UK: Scottish & Newcastle launches new distribution joint venture with Kuehne + Nagel for UK

Scottish & Newcastle (S&N) announced on April 25 a new joint venture with the global logistics business, Kuehne + Nagel. The venture will be formed by consolidating the relevant UK distribution assets of both companies, creating the biggest and best-invested drinks logistics business in the UK.

The joint venture will contract Kuehne + Nagel to provide all S&N UK’s primary and secondary distribution activities for an initial period of 10 years. To fulfil this contract, Kuehne + Nagel will form a new division, KN Drinks Logistics (KNDL).

The current distribution network will be opened up to new business, whilst continuing to guarantee the present supply chain to S&N’s existing customers. The experience of a global logistics partner will be instrumental in leveraging the existing cost base. Management of KNDL will be incentivised on growth targets to develop the new business.

As a result of the formation of the joint venture S&N expects annual cost savings of £5m in 2007 and will receive a net consideration of around £30m from the joint venture.

All current employees, c1,000 working for Kuehne + Nagel in primary distribution and 1,900 working for S&N UK in secondary distribution, will transfer into KNDL.

Stephen Glancey, S&N Group Operations Director comments “By placing our distribution business within this new joint venture, it becomes free of constraints to grow and to seek new contracts outside S&N. This will help to provide our current distribution employees with better job security and prospects within a specialist company. Furthermore, S&N UK will become free to concentrate on its core business of developing and selling great drinks brands.”

Details on the formation of KNDL: Kuehne + Nagel (formerly ACR in the UK) and S&N UK will form a 50:50 owned and controlled joint venture, Kuehne + Nagel Drinksflow Logistics Ltd, comprising the relevant assets of both businesses.

Kuehne + Nagel Drinks Logistics (KNDL) will become a new division of Kuehne + Nagel UK, with the freedom to specialise in the distribution of beverages and other products throughout the UK and to seek new contract work in this market.

KNDL will undertake distribution services on behalf of the asset JV. It will absorb Kuehne + Nagel’s existing contracts for primary distribution and warehouse operations services with S&N. At the same time, KNDL will take on the existing secondary distribution activity of S&N – the delivery to pubs and licensed premises from depots. As part of this transaction S&N will transfer 22 UK depots and 700 vehicles to the JV and five major regional distribution centres (RDC).

There will be no change to the service for existing customers and we do not anticipate any changes to the physical distribution network. KNDL will also be able to offer new customers an integrated nation-wide solution to service both the on- and the off-trade.

S&N is one of Europe’s leading brewers with strong positions in 14 countries, including leadership in three of Europe’s top six markets, Russia, the UK and France. S&N UK is the leading brewer in the UK with a 27% market share. The company supplies licensed pubs, clubs, restaurants & hotels and the take-home market.

S&N UK markets an extensive portfolio of famous brand names including Foster’s, John Smith’s, Kronenbourg 1664, Strongbow, McEwan’s and Newcastle Brown Ale.

S&N contracted its primary distribution to Hays logstics in 1995, following the acquisition of the Courage business. In 2003, the relationship was expanded to include to operation of 5 regional distribution centres. Hays logistic become ACR in 2005, which was then acquired by KN.

With 40,000 employees at 750 locations in 100 countries, the Kuehne &+ Nagel Group is one of the world’s leading logistics companies. Its strong market position lies in the seafreight, airfreight and contract logistics businesses, with a clear focus on providing IT-based Supply Chain Management services. The Kuehne + Nagel UK and Ireland organisation operates 78 locations with around 8,500 employees. Further information can be found at www.kuehne-nagel.com

E-malt.com, the global information source for the brewing and malting industry professionals. The bi-weekly E-malt.com Newsletters feature latest industry news, statistics in graphs and tables, world barley and malt prices, and other relevant information. Click here to get full access to E-malt.com. If you are a Castle Malting client, you can get free access to E-malt.com website and publications. Contact us for more information at marketing@castlemalting.com .