Competition council OKs booze company buyout

  • 2007-10-24
  • Staff and wire reports

TOASTING SUCCESS: S.P.I. Worldwide Trade, which already owns Latvijas Balzams, will further strengthen its position by buying AV&D.

RIGA - S.P.I. Worldwide Trade Limited, a subsidiary of Russian-owned S.P.I. Group, will be allowed to acquire a controlling stake in Latvia's alcohol wholesaler AV&D if it can meet several requirements concerning market competition raised by the Latvian Competition Council.
The Competition Council said that requirements for Worldwide Trade include assurances that all cooperation partners and customers have clear, equal and accessible conditions regarding AV&D discounts, bonuses, prices, terms of payment and credit limits, that the company prepare respective regulations and inform the competition watchdog about them by the start of 2008.

Worldwide Trade has also been ordered by the council to ensure that any retailer or wholesaler has the possibility to purchase production from the liquor producer 's and other beverages distributed by the company on equal terms as other market participants 's over the next five years.
The council has set the above-mentioned terms as the "acquisition might result in strengthening a dominant market position, which might further lead to a significant reduction of competition." According to the council, if Worldwide Trade meets this set of requirements, there should be no significant negative impact on competition.

The council's decision can be appealed at the Administrative District Court within one month.
S.P.I. Group, which already owns Latvia's largest liquor producer, Latvijas Balzams, has received permission from the competition watchdog to merge AV&D and Interlat, another distributor whose shares are already owned by S.P.I. Worldwide Trade, once the deal is completed.
Latvijas Balzams board chairman Rolands Gulbis said that the main benefit for the company will be the possibility to combine the wholesale warehousing and logistics systems of the two companies, thus reaching greater economies of scale in distribution.
"By purchasing AV&D and Interlat in Latvia, the group's strategy on development in the Baltic markets is being implemented, significantly improving and optimizing distribution of products in the Baltic states," said Gulbis, adding that the changes are related to the rapid increase of the company's sales in the Baltics.
In Gulbis' words, expansion within the group will ensure more efficient work, will develop existing product brands and create new ones.

Gulbis also said that at the end of 2005 S.P.I. Group restructured operations, with Worldwide Trade taking over 100 percent of shares in Lithuania's Bennet Distributors, providing for simplification of distribution of Latvijas Balzams' production in Lithuania. "The result was successful, and similar restructuring is underway in Latvia," he said.
AV&D last year generated 91.2 million euros in sales, up 16.2 percent year-on-year, with company profit at 774,140 euros, up by 13 times. Interlat generated 1.83 million euros in sales in 2006, up 2.6 times compared to 2005, with profit of 223,710 euros.

S.P.I. Group was started in 1997, and operates in the production and sale of alcoholic beverages, agriculture and real estate development. S.P.I. Group owns more than 130 alcohol brands.