Why the world’s largest Brewer has been dragged to the tribunal

The world’s largest brewer, AB InBev, and SABMiller have been accused by a South African local drink company, Distell of breaching their merger conditions of June 2016.

According to the Competition Tribunal, which is set to hear the matter on Thursday and Friday, September 12 and 13, it conditionally approved the merger between AB InBev and SABMiller in June 2016. The owner of the Amarula, Savanna and Hunter’s Dry, Distell participated in the hearing at the time and made substantial submissions relating to conditions that were ultimately imposed on the merger.

The tribunal was approached by Distell with allegations that the merged companies removed competitors’ advertising material from retail outlets, among others,  but the tribunal said in a statement, that the Commission found there was no breach.

Distell on another hand has now asked that a detailed review and full investigation should be conducted and the competition regulator said it will consider the submission during the hearing.

However, according to SABMiller, Distell’s complaint is an attempt to restrict competition and is unrelated to merger conditions. It says the complaints are baseless and should be dismissed.

The conditions imposed on the deal included the protection of any South Africa workers from retrenchment, diversifying certain aspects of SAB’s business to accommodate small enterprises, and localising the company’s product inputs.  In 2018, SAB told Parliament that the company’s R1bn public interest commitments were aimed at both complying with the Competition Commission conditions and aimed at long-term job creation, growth and development in South Africa.  

It would be recalled that this merger increased the market capitalization of SABMiller and created a brewing giant that dominates the global beer market. This merger was more enticing for AB InBev than for SABMiller since SABMiller was its major competitor. The merger was also beneficial for both companies in the emerging market such as Africa where SABMiller already had a foothold.

Currently, SABMiller is in about 15 African countries including Nigeria, South Africa, Tanzania, Ghana and Ethiopia. In Nigeria, it is among the top brewer and produces some of the cheapest quality beer and malt drinks such as Hero lager beer, Castle stout and Grand malt.

This merger had to pass several competition hurdles both in outside South Africa. It had to pass competition hurdles the EU, Australia, India, Botswana, Kenya, Chile and Mexico.