Heinken takes Sh5.3 billion contract battle to apex court

The battle between Danish beer maker Heineken and its local distributor Maxam Ltd over the rights to distribute its products in the country has escalated to the Court of Appeal.

This is after High Court in Nairobi barred Heineken from terminating Maxam Ltd's distribution rights and ordered it to pay Sh1.7 billion for loss of business.

Aggrieved, Heineken moved to Court of Appeal, arguing that Justice James Makau erred by holding that Maxam had a legitimate expectation that its 2013 contract won't be terminated.

Justice Makau found that Heineken kicked out the distributor in 2016 and appointed others, noting that the firm had lowered the price of its beer to the newcomers while upholding high rates for Maxam.

But Heineken now argues the judge did not factor in its evidence showing that it had every right to terminate the contract. Maxam sued Heineken, alongside its affiliates, Heineken East Africa Import Company and Heineken Brouwerjen BV, arguing it had no authority to cancel the contract.

Maxam argued that terminating the contracts would affect other firms from whom they had leased warehouses, hired Lorries, and sub-distributors.

Heineken then appointed Jeyfine Wines Company Ltd as well as Maxam’s customers as sub-distributors. “The plaintiff has credible information that the defendants have appointed many other distributors alongside Jey Wines Company, greatly reducing the margins and supply of the products to the plaintiff," Maxam lawyer Phillip Nyachoti argued.

Maxam said no reasons were given for contract termination. Heineken East Africa General Manager Ache Unigwe said the deal allowed Heineken to end agreements without explanation.

Heineken's deal with Kenya's Maxam was to see the distributor move beer for the Dutch brewer from May 2013 to May 2016, after which the contract would be renewed on a yearly basis.

The court heard that Maxam, Uganda’s Modern Lane Ltd, and Tanzania’s Olepasu Ltd boosted Heineken's turnover to Sh1.8 billion in 2015, up from Sh1.3 billion.

Heineken's distributors in their case filed by lawyer Phillip Nyachoti argued that allowing the beer maker to terminate their contracts would also affect other companies from whom they have leased warehouses, lorries for transportation, and sub-distributors to move the import products.

In its defense, Heineken East Africa General Manager Ache Unigwe said the deals struck with the firm allowed Heineken to end the agreements without having to explain why and that it would be considered if they applied for the new deal.

Heineken was to pay each distributor Sh51 million in compensation in the event it terminates their contract.