Brewer Scottish & Newcastle unveiled a new UK distribution joint venture with Swiss freight group Kuehne + Nagel on Tuesday to cut costs and boost spending behind its key brands.

The new venture will distribute S&N’s Foster’s, Kronenbourg 1664 and John Smith beers from breweries to pubs and retail outlets, and will also seek new contracts with other beer and soft drinks groups for distributing their products.

The move sees 1,900 existing S&N employees becoming employees of the Swiss company and transferring to the new joint venture KN Drinks Logistic. They will join with 1,000 Kuehne + Nagel staff.

Although the Transport and General Workers Union (T&G) reacted angrily saying it has not been consulted on the plan, S&N insisted all the 1,900 jobs were safe.

“There are no implications for the 1,900 jobs,” John Dunsmore, managing director of S&N UK, told Reuters.

He said the move was triggered by the changing UK beer market with the so-called on-trade of pubs and clubs seeing beer volumes declining annually three percent while supermarkets were more likely to favour distributors with a big range of products.

He said the new venture could attract regional brewers into the distribution arrangement as well as other suppliers to pubs such as food manufacturers and soft drink makers.

S&N said it expected the move to make annual cost savings of 5 million pounds by 2007, while it will receive around 30 million pounds from the joint venture.

The new 10-year deal will replace an old arrangement whereby Kuehne + Nagel did all distribution to S&N’s warehouses and to supermarkets, and S&N staff distributed to pubs and clubs.

The move reflects an on-going move to rationalise distribution with S&N’s two biggest UK rivals Molson Coors Brewing Co and InBev both using a Tradeteam joint venture to distribute to pubs. Britain’s other big brewer Carlsberg A/S has its own distribution.

S&N shares were steady at 524-1/2 pence by 11:30 a.m., while Kuehne + Nagel shares slipped 0.6 percent to 439.5 Swiss francs.

Source: Reuters

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