Heineken, The Coca-Cola Company and the Coca-Cola System in Brazil have settled their dispute about the distribution of Heineken products in Brazil. The partners finally agreed to redesign their longstanding distribution partnership after they met in the last years only in court.
As per the new agreement, which is expected to become effective mid-2021, the parties will begin a smooth transition of the Heineken and Amstel brands to Heineken Brazil’s distribution network. The Coca-Cola System in Brazil will continue to offer Kaiser, Bavaria and Sol, and will complement this portfolio with premium brand Eisenbahn and other international brands. “The agreement allows the parties to better serve consumers and customers in the Brazilian market with a solid portfolio, building on the positive momentum developed over many years of successful collaboration,” said Heineken in a press release.
“Additionally, as part of the redesign of the distribution partnership, the parties will have more flexibility. Subject to certain mutually-agreed upon terms established in the agreement, the Coca-Cola System in Brazil will be able to produce and distribute alcoholic beverages and other beers in a certain proportion to Heineken’s portfolio and Heineken will be able to explore further opportunities in the non-alcoholic segment. This will allow Brazilian consumers to benefit from a wider array of options,” the statement ends.
The agreement will have an initial term until December 31, 2026, with the possibility of automatic renewal for the subsequent period of five years, subject to certain conditions. The contract is subject to applicable regulatory approvals and, as part of the negotiation, the companies have agreed to close all disputes between them regarding previous distribution agreements. The financial terms of the deal were not revealed.
Reason for the dispute was Heineken’s acquisition of the former Schincariol breweries from Japan’s Kirin Holdings in 2017 (inside.beer, 13.2.2017, inside.beer, 1.6.2017) and the following termination of all distribution contracts with Coca-Cola. The contracts concerned all Heineken products like Heineken, Kaiser, Amstel, Bavaria, Xingu und Sol which were produced by Cervejaria Kaiser, a company which was acquired by Heineken in 2010, and which were distributed by Coca Cola.
Heineken argued at that time that it made economically no sense to continue the distribution through Coca Cola because it had acquired from Kirin not only brands and breweries but also a sales network. Working with two separate distribution networks in Brazil was no viable option, the Dutch brewer said.
Coca-Cola urged Heineken to adhere to the old contract but Heineken refused to do so. After the two partners could not reach an agreement on the matter, they started in November 2017 an arbitration case (inside.beer, 17.11.2017) which Heineken lost in October 2019.
Still, the case was not settled and in January 2020 in an action filed at the São Paulo Court of Justice, Coca-Cola Brasil asked for the annulment of the purchase of Brasil Kirin by Bavaria, a company also owned by Heineken. The plaintiffs justified their claim that Bavaria was a company that existed only on paper to circumvent Coca-Cola’s distribution rights for Heineken’s alcoholic beverages until 2022, as guaranteed in a mutual contract. (inside.beer, 24.1.2020)
Mauricio Giamellaro, president of the Heineken Group in Brazil, commented: “I am very pleased to redesign our distribution partnership with the Coca-Cola System in Brazil. Through a dual route to the market, we will be able to better reach and serve our consumers and customers with our broad portfolio, leveraging two strong distribution systems ”.
Luis Felipe Avellar, president of Coca-Cola Brasil & Cone Sul, highlighted: “Our companies have a long history of partnership in Brazil and we are pleased to reach a new agreement that will serve consumers for many years”.
Ricardo Mello, president of the Association of Coca-Cola Bottlers in Brazil, added: "This new agreement is positive news not only for the parties involved, but also for our Brazilian customers and consumers".