Competition authority to probe into Heineken-Eichhof deal
Fearing an unhealthy duopoly, the Swiss competition authority could take up to four months to investigate the takeover of the Eichhof brewery by Heineken which would give the Dutch brewer a 29 percent share of the 4.3 million hl beer market.
In April Heineken announced that it would buy the number three brewer in Switzerland, Eichhof, for CHF 290 million (EUR 180 million), provided the competition authority will not veto the deal. Combining their market shares, Heineken would move up closer to the market’s number one, Feldschlösschen/Carlsberg, which has 40 or so percent of the market.
The competition authority is concerned over the impact the recent consolidation will have on the on-premise sector. The Swiss off-premise sector is already heavily consolidated with two retailers Coop and Migros controlling 83 percent of the market. Usually retailers like to do business with an industry’s number one or two only. Teaming up with Eichhof was Heineken’s sole chance to be considered as a national supplier by either Migros or Coop with Eichhof’s brands.
Eichhof’s strong card is its on-premise distribution. According to reports in the Swiss media, since 2003 Eichhof has taken a lot of cash into its hands to widen its customer base among publicans. In Berne, Basle, Ticino and Zurich, Eichhof has bought into distribution and struck beer supply deals with on-premise outlets which will run for five to ten years. Eichhof’s marketing budget grew CHF 3 million per year to reach CHF 70 million (EUR 43 million) in 2007, it was reported. That’s mostly used for kick-backs. Add to that CHF 30 million (EUR 19 million) which Eichhof has given to publicans as credit and you will understand why Heineken will have to stop this practice.
