Overview of the Situation#

Royal Unibrew, a Danish brewing company, saw its shares plummet by more than 24% on Tuesday. This sharp decline followed the announcement that the company would terminate its licensing partnership with PepsiCo in key Northern European markets when their current agreements expire in 2028. This partnership accounts for about 13% of Royal Unibrew's total revenue.

Details of the Partnership Termination#

The existing licensing agreements, which also include trade along the German border, will conclude at the end of 2028. Despite Royal Unibrew's desire to continue the partnership, the company was unable to negotiate a new agreement. CEO Lars Jensen stated that while ending the partnership was not the preferred choice, it would remove certain structural limitations, allowing the company to focus on growing its own brands and exploring new partnerships.

Impact on Revenue and Future Plans#

From 2029 onward, Royal Unibrew will stop producing, selling, or distributing PepsiCo products in the affected markets. However, the partnership in the BeNeLux region will remain intact under existing terms. The company anticipates that the revenue loss from ending the PepsiCo partnership will be partially offset by the growth of its own brands, such as Faxe Kondi, Jaffa, and Novelle, which have been performing well in the soft drinks market.

Financial Outlook#

Royal Unibrew indicated that its own brands typically have higher profit margins compared to licensed brands. Ending the partnership is expected to free up production capacity and lower capital expenses. The company has projected transition costs of around DKK 300 million to support the growth of its own brands and cover potential exit costs. While there is uncertainty regarding the exact financial impact, Royal Unibrew maintains its long-term organic EBIT (Earnings Before Interest and Taxes) growth target of 6-8%. The company expects to achieve EBIT growth in line with this target through the end of 2028, although a decline in net revenue and volumes is anticipated for the 2029 financial year.