The ACCC has postponed its final decision on Asahi Group’s proposed acquisition of Carlton & United Breweries until March.
That’s not good news for Asahi, which took on a $16billion bridge loan to pay for CUB.
The ACCC has formed a preliminary view that the proposed acquisition will reduce competition in the market for cider and may also reduce competition in the beer market.
“The proposed acquisition would combine the two largest suppliers of cider in a highly concentrated market,” ACCC Chair Rod Sims said.
“A combined Asahi-CUB would control the Somersby, Strongbow, Mercury and Bulmers cider brands, which account for about two thirds of cider sales. We are concerned that the proposed acquisition may lead to higher cider prices.”
“Asahi argued to us that cider and beer are part of the same market, but our preliminary view is that cider is a separate market and drinkers do not readily switch between beer and cider,” Sims said.
“The ACCC also has preliminary competition concerns about the highly concentrated beer market. While Asahi is currently a relatively small brewer in Australia, accounting for approximately 3.5% of beer sales here, our preliminary view is that Asahi may act as a competitive constraint on the two largest beer brewers, CUB and Lion, and has the potential to be an even bigger threat in future.”
Asahi’s beer brands include Asahi Super Dry, Peroni, Mountain Goat, Cricketers Arms and the new Two Suns brand. Asahi is a global beer company with revenue of more than $25 billion worldwide in 2018. It is the second largest supplier of premium international beers in Australia.
“Our preliminary view is that having Asahi in the market as a competitor to the big two brewers may help to keep a lid on beer prices. This competitive presence, and the threat of Asahi growing more in the future, would be lost if this deal goes ahead,” Sims said.
In forming its view in relation to cider and beer, the ACCC spoke with a large number of market participants, including licensed venues, alcohol retailers, competitors and industry groups. Many market participants expressed concerns about the proposed deal.
The ACCC has released a statement of issues and invites submissions from interested parties by January 22, 2020. The final decision is scheduled for March 19, 2020.
Asahi responds to ACCC preliminary finding
Asahi has released a statement saying that all parties involved are working collaboratively with the ACCC to respond to the Commission’s questions.
Asahi Beverages Chairman Peter Margin said: “Asahi’s acquisition of CUB is a significant one. We always expected that the review process would take some time, and we support the ACCC’s diligent and robust approach.
“We are working towards completing the deal as soon as possible once we have received regulatory approvals.”
Reuters reported: “Asahi would likely be required to dispose of a cider brand, but the impact was manageable, Bernstein analysts said.
“In the worst case scenario, Asahi might offer to shed AB InBev beer brands Beck’s, Stella Artois and Budweiser locally. Losing Corona would likely be a deal breaker, they said.”