Asahi’s takeover of Carlton & United Breweries hits competition concerns
The Australian Competition and Consumer Commission (ACCC) today released its preliminary view: saying Asahi’s $16bn AUD ($11.3bn USD) acquisition of Carlton & United Breweries (CUB) from AB InBev raised concerns in both the beer and cider markets. It will make its final decision in March 2020.
Asahi has been increasing its global presence over the last few years, and it wants to buy CUB to establish Australia as one of its three core geographical pillars, alongside Japan and Europe.
The cider strength of Somersby and Strongbow
The ACCC has formed a preliminary view that Asahi’s proposed acquisition of CUB would reduce competition in the market for cider; and could also reduce competition in the beer market.
In cider, Asahi’s Somersby brand is the strongest performing cider, followed by CUB’s Strongbow, Bulmers and Mercury. The ACCC therefore considers that the acquisition would remove this element of competition in the 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.”
While Australia’s cider market also includes craft cider and private label segments, the ACCC considered that these are not likely to impose a strong competitive constraint as they have regional sales or appeal to a considerably smaller audience.
Beer: removing a competitive constraint?
Australia’s beer market is dominated by CUB and Kirin-owned Lion. Asahi currently holds a 3.5% share of beer sales - with brands including Asahi Super Dry, Peroni and Mountain Goat – with its strength in the premium international beer segment (it is Australia’s second largest supplier of premium international beers).
In beer, the Australian market is already highly concentrated with CUB, Lion and Coopers taking up 80% of the market by volume. While Asahi only has a small share of beer sales, it has still become a competitive force, according to the ACCC.
“In recent years, Asahi, a global beer company, appears to have emerged as a vigorous and effective competitor to the two major suppliers, CUB and Lion, particularly in relation to the supply of premium international and craft beers," notes the ACCC.
"The ACCC is concerned that the proposed acquisition may have the effect of removing the significant competitive constraint that Asahi apparently currently presents. The ACCC is also concerned that the potential for Asahi to expand its existing presence in Australia and pose an even stronger constraint on CUB and Lion would be removed if the proposed acquisition proceeds.”
Asahi and CUB
Carlton & United Breweries was acquired by the world's largest brewer AB InBev (which is headquartered in Belgium) in 2016 as part of AB InBev's takeover of SABMiller. Headquartered in Victoria, CUB employs around 1,600 people and has five breweries across the country. Its portfolio includes:
- Beer: Great Northern, Victoria Bitter, Carlton Draught, Carlton Dry, Cascade Premium, Pure Blonde, Matilda Bay, Fat Yak, Melbourne Bitter, Crown Lager, Pirate Life, 4 Pines, Foster’s, Reschs and Balter.
- Brands under licence: Goose Island, Corona, Stella Artois, Belle-vue, Hoegaarden, Leffe, Beck’s, Lowenbrau, Franziskaner, Spaten and Budweiser.
- Cider: Strongbow, Mercury, Bonamy’s, Little Green, Spring Cider Co, Dirty Granny and Pure Blonde Cider. CUB also manufactures and distributes Bulmers under licence from Heineken.
- Spirits: Cougar, Black Douglas, Lexington Hill, Karloff, Continental Liqueurs, Coyote and Prince Albert.
Asahi had revenue of over AUD $25bn worldwide in 2018. It has been increasing its global presence over the last few years: with the acquisition of former SABMiller brands Peroni, Grolsch and Meantime and SABMiller’s central and European business in 2016, both following AB InBev's acquisition of SABMiller. It also acquired Fuller’s beer business in the UK earlier this year. It wants to buy CUB to give its business three core geographical pillars in Japan, Europe and now Australia.
In Australia, Asahi manufactures and supplies a range of international and domestic beer, cider and spirits brands, including:
- Beer: Asahi Super Dry, Asahi Soukai, Peroni, Cricketers Arms, Pilsner Urquell, Grolsch, Mountain Goat, Green Beacon and Two Suns.
- Cider: Somersby (under licence from Carlsberg).
- Spirits: Nikka Whisky, Vodka Cruiser, Woodstock Bourbon, Mist Wood Gin, Untold Spiced Rum, Tequila Blu and Spicebox Whisky.
Are cider and beer the same market?
Asahi has argued that cider and beer are part of the same market, making its dominance in cider less relevant. But the ACCC says, under its preliminary view, that the markets are separate, and that drinkers do not readily switch between beer and cider.
As it continues to consider the case, it is inviting market participants to weigh in on how the beer and cider markets are distinguished in Australia – such as consumer interaction between the two categories; and the ease or difficulty in switching production between the two beverages.
It is also considering how separate the ‘premium international’, ‘classic’ and ‘craft’ beer markets are in Australia; given that Asahi’s current portfolio focuses on the premium international and craft beer segments.
The preliminary view and statement of issues can be found here; with submissions invited until January 22.