Cider Australia welcomes ACCC’s concerns over Asahi-CUB deal

13 December, 2019 by Andy Young

The concerns raised by the Australian Competition and Consumer Commission (ACCC) over Asahi’s proposed acquisition of Carlton & United Breweries (CUB), have been welcomed by Cider Australia.

The competition regulator said that its preliminary view of the proposed deal is that it would reduce competition in the market for cider and may also reduce competition in the beer market.

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“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.”

“Asahi argued to us that cider and beer are part of the same market, but our preliminary view is that cider is a separate market and drinkers do not readily switch between beer and cider,” Sims said.

The President of Cider Australia, Sam Reid, told TheShout the ACCC’s recognition of cider as a separate market was very welcome.

“We’re really pleased that the ACCC has recognised cider and cider drinkers as a distinct market,” Reid said.

“Cider Australia has been working for years to build a credible and sustainable cider category that serves many different drinking occasions and formats, and this decision supports all of our hard work to date.”

“Our focus now is on driving the provenance messaging in the cider category as we think that like wine, this plays an important role in premiumising the category.”

Looking at the beer market, the ACCC said it does have concerns regarding beer pricing, if the deal was to go ahead.

“The ACCC also has preliminary competition concerns about the highly concentrated beer market,” Sims said.

“While Asahi is currently a relatively small brewer in Australia, accounting for approximately 3.5 per cent of beer sales here, our preliminary view is that Asahi may act as a competitive constraint on the two largest beer brewers, CUB and Lion, and has the potential to be an even bigger threat in future.”

“Our preliminary view is that having Asahi in the market as a competitor to the big two brewers may help to keep a lid on beer prices. This competitive presence, and the threat of Asahi growing more in the future, would be lost if this deal goes ahead,” Mr Sims said.

In forming its view in relation to cider and beer, the ACCC spoke with a large number of market participants, including licensed venues, alcohol retailers, competitors and industry groups. Many market participants expressed concerns about the proposed deal.

Responding to the regulator’s comments, the Chairman of Asahi Beverages, Peter Margin, said that all parties are working collaboratively with the ACCC to respond to the Commission’s questions.

“Asahi’s acquisition of CUB is a significant one,” he said. “We always expected that the review process would take some time, and we support the ACCC’s diligent and robust approach.

“We are working towards completing the deal as soon as possible once we have received regulatory approvals.”

The ACCC has released a statement of issues and invites submissions from interested parties by 22 January 2020. The final decision is scheduled for 19 March 2020.