Heineken to go head-to-head with Interbrew

Heineken yesterday unveiled plans to go head-to-head with Belgium's Interbrew in the UK beer market, axing the licensing deal Interbrew inherited when it bought Whitbread and taking control of selling and marketing its beer.

The move, which follows Heineken's failure to acquire Carling UK last year, will see the Dutch brewer replace its standard lager with its premium strength beer, pitting itself against Interbrew's market-leading Stella Artois lager, early next year. Britain was the last country where Heineken sold its lower alcohol brand – Heineken Cold Filtered.

The lager was introduced to the UK in the late Fifties to appeal to heavy-drinking industrial workers. It will be phased out next year, along with Heineken Export, in favour of Heineken's 5 per cent strength premium version.

Analysts were surprised by the Dutch brewer's decision to expand its UK operations rather than seek a tie-up with a different partner such as Scottish & Newcastle, the market leader.

"It's quite a costly way of going about business. They would have been better off buying a brewer with a good market share and strong relationship with both the off and on trade," Matthew Jordan, at ABN Amro, said.

Heineken said the move would cost it about€20m (£13m) in 2003 and it would be "a number of years" before the UK business reached break even. The brewer will import Heineken premium from the Netherlands but will more than triple its UK staff of 30 to help market the new brand.

Under a separate deal, Interbrew announced that from next January it would take over the UK licence for Castlemaine XXXX, the Australian lager brewed by Lion Nathan, from Carlsberg-Tetley. The deal bolsters the Belgian brewer's portfolio with a standard strength lager. Interbrew, the UK's third-largest brewer, said it would spend £9m relaunching Castlemaine.