Competition Tribunal approves SAB's Smirnoff deal

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The Competition Tribunal has conditionally approved proposed licensing agreements between South African Breweries and Diageo South Africa.

Diageo SA will transfer some 11 000 of its Smirnoff branded coolers to South African Breweries at fair market value, the Tribunal said in a statement on Thursday. The terms of the licensing agreement have been kept confidential by agreement between the parties.

SAB will be appointed as the exclusive licensee for the manufacture, distribution, marketing and sale of Smirnoff and Guinness branded products in South Africa and certain other regions in exchange for royalty fees, the statement said. 

SAB will begin local production of Guinness draught and will continue to import 440ml cans until local sales volumes reach a level that will make local production viable. SAB will also have to market the Guinness brands and to reach minimum volume targets relative to the number of outlets serving Guinness from draught taps, as well as outlets serving Guinness 440ml cans, the Tribunal said.

SAB will also have to spend a certain percentage of net sales value on promoting the Guinness brands.

As for Guinness Foreign Extra Stout and Guinness Malt variations, these are currently imported and do not form part of the licensing agreements. However, SAB is granted an option to import these brands for the duration of the agreements.

In relation to the Smirnoff brands, SAB will be required to meet specific growth targets in line with the growth of similar brands.

SAB will be required to advertise and promote the Smirnoff Brands and spend a specified portion of net sales value in doing so.

Diageo will retain creative oversight and ensure consistency in respect of Smirnoff brand innovations with its global and South African spirit brands.

The Tribunal's approval is subject to certain conditions, the statement added. These include that the companies must avoid inappropriately exchanging "competitively sensitive information".

SAB must also continue to provide a proportion of its cooler space to competitors, in line with a condition relating to a prior agreement with AB InBev.

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