South Africa Competition Commission sets conditions for AB InBev’s acquisition of SABMiller

31-May-2016 - Last updated on 01-Jun-2016 at 14:41 GMT

AB InBev says it will ensure jobs are not lost, and small farmers are supported. Pic:iStock.

South Africa’s Competition Commission has recommended that AB InBev’s acquisition of SABMiller should be approved with conditions.

It says AB InBev will sell SABMiller’s shareholding in Distell within three years.

In a set of public interest commitments announced last month, AB InBev said it would ensure its acquisition of SABMiller would not result in job losses in South Africa. It will also create a R1bn ($63.7m) fund, part of which will support barley, hops, maize and malt farmers.

The deal will now go to the country’s Competition Tribunal for a final decision.

South African market

The Competition Commission said the proposed merger raises several competition and public interest concerns, prompting it to recommend a number of conditions to the Tribunal.

In South Africa, AB InBev supplies beer brands including Corona Extra, Stella Artois, Beck’s Blue and Budweiser. These are imported and sold through distributor DGB (Pty) Ltd.

Through its subsidiaries, SABMiller is involved in the manufacture, distribution and sale of alcoholic and non-alcoholic beverages. It is the largest producer of beer products in South Africa, with brands including Carling Black Label, Castle Large, Hansa, Castle Light and Peroni.

Through South Africa Breweries (SAB), it owns a hop production company (SAB Hop Farms), a barley farming company (SAB Barley) and a barley malting company (SAB Maltings).

Distell

South Africa Breweries holds a significant shareholding in Distell, the largest producer of ciders in South Africa (with South Africa Breweries being the second largest).

Under the merger, AB InBev would be entitled to appoint directors to the board of Distell.

“The Commission is of the view that this relationship creates a platform for the exchange of commercially sensitive information between AB InBev and Distell," said the Commission.

"Further, the ownership of an economic interest in a direct competitor is likely to dampen potential competition that could occur between AB InBev and Distell in relation to the production and supply of ciders in South Africa.

“In order to address the above concerns, AB InBev will divest the Distell shareholding within three years after closing date of the transaction.”

Coca-Cola and Pepsi bottling

SAB, through its subsidiary ABI Bottling, is a Coca-Cola bottler.

AB InBev bottles soft drinks for Pepsi in other jurisdictions.

“The Commission is concerned that these bottling arrangements for the two global leading soft drinks manufacturers could be a platform for coordination,” said the Commission.

“In order to address this concern, AB InBev has undertaken to ensure that its employees who are involved in bottling operations for Coca-Cola will not also be involved in its bottling operations for Pepsi, and there will be no sharing of commercially sensitive information between the two.”

Protecting small breweries

South Africa Breweries holds a significant interest in Coleus Packaging, the sole producer of tin metal crowns in South Africa. AB InBev has committed to supply tin metal crowns to third parties for a period of five years.

AB InBev has also said that where it supplies retailers and taverns with beverage coolers or refrigerators, it will allocate at least 10% of the space in one cooler to products from small beer producers.

Craft brewers in South Africa source the majority of their hops and malt requirements from SAB Hops and SAB Maltings. The Commission says AB InBev should continue to supply the small beer producers that SAB currently provides.