UNB accuses SABMiller of predatory pricing

Is SABMiller using its dominant position in South Africa to squeeze a local competitor out of the market? In September 2013, United National Breweries (UNB), which has just completed a transaction in which global drinks group Diageo acquired a 50 percent stake from India’s Vijay Mallya, lodged a complaint against SABMiller with South Africa’s Competition Commission, alleging that SABMiller is engaging in predatory pricing and “springboarding” to restrict sales of UNB’s Chibuku sorghum beer.

The complaint appears to stem from SABMiller’s initiatives to flood the northern part of South Africa with sorghum beer produced in neighbouring Botswana. In South Africa, the sorghum beer market is dominated by UNB with the Chibuku brand.

In Botswana, SABMiller recently established a company, Alliance Beverages, to facilitate exports of traditional opaque beer from its Botswana breweries into South Africa.

UNB’s springboarding allegations relate to SABMiller removing UNB products from the shelves of wholesalers and replacing them with SABMiller products, South African media reported.

Moreover, UNB wonders how SABMiller’s sorghum beer can sell at a lower price than Chibuku considering that SABMiller’s beers are produced in Botswana and accordingly would incur certain import duties and VAT, thus rendering them actually more pricey than Chibuku.

SABMiller’s South African division has not sold sorghum beer following its decision to sell its Traditional Beer Investments to UNB about 13 years ago. To make matters more complicated, although UNB has the licence to sell Chibuku in South Africa, SABMiller holds the licence for the Chibuku brand outside South Africa.

This being South Africa, it might take the Competition Commission some time to comment on the complaint.