Lion has been cleared to acquire Fermentum, parent of Stone & Wood, with the Australian Competition & Consumer Commission saying it is unconcerned about any potential reduction in competition.
Byron Bay-based Fermentum and Lion both manufacture a range of alcoholic and non-alcoholic beverages including beer, cider, alcoholic seltzer and kombucha. The deal was announced in September, subject to regulatory approvals.
Fermentum’s primary brewery operation is located in Murwillumbah, NSW and it has smaller plants at Byron Bay, Brisbane and Melbourne, with plans for another in the Northern Rivers, NSW. The company’s other brands include Fixation, Two Birds, Forest for the Trees, Little Dragon and Sunly Seltzers.
ACCC Commissioner Stephen Ridgeway said the ACCC was initially concerned the deal would remove a large, popular independent craft brewer that has plans to expand its capacity and potentially compete more aggressively against the two major brewers in Australia, being Lion and Asahi/Carlton & United Breweries.
“However, our investigation concluded that a wide range of alternative independent craft beers will remain available in the market even if the transaction goes through.”
The ACCC also decided that overall, the Fermentum brands do not compete closely with Lion’s products, as Fermentum’s products are generally in a higher price bracket and Lion’s craft-style brands are generally perceived as mainstream.
Before reaching its decision, the ACCC conducted “a large number of market inquiries” with customers, competitors and industry bodies, who reportedly did not raise strong competition concerns.
One concern was that the sale might restrict access for rival brands to beer taps in hospitality venues or shelf space in liquor stores. That is because Stone & Wood will no longer be eligible for the taps reserved for independent brewers post-acquisition.
“Consumer demand for independent beer has grown significantly over the last five years, and this has helped independents grow their presence at hotels, clubs and retailers,” Ridgeway said.
“We know from speaking to a wide range of venues, particularly those in metropolitan areas, that they typically reserve one or two taps for independent brands. Therefore, it is likely other independent brewers will be able to take up many of the taps that were previously Stone & Wood independent taps.”
Meanwhile, the ACCC says it continues to listen to industry concerns about exclusivity agreements with breweries and distributors that can limit access of independent brewers to compete in bars and on retail shelves.
Since deciding in 2017 not to take legal action over the issue at the time, the regulator has been closely monitoring any potential impact of exclusivity arrangements have on competition since then.
The ACCC made it clear that while it would not oppose the purchase of Fermentum by Lion, it would “closely review any further acquisitions in this industry”.
Another major boutique brewer is currently on the market after Coca-Cola Europ Pacific announced it was quitting the beer market, putting its Feral Brewing business up for sale.
