East African Breweries Limited (EABL), a subsidiary of Diageo, has issued a 12- month notice to terminate its Brewering and Distribution Agreement (BDA) with Tanzania Breweries Limited (TBL), a subsidiary of SABMiller.
In a statement, the EABL Corporate Affairs Manager, Ken Kariuki, said that the notice was as a separate matter to another notice of terminating the agreement reached in 2002
The initial term of the BDA and SPA agreement with TBL was for five years. It expired in 2007. Since then the contract has continued to roll forward in accordance with its terms and despite a long series of discussions with SABM to renew, "we have been unable to agree the terms of a permanent renewal," he said.
The 2002 deal stopped competition in Tanzania and Kenya which had stagnated beer prices for close to five years. Essentially, it restricted SAB to Tanzania and EABL to Kenya - where it brews and markets for SAB.
The EABL's notice has come a few days after Judge Christopher Clarke of the UK commercial court has temporarily suspended a move by the EABL to acquire Serengeti Breweries Ltd (SBL) until arbitration between Diageo and SABMiller is concluded. Mr Clarke made the ruling on Tuesday following a suit by SABMiller that such acquisition violates a non-compete agreement between EABL and TBL.
Mr Kariuki said that the ruling maintains the status quo and that the arbitration would determine the resolution of the case. "This hearing was essentially an interim hearing to determine how the parties should proceed, pending resolution of the substantive issue, which will be resolved at arbitration," he said.
He said that the status quo meant that TBL and EABL should continue implementing the Brewing and Distribution Agreement (BDA) as normal.
"We are keen to start the arbitration process quickly so as to resolve this as soon as possible We have also given notice to terminate the BDA in 12 months' time as a separate matter," Kariuki said. He added: "The assertion that there can be a 'status quo' with the current BDA is unrealistic.
"We have clearly laid out that our future lies with Serengeti Breweries Limited(SBL). This is not only good for us and our brands, but also to promote competition within Tanzania and a higher profile for SBLs own Tanzanian brands like Serengeti.
" Diageo and SAB have free competition in Uganda where they own majority stakes in Uganda Breweries and NileBreweries respectively.
**Brace yourself for a very interesting show down in the next coming months....my take is that this beer war is going to turn ugly before they agree on a deal....
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