Whose shout is it again?

Here is a handy summary of the manoeuvring in the Australian drinks markets in recent months. The current offers on the table are:

– NZ brewer Lion Nathan (46% owned by Japanese brewer Kirin) pitching for Coca Cola Amatil (who bottle and distribute soft drinks and beers and are roughly 30% owned by US firm Coca Cola Company) (discussed earlier here).

– Japanese brewer Asahi bidding for the Aussie Schweppes business (but potentially scuppered by Coca Cola Company) (discussed earlier here).

The Asahi offer throws up the possibility that the firm may either expand its relationship with Aussie brewer Fosters’ or go head to head with them. The firm claims to be biding its time until Fosters’ sorts out whether it wants to stay in the wine business.

Meanwhile, a raft of potential international bidders remain on the horizon for Fosters’ beer business if they can dump the less profitable (and less stable) wine arm, including Moors Colson, SAB Miller, presumably the aggressive Anheuser-Busch Inbev or even Coca Cola Amatil (if they can survive the Lion Nathan bid).

This is well and truly a game of chess in terms of the moves and countermoves we are likely to see over the next 6 months. The wild cards in the pack are (i) the competition regulator in Australia (the ACCC), who might deem any one of these current proposals (or any move by Coca Cola Amatil) unacceptable on the basis that rivalry will be reduced,and (ii) the Foreign Investment Review Board could deem an international acquisition of Australian assets to be outside the national interest. The latter is extremely unlikely given the current level of international involvement.

It still remains very unclear whether if there are clear and valuable synergies here.

Are there genuine economies of scope between the distribution of soft-drinks and beer?

Fosters’ experience seems to indicate that the wine and beer don’t mix well, despite sharing the same retail outlets.

Why would we expect the non-alcoholic and alcoholic product lines to gel any more effectively?

Or, in the end, is this just a simple grab for a currently very profitable, oligopolistic Aussie beer market?

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More action brewing?

The moves in the usually dormant Australian brewing sector just keep coming. A month or so after Lion Nathan made a play for Coca Cola Amatil (discussed in this post), we see another takeover, this time from Japanese brewer Asahi.

Asahi look have puchased the Australian Schweppes business from Cadbury. This gives them access to various soft drink, bottled water and cordial brands, including the bottling and distribution rights to Pepsi and Gatorade stables down under.

On all accounts, Asahi outbid fellow Japanese beer giants Suntory and Kirin, as well as Coca Cola Amatil (CCA). It is still possible the US Coca Cola Company (CCC) could scupper the deal with a counter offer (due to a “last rights” arrangement dating back to the late 1990s). It is unclear whether CCC will exercise this right, nor is it clear how Australian competition regulators would view a greater Coca Cola presence in the market. Also CCC would need to offload the Pepsi business thus reducing the gains from any purchase.

While soft drinks (and other non-alcoholic beverages) are undergoing such a shakeup, the big questions remains whether Asahi are planning to also expand into brewing down here. Currently, their beers are distributed through Fosters in Australia. It is conceivable that Asahi could expand into their own brewing and distribution using the Schweppes facilities and value chain. Asahi have been innovators before. Their launch of the Super Dry product is much studied, as it launched from a minor to a major player in the Japanese market.

Or perhaps they are just going to bombard our market with a huge range of soft drink products from Japan. Canned coffee anyone?