Tuesday, 1 September 2009

Beer dispute in East Africa fermented in UK High Court

A dispute concerning production and distribution of beer in Tanzania, between Tanzania Breweries Ltd ("TBL") and Kenya’s East African Breweries Ltd ("EABL") has been decided in favour of TBL by the High Court in UK. The ruling (available here on BAILII) by Justice Christopher Clarke, and dated 18th August 2009 effectively restrains EABL from terminating a brewing and distributorship agreement with TBL. The injunction also prohibits EABL from distributing or engaging any other company to distribute its range of products in Tanzania. TBL is a subsidiary of South Africa’s Sabmiller Africa BV while EABL is a Kenyan listed company with majority shareholding by Diageo Plc.

The dispute, linking various companies under the control of the two multinational brewing giants arises from a number of brewing and distribution agreement entered into between the two companies in 2002 in which EABL ceased operating in Tanzania and likewise TBL ceased operating in Kenya. Under the agreement, the products of each company would be brewed and distributed under licence by the market leader in each country.

In Tanzania TBL is the leader in the beer market holding 80% market share with popular brands Kilimanjaro and Safari. In Kenya EABL owned Kenya Breweries Ltd is the market leader with brands such as Pilsner, Tusker, Guinness and Malta Guinness with Tusker being the most dominant brand.

The battle between South Africa brewery and EABL, often termed as a proxy war between the multinational Companies SABmiller Plc and Diageo Plc started in Kenya when the South African brewer entered the Kenyan Market as Castle Breweries with a huge investment in a brewing facility in Thika. The ensuing rivalry between their respective brands -Tusker and castle witnessed both companies throwing thinly veiled allegations at each other over destruction of advertising billboards. The battle subsided in 2002 when the contract now under dispute was agreed upon- in what later emerged as a deal struck in UK by the parent companies.

The court ruling means that the status quo remains until 17th January 2011 when the contract is set to expire or earlier if ordered by the Court or of an arbitration tribunal appointed by the parties to resolve the dispute.

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