South Africa: Distell loses round one of its fight against AB InBev
Brewer Distell’s attempt to get its rival, AB InBev, declared in breach of its merger conditions with SABMiller has fizzled out. But it’s not giving up just yet.
In its complaint lodged with the Competition Commission, Distell accused the merged entity of removing “competitors’ advertising material from outlets”. But the Competition Commission found that “the conditions had not been breached,” according to the Competition Tribunal.
Distell is pursuing the matter further with the Competition Tribunal.
Distell spokesperson, Dennis Matsane says the company has asked the Tribunal “to issue a notice of apparent breach of merger conditions and that the conduct relied on by Distell be fully investigated.”
Megabrew, mega discontent
In June 2016, the Tribunal granted conditional approval for the AB InBev and SABMiller tie-up in what was dubbed the “megabrew” deal. At the time, the transaction was valued at $100bn, resulting in the creation of the world’s biggest brewer with annual sales of $55bn.
Before the deal, AB InBev was the largest beer brewer globally, while SABMiller occupied second place. The transaction triggered competition concerns in multiple jurisdictions because AB InBev was the dominant brewer in the developed world, while SABMiller had conquered emerging markets.
The deal resulted in Budweiser, Stella Artois, and Corona being brought under the same stable as Peroni, Grolsch, and Pilsner Urquell, which accounted for one-third of global beer volumes.
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Various quarters opposed the merger, including South African labour unions which were concerned about job losses and a staff share scheme.
- In particular, the Food and Allied Workers Union (Fawu) fought hard to ensure SABMiller’s workers received an advance payout immediately after the deal was concluded instead of waiting until 2020, when the ‘Zenzele’ empowerment scheme was scheduled to vest.
In contrast, more than a thousand SABMiller managers stood to receive a $1.9bn early payout once the transaction was approved. Fawu won the day and was granted a concession.
During that time, Distell was among the parties in South Africa which made submissions to competition authorities, asking for conditions to be attached prior to the deal’s approval. These were subsequently adopted and imposed on AB InBev and SABMiller.
In December 2016, AB InBev sold its entire indirect stake in Distell to the Public Investment Corporation for an undisclosed amount.
- In early 2017, the sale was concluded and formed part of the merger conditions imposed for the megabrew deal.
The Competition Tribunal says Distell is asking it “to review and set aside the Commission’s finding”.
For its part, SABMiller views the complaint as Distell’s attempt “to restrict competition and is unrelated to the merger conditions”. Furthermore, “the complaints have no merit and should be dismissed,” according to SABMiller.
The Tribunal heard the matter in mid-September and an outcome is pending. Distell is waiting to hear from the Tribunal before commenting further.
In its recently published Q1 trading update, Distell says tough trading conditions are persisting in South Africa, “where consumer spending remains subdued resulting in an adverse effect on the broader retail sector”.
In the rest of Africa:
- Distell “achieved single-digit revenue growth off [of] a high comparative period. The previous period included stronger sales revenues from both Namibia and Zimbabwe which have since been affected by varying levels of challenging economic conditions.”
- “Key markets such as Kenya, Botswana, Zambia and Mozambique continue to grow double-digit revenues and volumes.”
- “Our Kenyan operations are expected to deliver on previous trends while our new production facility in Nigeria is demonstrating early, commendable performance.”
In South Africa, Distell vowed to “continue to defend and grow its domestic market share”, in what appears to be a pointed remark at its competitors.
Bottom line: Distell is vowing to defend its domestic market share as it attempts to accuse AB Inbev of anti-competitive behaviour.