Maxam Ltd, an alcoholic beverage distribution company owned by Kenyan businessman Ngugi Kiuna, has been awarded $17 million in damages by the High Court of Kenya for loss of business after Heineken International BV unfairly terminated its distribution agreement with the Kenyan firm. The High Court has reportedly also reinstated the distribution agreement that the Dutch beer company cancelled.
Heineken International BV has been supplying its beer in Kenya through Maxam Limited, a company that has held the franchise since 2007. In 2013, a formal exclusive distribution agreement for Kenya was signed between the two companies and Maxam invested significantly in developing distribution infrastructure and in marketing the Heineken brand in Kenya. In 2016, Heineken terminated the contract, saying the termination was aimed at deleting the exclusivity clause in the agreement to open up the distribution of its products across the region to other firms that were willing to partner with it.
Maxam accused Heineken of sidestepping them and going ahead to acquire Maxam’s key account customers as sub distributors inspite of an order stopping the same. Maxam also accused Heineken of offering lower prices to other distributors while approving higher prices to Maxam on the same products thereby indiscriminately reducing their approved margins.
In the ruling, Justice James Makau said the complainant convincingly proved that the defendant acted in breach of their contract and noted that there was no basis for Heineken to appoint additional distributors. According to the judge, after Heineken terminated its agreement with Maxam, the distributor lost significant business. In order to compensate Maxam for the loss, he directed Heineken to pay Maxam KES 1.79 billion ($17 million) in special damages.
“I find the promise and arrangement of automatic extensions served as motivation for Maxam to keep performing in accordance with the assigned obligations resulting to investing heavily in the business,” Justice Makau said.
Ngugi Kiuna is a prominent Kenyan businessman with interests in industrial gases, banking, real estate and agriculture. His Maxam Limited, which is one of Kenya’s largest alcoholic beverage distribution companies, has annual revenues in excess of $35 million.
A spokesperson for Maxam declined a request for comment.