Ngugi Kiuna seeks compensation for loss of Heineken distributor deal

Businessman Ngugi Kiuna has claimed that Dutch beer maker Heineken promised financial compensation in the event that the brewer cancelled lucrative distribution contract it awarded to his firms in 2013.

Mr Kiuna says his firms-Maxam Limited, Modern Lane (Uganda) and Ole Pasu (Tanzania)-received assurances from Heineken’s representatives Koen Morshuis and Rob Marijnen in negotiation meetings that the brewer would compensate its distributors in the event it pulled out of the distribution deals.

The three Ngugi Kiuna-owned firms have sued Heineken for cancelling their exclusive distribution deals in Kenya, Uganda and Tanzania. They have obtained a court order barring the Dutch brewer from firing them until the suit is heard.

Heineken holds that the deals struck with the three firms allowed it to terminate the agreements without having to make any explanations.

“Mr Morshuis and Mr Marijnen who were involved in the negotiations constantly affirmed the position that Heineken would not terminate the agreements without proper and reasonable compensation. To this end, they persuasively quoted the compensation package paid out to their previous Tanzanian distributors as evidence of their commitment,” Philip Nyachoti, the distributors’ lawyer says.

Heineken says the termination is aimed at deleting the exclusivity clause in the current contracts to open up the distribution of its products across the region to more firms that are willing to partner with it.

The brewer says it left the door open for Mr Kiuna’s firms to negotiate new non-exclusive distribution deals.

But Mr Kiuna says he personally attended a January 27 meeting with Heineken in which one of the brewer’s representatives only identified as Mr Linck specifically told the distributors that there was no chance of negotiating new deals.

“Mr Linck was categorically unequivocal that there was no more room for discussions but the applicants were on their part more than ready to negotiate a way forward hence the institution of these proceedings,” Mr Kiuna adds.

READ: Heineken distributors win first round in contract termination row

Mr Kiuna adds that his Kenyan firm-Maxam Limited-held meetings with the Dutch brewer in December in which he protested to a proposal to hike Heineken’s cut for each case of beer sold.

The businessman claims Heineken wanted to increase its gains from each case of beer sold from Sh465 to Sh1099.

Mr Kiuna holds that accepting the proposal from Heineken general manager Uche Unigwe would have dropped Maxam’s earnings from Sh854 to Sh220 per case sold.

Heineken sent termination notices to the three distributors last month. They have sued Heineken International BV and its subsidiaries Heineken East Africa Import Company and Heineken Brouwerjen BV.

The three distributors in their suit argue that Heineken wants to terminate their contracts despite their efforts to grow the brewer’s turnover to Sh1.8 billion in 2015 up from Sh1.3 billion a year earlier.

Businessman Ngugi Kiuna has claimed that Dutch company Heineken promised financial compensation in the event that the brewer cancelled lucrative distribution contract it awarded to his firms in 2013.