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The deal
Royal Unibrew has agreed a deal to acquire Dutch soft drinks manufacturer Vrumona from Heineken.
The purchase gives the Danish company a foothold in the soft drinks market in the Netherlands. Vrumona is the country’s second-largest soft-drinks producer and holds the licence to make and distribute PepsiCo’s portfolio domestically.
Why it matters
After having its paws stung by last year’s scuppered attempt to buy Danone’s mineral water brand Aqua d’Or, Royal Unibrew has gone soft (not literally) with an ambitious play in Dutch non-alcoholic drinks.
Unlike other bolt-on M&A moves by the Royal Beer brand owner in the last 12 months, the purchase of Vrumona effectively transforms Unibrew into a major player in The Netherlands overnight. With annual revenues of €200m ($217m), 300-plus employees and the rights to manufacture and sell PepsiCo’s portfolio in the country, Vrumona will boost Unibrew’s top and bottom line and strengthen its position outside of its core markets of the Nordics, Baltics, Italy, France and Canada.
The access to PepsiCo’s brands is particularly significant. The tie-up Royal Unibrew already has with the Gatorade brand owner in its domestic market has proven fruitful as part of its efforts to become a “total beverage company”, according to Rabobank analyst Francois Sonneville.
“When you compare Pepsi versus Coca-Cola brands in European countries, we see that Pepsi brands are performing really well in the UK and in Denmark,” Sonneville explains. “Britvic and Royal Unibrew are doing a really good job with PepsiCo’s brands, whereas if you look in Sweden and the Netherlands, Heineken and Carlsberg, they’re struggling much more in value and volume terms.
“PepsiCo is much more important for Royal Unibrew in Denmark than it is for Heineken in the Netherlands, or for Carlsberg in Sweden. If you’re successful, do you want to have more of this? How happy is PepsiCo with you, and do they want you to do another country? Would someone who is less successful be willing to get rid of that asset?”
Forty per cent of Royal Unibrew’s net revenue came from soft drinks in 2022 (around $670m), so the company is far from in unfamiliar territory. It will be confident of growing Vrumona’s sales further by investing in the company’s brands and facilities. The Faxe-headquartered company also had no significant presence of its own in the Netherlands prior to the deal, so it may also be eyeing further cross-selling opportunities for its own portfolio in the market.
“They’ve done something similar in France, where they’ve made acquisitions and then used the platform to bring other brands along,” Sonneville adds. “So adding this strategy in the Netherlands, which up till now was probably an export market, and get on the ground seems to make sense from their point of view.”
Royal Unibrew will also likely have had at least one eye on The Hague when striking this deal. Lawmakers in The Netherlands are exploring the possibility of introducing a progressive tax on sugar-sweetened beverages, a move favoured by 40% of Dutch adults. Vrumona’s portfolio has a heavy emphasis on health, with over half of its SKUs falling wthin what Royal Unibrew termed “the no/low sugar and calories segment”.
“Annual soft drink data in the Netherlands from GlobalData shows significant growth among health-focused and low-calorie categories, such as packaged water, as health consciousness gains traction across the country,” says Global Data senior analyst Thomas Evans. “According to a recent GlobalData consumer survey in the Netherlands (Q1-2023), 26% of Dutch consumers are always influenced by this how the product/impacts their health and wellbeing, with 29% being often influenced, and 25% are somewhat influenced.”
Evans continues: “Vrumona produce two of the largest water-based brands in the Netherlands in Sourcy and Crystal Clear. Hence, Royal Unibrew has made a smart move to acquire the company, giving it an immediate strong foothold in the Dutch soft drink market, from which it can capitalise on emerging health trends among consumers.”
Sonnevile concurs that Sourcy will be an important asset for Unibrew, citing recent health concerns over artificially sweetened beverages as one reason why the Faxe Kondi brewer will have been keen to get its hands on the water brand.
“Although the news about artificial sweeteners from the WHO came out two weeks ago, and so won’t have been a driver for the deal, we could see water benefit a little bit from people who are wondering how healthy their low-calorie soft drinks are,” he adds.
Turning to the value of the deal, an acquisition multiple of 12 x EV/EBITDA is in the same sort of range as other recent high-profile acquisitions made by Unibrew (Solera Beverage Group: 11x EV/EBITDA, Hansa Borg: 15.7 x EV/EDBITDA). Unsurprisingly, the price is more expensive than the €25m purchase of Dutch manufacturer Avandis last year, given Refresco agreed to take on Avandis’ debt as part of the terms, and Lucas Bols and De Kuyper elected not to sell any brands in the deal.
From a Heineken standpoint, the deal looks to be a case of active portfolio management to prioritise other areas of its business. The Amstel brewer had always insisted privately it remained committed to Vrumona and had the best synergies and routes-to-market to make a success of its ownership of the company. However, it has been investing more heavily in its beer and cider portfolio than in soft drinks, with seven launches in the former and none in the latter in 2022, according to GlobalData. It also recently bought the remainder of Amsterdam craft brewing outfit Oedipus Brewing, a further indication of where its priorities lie domestically.
“Heineken’s beer and cider brands have seen a more positive performance in terms of incremental volume than their soft drink counterparts in recent years,” offers GlobalData consumer beverages analyst Conor Hall. “The company is looking to focus on premiumisation trends with its premium beer portfolio, as well as capitalising on moderation and avoidance by expanding or developing its low-and-no alcohol range through extensions of existing beer and cider brands.”
“The opportunity to sell Vrumona will help the company focus resources on their much more profitable brands, ensuring sustainable revenue growth for the future.”
The details
At completion, Royal Unibrew will acquire 100% of Vrumona in consideration of €300m on a debt-free basis.
The transaction, which is set to close in September or October, is dependent on one regulatory approval in a small, undisclosed Royal Unibrew export market.
Royal Unibrew said the acquisition of Vrumona is expected to be EPS accretive in 2024.
Royal Unibrew A/S Company Profile
