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Regulators oppose Asahi’s P&N Beverages takeover

The proposed acquisition of P&N Beverages by Japanese beverage giant Asahi has met with opposition from the Australian Competition & Consumer Commission (ACCC).

With Asahi already owning Schweppes Australia, which is bought from Cadbury in 2008 for just over $1 billion, the ACCC has ruled that the $364 m bid for P&N would leave too little competition at the lower end of the carbonated soft drinks market.

"At the heart of the ACCC’s concerns is that the proposed acquisition will remove a vigorous and effective competitor in the markets for the supply of carbonated soft drinks (CSDs) and cordial," ACCC chairman Graeme Samuel said.

Since acquiring Schweppes Australia, Asahi owns one fifth of the market share, behind Coco-Cola Amatil, which holds close to three quarters.

"The proposed acquisition would remove P&N as a vigorous and effective competitor in the CSD market and would result in Asahi and Coca-Cola Amatil being the only remaining significant competitors in the CSD market."

If Asahi were to take on P&N, it would greatly increase the Japanese company’s market share and would provide them with the opportunity to increase the prices of this sector.

"Since Asahi will face little competition from other suppliers in relation to the lower priced value CSDs, Asahi would have the ability and incentive to increase the price of P&N’s branded and private label CSDs post acquisition.

"The proposed acquisition would weaken the constraint provided on the Schweppes range of CSDs, allowing Asahi to also increase the price of its Schweppes range of CSDs," Mr Samuel said.

Further, following the acquisition, Asahi will lose the incentive to supply private label CSDs in competition with P&N.

Mr Samuel said the ACCC concluded that the acquisition would remove a strong competitive constraint in the cordial market.

"P&N has been successful in growing its market share through discounting and product innovation. While there are other sources of competition in the cordial market such as Golden Circle and private label cordial, the ACCC concluded that these constraints would be insufficient to replace the competition lost from the removal of P&N.

"The ACCC considered that the proposed acquisition will allow Asahi to increase the price of its Cottee’s cordial product."

The ACCC has given consideration to whether the competition concerns can be resolved, and has concluded that the appropriate decision is to oppose the acquisition.

 

Image courtesy of https://www.adelaidenow.com.au
 

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