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News analysis: Scottish & Newcastle takeover

By The Drum, Administrator

January 31, 2008 | 6 min read

Inevitably, the future of the Scottish & Newcastle brands has entered into a period of uncertainty since the announcement of the proposed deal, which still requires to be ratified at an Extraordinary General Meeting scheduled for April. However, a promising barometer is the signing of a 50 year licensing agreement by Heineken for the distribution of Kronenbourg.

With Heineken operating in the UK on a much smaller scale than Scottish & Newcastle, agencies handling the brewer’s Scottish accounts, such as Tayburn, Frame and IAS Smarts, are optimistic that the new proprietors will retain the existing marketing expertise, in an effort to retain the brand identities.

Erick Davidson, founder and chairman of Tayburn, who currently handle all of S&N’s artwork as well as a number of packaging and corporate design jobs thinks it is possible the company may remain in flux, with the possibility of a further sell on, for some time to come.

“Nobody really knows to be honest. I’m not even sure it’ll be Heineken. There could easily be somebody else coming along,” he told The Drum.

“One or two guys in the S&N arena said they don’t think this will be the end of it. There could be another purchaser who makes an appearance. There are some very big brewers in the market for a business like this.”

However he does believe that it would be in Heineken’s interest to retain the shares, and to take advantage of S&N’s existing marketing platforms, given the far smaller scale of Heineken’s UK operation.

“It fits best with Heineken because they already own 50 percent of Baltika. That is not to say it is impossible that somebody else will appear. We just don’t know. It is too early to speculate. All the vibes at the moment are that nothing will change.

“If it goes ahead with Heineken, as planned, I think they will very much want to keep the brands marketed from Scotland. We would hope that would be the case. And we are pretty optimistic.”

Nigel Pollard, head of PR at Scottish & Newcastle’s Scottish Courage division said the company was not able to confirm whether the new owners would supplant the existing branding and advertising operations with their own teams from Heineken, although they do not appear to be sufficiently resourced to do so.

“They have a team of people based in Wimbledon who deal with existing business interests in the UK. I am sure that will be a mixture of sales and marketing people,” he told the Drum.

“They are excited at the prospect of owning S&N in the UK, and have a huge amount of respect for it as a business. It will be an integration of two businesses. How that will happen is impossible to say.

“At present, we have resources necessary to market our brand in the UK. The question to ask is, what capabilities do they have in their office in Wimbledon? It is a comparatively small operation, based on an up and coming brand.”

David Jones the press and PR manager of S&N’s corporate team was keen to point out that it is far too early in the process to speculate on the future of the existing advertising and branding contracts.

“What has been announced is that the S&N board has recommended the offer to its shareholders. They’ll vote at an EGM in April. Until then, they haven’t even purchased the business, let alone talk about what they might do with people, jobs, brands and everything else,” he told The Drum.

“They did make one thing very clear; they are buying S&N’s UK business for the strength of its brands and its people. They don’t have a big operation. It is less than one percent of the UK beer market, whereas S&N has 27 percent. They are going to be taking on all the brands with relish. They will go from a tiny player in the UK, to number one.”

“You are talking about a brewer with relatively small representation and market share. The reason they are buying S&N is for its brands and its people. They don’t produce and don’t brew in this country.”

The Drum endeavoured to obtain clarification from Heineken without success.

The bullish optimism did not prevent First Minister Alex Salmond picking up the phone to both Scottish & Newcastle and Heineken, to lend his personal touch to the efforts to ensure the Scottish workforce are not purged during the takeover.

“I have spoken with S&N at the highest level, and am arranging to meet with Jean-Francois Van Boxmeer, chairman of the executive board of Heineken, to pursue our concerns about employment and skills,” he said.

“Our initial assessment is that the vast majority of the Scottish jobs in S&N are secure, including the operations at the Gyle and the phone centre at Livingston. However we have substantial concerns about the employment at the group head office in Edinburgh, which numbers some 240 highly skilled posts. It is this crucial aspect in particular that we intend to pursue in our meetings with Heineken, and we will seek specific assurances on the continuation of these highly skilled posts.”

Heineken’s Veronique Schyns told The Drum that it was still far too early to confirm any details about contracts or what is likely to happen with marketing and advertising jobs, or the effect the acquisition would have on staff.

However, she did hint that there may be some overlap of personnel.

“We see some synergies,” she added. “But these are from both the Heineken Group side and the Scottish and Newcastle side.”

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