Heineken ends distribution tie-in with Coca-Cola Femsa in Brazil

Heineken will end its distribution partnership with Coca-Cola Femsa in Brazil, following its €665 million acquisition of Kirin’s struggling Brazilian business.

The Dutch brewer said that it would review its future routes to market when it announced the acquisition in February. It has now confirmed that it will abandon its tie-in with Coca-Cola Femsa in favour of leveraging Brasil Kirin’s existing routes to market for the Heineken portfolio.

The partnership had been due to last at least until 2022, but Coca-Cola Femsa chief financial officer Hector Treviño suggested that this was now thrown into doubt.

“The idea is just to continue our normal operation. So we don’t have a specific date on [the] termination,” Treviño told investors in a conference call. “What we can share is the public information we have out there… revenues for beer in Brazil accounted for MXN 7.8 billion ($415 million) and are close to 18% of the revenue we have in Brazil. Given this situation, perhaps it’s much better not to continue commenting on this until we assess the next steps and, as I’ve mentioned, possible actions.”

Treviño said that Coca-Cola Femsa was also evaluating whether Heineken would incur fees for terminating the contract early.

Heineken agreed to acquire Kirin’s struggling Brazilian business in February. At the time, it said that the acquisition will make it the second largest beer company in Brazil with a stronger commercial platform from which to capture future growth.

The brewer first entered the Brazilian market with the acquisition of Femsa Cerveza in 2010, including all of Femsa’s Mexican beer operations as well as its US and other export businesses, in a deal that valued the company at €3.8 billion.