.In Multi–Billion Naira Deal With Carlsberg
By Henry Okoduwa –
Big alcoholic beverage manufacturers, Sona Breweries Nigeria Plc are locked in a bitter compensation war with Carlsberg Breweries International over what it has described as a breach of contract.
The Nigerian Company still reeling from huge losses incurred after Carlsberg Breweries pulled the plug on a multi–billion Naira agreement that has over two decades made them the sole producers and franchise owners of the Denmark-based Company’s range of products in Nigeria, have since embarked on a wholesale crushing of unused crates, bottles and cans to mention just a few, to at least recoup some of the losses.
Sona Breweries are claiming that Carlsberg were not guided by the provisions of the agreement long consummated since 1982 in reaching their decision to abruptly cancel the deal.
Relying on a clause 7.7 of the 2004 agreement made available to the media, which state inter alia, “This agreement will last for as long as both of us wish to end this agreement, we will give to the other at least six months during January in any year”, the claimant (Sona Breweries), insist they were neither given sufficient time to wind down production of the products nor given cogent and plausible reasons for the abrupt withdrawal especially when discussions for expansion on the deal was ongoing.
According to the Company’s spokesman Barrister Joseph Ogunniyi who spoke on the issue recently, Carlsberg’s action smacked of betrayal, blackmail and intimidation.
“Sona Breweries, together with its sister Company International Beer and Beverage Industries of Nigeria Limited, Kaduna entered into a Trademark, Licence Agreement with Brasseries Kronenbourg SA of Strasbourg of France where in they were granted the exclusive license to use the following Kronenbourg trademarks in Nigeria– Gold de Kantebrau, Wilfort, Kronenbourg, Eva malt, Tusk and Maltonic.
The agreement which was to last for five years before renewal was signed in 1998”, he opened up in an interview.
“We had no problem as everything ran smoothly. For the records, we paid one hundred thousand US dollars ($100,000) to acquire this license and our relationship with the parent company was cordial. And at the expiration of the first five year contract, we naturally sought for a renewal but learnt that the French –based Company had been bought over by a Scottish Company, Scottish and Newcastle International Limited, known for short as S & N.
“Well, we had no option but to deal with them. We opened a series of negotiations and by October 14, 2004, Sona Breweries signed another five-year deal which would have lapsed in 2009.
“However, we would again receive the news of S & N’s acquisition around 2008 by Carlsberg Breweries and Heineken International. By the understanding that the Kronenbourg assets and operations would be transferred to the new owners (Carlsberg), we opted to do business with them.
“But things started to go awfully awry when Carlsberg began expressing disappointment at the level of royalty paid by Sona Breweries under the 2004 agreement
“Michael Reder, acting on behalf of Carlsberg had sent an e-mail to this effect on July 31, 2008. He further insisted that a satisfactory solution to the problem of royalty had to be found before the parties would discuss a possible expansion of their cooperation.
“This was what led to Carlsberg asking for a major rise of up to 1000% in royalties to be paid to it. Our immediate reaction was to write and inform them of the impossible nature of their demands, insisting that local production and consumption could not support it. The implication of their demands, would entail that all the prices of the Sona Breweries brands would rise astronomically, far above what was being presently paid for consuming the products.
“We also explained to them that the royalty level they proposed would be illegal in Nigeria as violating the rules of the regulatory authority, the National Office for Technology Acquisition and Promotion (NOTAP).
“These negotiations were still going on when Sona Breweries received a notice of termination dated January 6, 2008 informing it of Carlsberg’s decision to terminate the agreement on July 2009. The notice took us by surprise as we were already in advanced stages of negotiations. And to prove they meant business, Carlsberg caused to be published in THE PUNCH Newspapers of July 16, 2009 a full statement of its withdrawal from the deal with a banner head line – “Termination of license agreement with Sona Breweries Plc!”
“Carlsberg had been so emphatic as they warned Sona Breweries to cease the production, marketing and sales of Maltonic, Wilfort,Tusk, Kronenbourg Tigre Bock and Gold de Kantebrau.
“But this negated, wholly, the terms of the agreement earlier quoted in the clause 7.1. The action also contradicted provisions in clause 7.2 of the agreement where it stated that,
a. each of us will settle any payments owing up to the date of termination,
b. that each of us will cooperate to ensure a smooth handover of responsibility for the products, in the territory to whoever we nominate,
c. each of us will return any property owned by the other and
d. neither of us will be entitled to claim compensation from the other for termination of this agreement but any liabilities arising prior to termination will not be extinguished.”
“According to Barrister Ogunniyi, this sudden turn of events would lead to massive losses for Sona Breweries. We are yet to get over the gargantuan losses incurred in this brazen disregard of our rights by Carlsberg Breweries of Denmark.
“Close to N2billion have gone down the drain since this withdrawal- of -licence saga began 2009. Thousands and thousands of empty crates, Kronenbourg cans and bottles lie fallow and wasted in many of our warehouses located in our Sango Otta and Kaduna factories.
“We are only just now beginning to crush the thousands of plastic crates, cans and bottles, at least to cut our losses as we wait patiently on Carlsberg to either pay us compensation for the losses or altogether rescind their decision.
“We are therefore seeking a declaration that recipes for Wilfort, Gold de Kantebrau and Kronenbourg which we solely developed when the Nigerian government banned the importation of raw materials between 1986 and 2003 be jointly owned.
“This therefore means that they (Carlsberg) cannot disclose the recipes of these aforementioned brews to a third party.
“We are also declaring that Carlsberg were not entitled to issue a notice of termination at the time they did because it negates our 2004 agreement with S & N stipulating at least a period of three years grace before it could be invoked.
“It also therefore implies that the publication which appeared in the PUNCH of July 16, 2009 remains null, void and of no effect.”
And with the acrimonious and controversial end of their partnership, Barrister Ogunniyi insists it would be unwise for any individual or corporate entity to consummate a foreign franchise agreement not guaranteeing business security through a religious adherence to the terms of such partnership.
“Our ordeal in the hands of Carlsberg should serve as a warning to companies in Nigeria, that the fact that you have a contract with a foreign partner may not necessarily guarantee it would be respected. And I think the attitude of Carlsberg as a big set back for investment initiatives as well as foreign partnerships in Nigeria”, he claims.
Meanwhile, efforts to reach Carlsberg’s representatives in Nigeria to state their side of the story is yet to yield any result as at the time of filing this report despite repeated visits.