SABMiller unit wins East Africa beer war in court August 19, 2009
By Ann Crotty
The agreement between SABMiller and Diageo, which effectively determines the competitive landscape of the beer industry in Tanzania and Kenya, is set to remain in place until January 2011 following yesterday's ruling by a London High Court.
The court ruled that the brewing and distribution agreement between SABMiller-controlled Tanzania Breweries Limited (TBL) and Diageo-controlled East African Breweries Limited (EABL) must remain in force until January 2011. It also ordered that EABL could not acquire a controlling stake in Tanzania-based Serengeti Breweries or enter into a brewing and distribution agreement with it until that date.
Last month EABL gave notice to TBL that the company was terminating the brewing and distribution agreement that had been in place since 2002 and was acquiring a controlling stake in Serengeti.
It justified its course of action by claiming that TBL had fundamentally breached the terms of the agreement.
The breaches included the inappropriate pricing of EABL's products by TBL; TBL's failure to use its best endeavours to promote and sell EABL's products; and TBL's failure to use sufficient funds to market EABL's products, the Diageo unit said.
TBL immediately sought an injunction in the London High Court to prevent EABL from terminating the agreement and entering into an arrangement with Serengeti.
In his decision yesterday the judge said the so-called breaches raised by EABL did not amount to fundamental breaches because there was scope within the agreement for the parties to resolve them.
Having given notice last month, EABL is bound by the brewing and distribution agreement with TBL until July 2010. In addition there is a further six-month period during which EABL is restrained from entering into competition with TBL.
The judge added that the loss that would be suffered by TBL as a result of the creation of a "powerful new competitive force" in the Tanzanian beer market would be "real".
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By Ann Crotty
