Business Times

Enhancing capacity at the 3 Coins brewery

Cargills enters soft liquor business

The Cargills Group this week finally wrapped up an Rs 1.4 billion deal to buy the assets and business of local, long-standing brewer Three Coins, announcing the transaction in the Colombo stockmarket after a near six months of ‘see-saw’ negotiations in a process that saw other buyers in the fray.

Negotiations between the two parties had been on for many months and at one time collapsed until it was revived again leading to this week’s announcement. The process was also delayed due to court issues relating to the license and debt dues by the 46 year-old brewer, sources from both groups said.
According to Chandana Ukwatte, Chairman of McCallum Breweries, which owned the brand and its subsidiaries and associates, he decided to sell the brand and the assets as the ‘effort and time needed to make the business a real success did not seem worthwhile to me.’ Mr Ukwatte owned 95% of the group and has been trying to revive the company, which has been snowed under debt over the past decade, but the efforts were futile.

In an exclusive interview with the Business Times, Mr Ukwatte – who at times was in a philosophical mood and also willing to acknowledge his weaknesses and flaws -, explained why he sold out and the deal-making process where he went back to Cargills ‘with his tail behind his legs’ after initial negotiations didn’t work out.

Stuart Young, the former Nestle Sri Lanka Managing Director who has been appointed as Chairman of Millers Brewery Ltd, said the Cargills group got into this business as this segment of the market offers good long term growth potential since soft liquor is relatively undeveloped in Sri Lanka compared to markets in other countries.

He said the company will launch an extensive capacity enhancement programme over the next 18 months to produce the volumes required to meet the needs of ‘our’ strategic objectives in the marketplace. Cargills has been on a strong growth path in the food and retail industry over the years and in the post-war period has been eyeing many other acquisitions and is also discussing the prospects of expanding into financial services including banking, the Business Times learns.

Three Coins was purchased by Cargills new subsidiary Millers which signed an agreement to purchase the business and business assets, including the brands, of McCallum Breweries (Ceylon) (Pvt) Ltd, McCallum Brewing Company (Private) Ltd and Three Coins Company (Private) Ltd.

Mr Ukwatte said there were others interested in the company with at least two parties, including another brewer being serious contenders, “but they turned out be only interested in preventing Cargills from entering the beer industry”.

Three Coins is the only independent brewery in Sri Lanka with, the other two breweries being either partly or wholly owned by global brewers. It is the only speciality brewer in the region, according to Mr Ukwatte. It was the first to can beer locally ad first to introduce the 500ml can to locally produced beer.

Such specialty beers as Irish Dark, 3Coins Riva and Grand Blonde which were part of the core Three Coins product portfolio were well received by consumers, he said adding, that however the company lost the confidence of bankers and potential investors, when its volumes failed to achieve critical mass.

Read the Interview: Ukwatte – Why I moved out of business

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