E-Malt. E-Malt.com News article: Tanzania: Tanzanian competition authorities investigating Tanzania Breweries allegedly anti-competitive behaviour

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E-Malt.com News article: Tanzania: Tanzanian competition authorities investigating Tanzania Breweries allegedly anti-competitive behaviour
Brewery news

The Tanzanian competition authorities are investigating allegations of anti-competitive behaviour against SABMiller's Tanzania Breweries Limited (TBL), The Business Report posted on November, 9.

The allegations have been made by Serengeti Breweries Limited (SBL), which is the global beer group's only competitor in Tanzania.

Last week, Godfrey Mkocha, the director-general of Tanzania's Fair Competition Commission (FCC) said claims that TBL had resorted to anti-competitive tactics were under investigation by his office.

The referral to the FCC is the latest move in a battle for the east African beer market that began four months ago. The battle has been fought not only in the streets of Dar Es Salaam, but in the courts of London as well as, briefly, in the parliament of Tanzania.

The final outcome is expected to involve a dramatic realignment of the players that dominate not only the beer market in Tanzania, but also in neighbouring Kenya.

SBL, which is owned and managed by Tanzanians, succeeded in growing its share of the local beer market from just 4 percent in 2002 to a high of 17 percent last year.

In the past 12 months it has lost an estimated 2 percent market share to TBL, which dominates the market with an 85 percent share. So impressive was SBL's performance that Castel, a major player in the African drinks market with an array of Africa-based joint venture agreements with SABMiller, entered into a series of discussions aimed at acquiring a stake in SBL.

However, in the light of the extensive market share arrangements that existed between Castel and SABMiller it was decided that SABMiller, rather than Castel, would pursue a tie-up with SBL.

In June SABMiller and SBL signed a confidentiality and exclusivity agreement to this end.

A few weeks later, however, Diageo decided to commence discussions with SBL.

At the time Diageo's subsidiary East African Breweries Limited (EABL) was involved in a market share arrangement with SABMiller that covered the Tanzanian and Kenyan beer markets.

The deal between SABMiller and Diageo involved EABL acquiring a 20 percent stake in TBL. In terms of the arrangement TBL undertook to brew and distribute EABL's products under licence in Tanzania. The arrangement saw EABL closing its operations in Tanzania and SABMiller closing its operations in Kenya.

In July, at the same time that Diageo signed a conditional agreement to acquire a substantial stake in SBL, it informed SABMiller that it was terminating their East African market share arrangement.

SABMiller immediately took the issue to the London High Court, which ruled that the agreement could not be unilaterally terminated.

And so, unless Diageo and SABMiller can come to another arrangement they will be bound together in East Africa until the end of next year.

In the meantime Diageo cannot acquire a stake in SBL.

At the same time the battle on the ground in Tanzania has heated up with SBL alleging that TBL salespeople are destroying its sales material and "manipulating" bar owners not to handle SBL products.

The FCC is trying to establish the truth of the allegations and whether they amount to illegal anti-competitive activities.

11 November, 2009

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