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Commission approves Interbrew's horeca arrangements

16-Apr-2003

The European Commission has given its approval to new arrangements by Belgian brewing group Interbrew which will open up that company's hotel, restaurant and catering (horeca) outlets to competition from other beer brands.

Under new regulations which came into force on 1 January 2002, brewers with a market share not exceeding 30 per cent are able to oblige horeca outlets to buy all their beer from them in exchange for a five year loan, or for as long as they lease or sub-lease premises from the brewer.

 

But since Interbrew holds an overall market share of roughly 56 per cent of the Belgian horeca sector, these rules do not apply, even though Interbrew had been perfectly within its rights to demand the same exclusive agreements prior to the rule change.

 

Interbrew made some changes to the agreements after 1 January 2002, but these were not considered sufficient by the Commission to improve competition in the Belgian market, prompting the review and the new arrangements which this time met with the Commission's approval.

 

Under the terms of the new arrangements, for the more than 7000 outlets which have so far been entirely tied to Interbrew under a so-called 'loan agreement' (because Interbrew provides the outlets with a loan, a bank guarantee or valuable material such as cooling installations), the clause forcing them to serve exclusively Interbrew's beer will in the future be limited to draught pils.

 

This effectively means that the Stella, Jupiler and Safir lager brands served from 30 litre or 50 litre kegs will continue to be the main beer brands sold through the Belgian outlets, but that they will also be able to buy any draught beer other than pils and any beer (including pils) in bottles or cans from Interbrew's competitors.

 

In the unlikely event that Interbrew's draught pils accounts for less than 50 per cent of a tied outlet's total beer throughput, then that outlet is still required to make up the shortfall from other Interbrew brands, however.

 

The new system also allows the outlets to terminate their loan agreement more easily. They can do so at any time prior to normal termination after five years provided they give Interbrew three months' notice. If the outlets do so, they (or the competing brewer from whom they intend to buy in future) must of course repay the outstanding capital of the loan or the remaining value of the material (or return this material in kind). This repayment is made without any early redemption penalty.

 

There is also a change to the arrangements governing Interbrew's relationship with some 3,000 or so other outlets which lease or sublease from Interbrew, who will now be required only to stock Interbrew's beer on draught. This gives competing brewers the possibility to sell their bottled or canned beer, including pils, to these outlets.

 

In addition, the horeca operator will have the right to serve one draught beer other than pils as a 'guest beer', and Interbrew will be obliged to accept the decision even if it brews this type of beer itself. The Commission agreed that this guest beer could be supplied by Interbrew or a wholesaler appointed by it, but said that it would review the impact of the guest beer clause after one year of operation in order to verify whether it has given competing brewers a real entry into Interbrew's lease and sublease outlets.

 

Under a lease or sublease agreement, which lasts for at least nine years, Interbrew owns the outlet and lets it to an independent operator or it is the principal lessee of this outlet and sublets it to such an operator.

 

Welcoming the new agreement, Mario Monti, Commissioner responsible for competition, said: "Consumers will now have additional choice of beer brands in more than 10,000 outlets which have so far been exclusively supplied by Interbrew. In view of Interbrew's strong position, I expect that this will bring an extra dynamic to the Belgian beer market."

 

The Commission told Interbrew that its amended agreements no longer lead to an appreciable restriction of competition in the Belgian market and the brewer has committed itself to implementing the amended agreements within two months.

 

A similar change in horeca agreements in the Dutch market, where Heineken is market leader with more than a 30 per cent share, was approved by the Commission in May 2002.

 

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