium end of the beer market to add to its portfolio.

Last week, when Lion confirmed market rumours that it was in talks with Heineken on establishing the joint venture, one analyst suggested that on a pre-tax basis, such a deal would be worth A$6 million ($6.9 million) to A$7 million a year to Lion.

The agreement with Heineken covers the manufacturing, importing, marketing, selling and distribution of Heineken in Australia.

Lion said the agreement would allow it to access Heineken's international marketing initiatives and technical support.

Heineken's Australian managing director Hans-Erik Tuijt will become the managing director of the joint venture.

"We believe that the combined strength of Lion Nathan's brands and infrastructure and one of the world's leading premium brands, Heineken [which grew its volume in Australia by 45 per cent last year], will provide both companies with significant opportunities to grow their respective businesses in Australia," Tuijt said in a joint statement with Lion Nathan Australia managing director Andrew Reeves.

A price for the joint venture was not disclosed.

DB BRANDS

Export Gold, DB Draught, Heineken, Monteiths, Tui, Amstel, DB Bitter, Tiger, Double Brown, Export Dry, Black Draught, Bullseye, Flame, Murphy's, Vita Stout