The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Kalik’s brewer and Budweiser’s parent are in negotiations over a settlement that could be worth up to $1.7m following the long-running battle over their distribution deal break-up more than one decade ago.

Commonwealth Brewery, manufacturer of the domestically-produced Bahamian beer, revealed details of the ongoing talks with Anheuser-Busch - which is said to have shown “willingness” to settle for $1.6m - in its just-released results for the year to end-December 2025.

The financial statements, audited by KPMG, disclose that Anheuser-Busch was seeking up to $1.77m after the London-based Privy Council, the highest court in the UK judicial system, earlier this year rejected Commonwealth Brewery’s bid to resurrect its $2.4m damages counterclaim over the loss of its 40-year Budweiser distribution agreement.

The legal battle, and its outcome, were a key factor in dragging down Commonwealth Brewery’s 2025 full-year profits to just $10.02m, which represented a near-30 percent or more than $4m decline compared to the prior year’s $14.228m. Almost 50 percent, or $1.901m, of the $4m drop related to “other expenses”, the bulk of which - some $1.77m - related to provisions for the legal dispute with Budweiser’s owner.

However, Commonwealth Brewery fared better in another legal dispute - this one with the Department of Inland Revenue (DIR) over whether transfers of inventory and product between different corporate entities within the group “for Business Licence purposes” should attract VAT worth $1.156m. But, while it was successful in the arbitration proceedings, the Bahamian tax authority still has the right to appeal.

“The group was assessed $560,403 in 2017, and $596,003 in 2016, and a bank guarantee was issued during arbitration,” Commonwealth Brewery’s 2025 financial statements assert.

“The group was successful in their defence through arbitration, concluding that the group’s assessment of intra-company inventory transfers should not incur VAT. Therefore, no liability is presented on the statement of financial position. The Department of Inland Revenue has kept their right to appeal open, and the matter is still pending.”

And it was also revealed that the BISX-listed brewer’s 2024 financials have had to be revised and restated because it mistakenly believed it was not liable to pay the Domestic Minimum Top-Up Tax, or 15 percent corporate income tax, for that year. The legislation makes this tax retroactive to 2024, and Commonwealth Brewery said the figures for that year have been changed because it now realises it is caught by the DMTT through its 75 percent majority owner, Heineken.

In effect, the Budweiser distribution deal battle has pitted two of the world’s leading beer producers - Heineken and Anheuser-Busch - against each other with the final outcome favouring the latter and creating a liability that the BISX-listed brewer, based at Clifton Pier in south-west New Providence, must settle.

Commonwealth Brewery, at the bottom of its 2025 financial statements, said that following the end-December year close it has “received formal correspondence, via its legal advisors, in relation to the ongoing dispute with Anheuser-Busch following the Privy Council ruling.

“The correspondence indicates that Anheuser-Busch has asserted a total claim of approximately $1.77m, inclusive of legal costs, and has indicated a willingness to settle the matter at approximately $1.6m,” Commonwealth Brewery said. “Management is currently engaged in ongoing negotiations and expects the final settlement to be within the range of approximately $1.5m-$1.7m…. The final settlement remains subject to agreement between the parties.”

The dispute between Anheuser-Busch and Commonwealth Brewery revolved around what constituted an adequate notice period for the former and its Caribbean operation,  Cerveceria Nacional Dominicana (CND), the Dominican Republic brewer and drinks producer, to inform the latter that it was terminating its Budweiser distribution deal in The Bahamas.

The Privy Council, in a unanimous verdict that rejected the vertically-integrated Bahamian brewer’s appeal, backed the Court of Appeal’s decision that the three-and-a-half month notice provided by Budweiser’s parent, Anheuser-Busch International (ABI), that it was terminating the two sides’ agreement and switching to the rival Bahamian Brewery and Beverage Company (Sands), was sufficient.

Both higher courts thus rejected an earlier Supreme Court ruling which found that Anheuser-Busch International should have given the BISX-listed brewer some 15 months’ warning of its plans to end their relationship. The Privy Council determined that the alleged loss of profits suffered by Commonwealth Brewery subsidiary, Burns House, was “not a relevant consideration” as Budweiser accounted for just 10 percent of its total turnover.

The original 1975 Budweiser distribution deal was with Burns House, which was ultimately fully acquired by Commonwealth Brewery from the Finlayson family in 2011 and brought into the group. It  it appears that Anheuser-Busch became increasingly uneasy over one of its main global competitors, Heineken, exercising increasing control over Burns House via Commonwealth Brewery’s vertically-integrated brewer, wholesaler and retail model.

Meanwhile, Commonwealth Brewery’s 2025 financials revealed that the 2024 figures have been reinstated after the group concluded that, via its relationship with Heineken, it is caught by what is known as the ‘Income Inclusion Rule’ and is thus liable to pay the 15 percent corporate income tax on profits earned for that year.

“During 2025, management reassessed the application of the legislation and concluded that the company was within scope of the DMTT for the year-ended December 31, 2024, as a result of the Income Inclusion Rule at the level of the ultimate parent entity,” the BISX-listed firm said. “Accordingly, a DMTT liability and related income tax expenses should have been recognised in the 2024 financial statements.”

The impact has been a slight increase in 2024’s net profit, from $14.109m to $14.228m, with Commonwealth Brewery explaining that the amount of corporate income paid is deducted from the Business Licence fee payable. If the Business Licence fee exceeds the amount of DMTT, or corporate income tax, that is paid then the difference is “carried forward and applied” against DMTT due in future years.

Acknowledging that the 2024 revisions were caused by “error” and “an incorrect assessment” of whether Commonwealth Brewery was liable to pay DMTT, the BISX-listed brewer said a $1.529m corporate income tax expense has now been taken for 2024. A further $1.642m was incurred in 2025, giving the company a collective near-$3.2m corporate income tax bill for those two years combined.