Competition watchdog to investigate brewers’ grip on pubs
Competition watchdogs on the prowl. In January 2014, the Australian trust-busters launched an investigation into the supply of beer to Australia’s pub industry to find out if brewers are resorting to anti-competitive tactics that lock out rival beer brands.
In a letter sent to major brewers, the Australian Competition and Consumer Commission indicated that it was seeking a better “understanding” of the market to assess whether anti-competitive conduct was taking place. It is also scrutinising the profit margins of the beer companies, media said.
The commission is seeking responses by 21 February 2014.
The Australian beer market is amongst the most profitable world-wide. According the estimates by Nomura, a bank, the Australian beer profit pool (as measured in EBIT) in 2012 was bigger than China’s. The market is basically a duopoly, dominated by Japanese-owned Lion and SABMiller, which bought Foster’s CUB a little over two years ago.
Smaller brewers have raised concerns over the hurdles in their paths to securing distribution agreements with pubs that are aligned to either of the big players.
Still, industry observers think the inquiry somewhat beside the point. They say the competition watchdog should have been more concerned about the market power of the supermarket giants in off-premise alcohol sales.
Two retailers, Coles and Woolworths, control more than 60 percent of the packaged alcohol market through chains including Dan Murphys, First Choice, BWS, Liquorland and Vintage Cellars.
But pub operators complain that the squeeze being applied to the big brewers is affecting them too, with the price of draught beer – which is mainly sold in pubs and clubs – rising more quickly than that of packaged beer, most of which is sold at outlets such as Dan Murphy’s.
In 2011, Foster’s was forced to pull stock from Coles and Woolworths after learning of a blitz below-cost promotion.
At one stage it was cheaper for independent retailers to go to Dan Murphy’s rather than to the brewery to buy their beer.
Australia’s beer market generates more than AUD 5 billion in sales annually, with about half of this made in pubs, it was reported.
