- Broo’s (BEE) wholly-owned subsidiary, Broo Exports, has terminated its distribution agreement with Beijing Jihua Information Consultant
- In November 2017, Broo Exports and Beijing Jihua entered an agreement to exclusively market and distribute Broo Premium Lager beer products in China
- The aim of this was to speed-up sales and distribution of beer products in the Chinese market
- Broo has today revealed it believes Beijing Jihua is in breach of the agreement because it failed to make minimum royalty payments
- These were due in December 2020, and on December 18, Broo sent a letter to Beijing Jihua advising it to make the payments no later than 14 days from the letter
- Beijing Jihua is yet to make these royalty payments and Broo Exports has terminated the agreement with immediate effect
- Broo has dropped 11.8 per cent on the market and shares are currently trading at 1.5 cents
Broo’s (BEE) wholly-owned subsidiary, Broo Exports, has terminated the distribution agreement with Beijing Jihua Information Consultant.
In November 2017, Broo Exports and Beijing Jihua entered an agreement to exclusively market and distribute Broo Premium Lager beer products in China.
The aim of this agreement was to speed-up the sales and distribution of beer products in the Chinese market.
It was meant to run for an initial seven-year period, however, Broo believes that Beijing Jihua is in breach of the agreement with its failure to make minimum royalty payments for the first three years.
These were due in December 2020, and on December 18, Broo sent a letter to Beijing Jihua advising it to make the payments no later than 14 days from the letter.
Beijing Jihua is yet to make these royalty payments, and Broo Exports now has the right to terminate the agreement.
The company has exercised this right and notified Beijing Jihua that the agreement has been terminated, effective immediately.
Based on the full seven-year term, Broo expected to receive RMB602 million (around A$120 million) under the deal.
The first payment was expected upon completion of the third year, while the remainder was to be paid on a six-month basis.
“There has been an extensive period of product assessment and negotiation, I am delighted to have reached an agreement with such a high-calibre Chinese distribution partner,” Broo CEO and Founder Kent Grogan said at the time.
“Jihua’s distribution reach in China will see Broo Premium Lager penetrate the Chinese beer market and expand into a major brand over the coming years,” he added.
Broo has dropped 11.8 per cent on the market and shares are trading at 1.5 cents at 12:30 pm AEDT.