Beer merger: better deal demanded
The proposed conditions for the merger of SABMiller and Anheuser-Busch InBev (AB InBev) to create the world’s largest beer maker came under fire this week.
The most vigorous assault on the conditions stipulated by the Competition Commission came from Dutch beer company Heineken, which said it had a local market share of up to 10%.
At a Competition Tribunal hearing into the proposed merger – held in Pretoria on Thursday – Anthony Norton, an attorney representing Heineken, described the conditions as “vague”, “ambiguous” and “totally irrational”.
The conditions proposed needed to be framed more precisely, he said.
A key area of concern, raised by a number of parties, was that these conditions did not provide enough continuing oversight into whether the new company complied with the conditions that would ultimately be set down.
Norton said that AB InBev should report to the public at large about its compliance programme with the merger conditions.
Norman Manoim, the tribunal’s chairperson, suggested that a lay person’s manual be created to indicate what merger conditions were allowed.
The commission has recommended that the merged entity have a compliance programme within six months.
But Heineken called for compliance to be effective within one month.
Tebogo Khaas, of the nonprofit organisation SA Small, Medium and Micro Enterprises Forum, which he said had 2 000 members, also stressed the need for the tribunal to monitor the merged entity to ensure it kept to the spirit and letter of the conditions that were ultimately set down.
These ideas also won support from Tshidiso Mokhoanatse, the leader of the political party Agency for New Agenda and the Black Business Forum.
Mokhoanatse was concerned that the implementation board might only meet once, and after one year. “This is quite scary, given what could happen in the first year,” he said.
Mokhoanatse said the new company would need to address the issue of racial exclusion in South Africa.
Norton accused SABMiller, which he estimated had a local beer market share of up to 90%, of “dirty tricks”.
He alleged that these tactics included removing and defacing competitors’ signage and marketing material, and placing higher-priced stickers over their advertised product prices.
AB InBev and SABMiller, the world’s two largest beer producers, are looking to merge in a deal worth $108 billion (R1.7 trillion).
Norton said that the tribunal needed to ensure that the conditions it set for the merger did not eliminate competition.
He went on to warn that the new entity’s greater access to capital could see it engage in predatory tactics.
Heineken also raised the prospect that the new company could shut out competitors from retailers as well as cold storage space.
Heineken took exception to the fact that SABMiller had offered 10% of its refrigeration space to craft brewers, and a further 10% for Distell’s ciders.
“Distell is the largest cider producer in South Africa, with more than 50% market share. It is not some micro-brewer lurking on the street corner, yet they [SABMiller] are willing to say that the biggest cider producer in the country ... can get 10% of their fridge space, but Heineken – with 8% to 9% [local market share in the beer market] – cannot. It is totally irrational.”
Jannie de Villiers, CEO of Grain SA, which represents local grain farmers, said farmers wanted SABMiller’s assurance that it would continue to purchase local barley after the merger rather than substitute it with cheaper imports.
SABMiller is the sole local buyer of barley output, which is used in the making of beer.