Scottish & Newcastle UK and Kuehne + Nagel UK to create largest national drinks distribution company

Kuehne + Nagel UK and Scottish & Newcastle UK (“S&N UK”) announce today that they have agreed to form a new joint venture to undertake drinks distribution in the UK. The venture, which constitutes one of the largest logistics contracts of its kind in the UK, will be formed by consolidating the distribution assets of S&N UK with those of Kuehne + Nagel and by the creation of a new Kuehne + Nagel owned division, KN Drinks Logistics.

Under the agreement, the joint venture will contract Kuehne + Nagel to provide all S&N UK’s primary (bulk movements from production sites to warehouses & multiple retail customers) and secondary (delivery from warehouses and regional depots to pubs and licensed premises) distribution activities for an initial contract period of 10 years.

To fulfil this contract, Kuehne + Nagel’s new division, KN Drinks Logistics, will specialise in the primary and secondary distribution of beverages throughout the UK, using the existing network facilities of both Kuehne + Nagel UK and S&N UK. At the same time, the joint venture will allow S&N UK to focus on its core business and will give KN Drinks Logistics the opportunity to specialise in the distribution of beverages. In addition, it provides an excellent base from which the newly created KN Drinks Logistics can develop an industry platform for all drinks suppliers and retailers in the UK.

Since 1991 Kuehne + Nagel has provided S&N UK with primary distribution and warehouse operations services, including five major regional distribution centres at strategic sites across the UK, and employing around 1,000 people. KN Drinks Logistics will absorb the existing Kuehne + Nagel contracts with S&N UK and will take over responsibility for secondary distribution activity.

All staff employed in the current Kuehne + Nagel primary operations on behalf of S&N UK, and all current S&N UK secondary distribution staff will transfer under TUPE into KN Drinks Logistics. The combined business will have nationwide coverage through 22 depots, with around 850 vehicles and 2,900 people.

Chief Executive for Kuehne + Nagel UKand Ireland, Peter Ulber, said: “This is a true win-win deal for all parties. Kuehne + Nagel will add value by using its logistics expertise. The independent KN Drinks Logistics business will represent a new and compelling offer to pub companies and beverage suppliers throughout the UK.”

Stephen Glancey, Group Operations Director for S&N plc said: “By placing our distribution business with the new venture, we have created the biggest and best invested drinks logistics business in the UK. It becomes free of constraints to grow and will be able to seek new contracts outside S&N. This specialist business will help provide our current distribution employees with enhanced job prospects and stability. Furthermore, S&N UK is now free to concentrate on its core businesses of developing and selling great drinks brands and contract pub management. The deal will free up further cash to be reinvested in these areas.”

S&N UK does not anticipate any immediate changes to its physical distribution network and customers are being briefed to explain the new arrangements and assured that it is business as usual.

Following today’s announcement S&N will begin a period of detailed briefings and consultation with affected employees. Subject to receipt of necessary regulatory approvals, it is proposed that KN Drinks Logistics Ltd will become operational and trade with effect from Monday 3rd July 2006.