Tuesday, August 4, 2009

Tanzania to behead beer monopoly

August 4, 2009 - Business Report - By Ann Crotty

Any new mergers or acquisitions in the Tanzanian beer market would be subject to close scrutiny by that country's competition authorities, which are intent on preventing a repeat of the present monopoly market structure.

Godfrey Mkocha, the director-general of Tanzania's Fair Competition Commission, spoke to Business Report last week of his concerns about the monopoly situation created by the 2002 market-share agreement between SABMiller and Diageo.

His comments followed a statement by international drinks group Diageo that it had informed SABMiller it was terminating their Tanzanian market-share agreement.

Diageo made the move just hours after its Kenya-based subsidiary, East African Breweries Limited (EABL), signed a conditional agreement to acquire a "substantial" stake in Serengeti Breweries Limited (SBL), a Tanzanian company.

In terms of an arrangement put in place in 2002, EABL, which is controlled by Diageo, acquired a 20 percent stake in Tanzanian Breweries Limited (TBL), in which SABMiller controls 53 percent.

The Tanzanian government also held a stake in TBL.

As part of the agreement TBL undertook to brew and distribute EABL's products under licence in Tanzania, while EABL closed down its brewing and distribution operations in Tanzania. SABMiller also closed its operations in Kenya.

SABMiller is seeking a UK court injunction to stop Diageo terminating the arrangement.

The lawyers for the two sides will be back in court in London today.

Mkocha said that the closure of EABL's brewery in Tanzania had resulted in "800 employees losing employment at an hour's notice".

He added that the arrangement meant that TBL was left with almost 96 percent of the Tanzanian beer market.

If the Diageo/SABMiller joint venture is terminated Mkocha said any subsequent initiatives either party attempted to implement in Tanzania "would be subject to competition effects analysis".