Loyal drinkers may have made AB InBev's beer-market abuse a one-off

15 May 2019 2:33pm

13 May 2019. By Nicholas Hirst.

AB InBev's 200 million-euro settlement with the European Commission will be closely studied by antitrust enforcers across Europe, who will see the upside of lowering the cost of citizens' weekly shop.

But while the probe has unearthed multiple examples of illegal conduct that helped keep beer prices high in Belgium, the unusual loyalty of beer-drinkers may have given the world’s largest brewer opportunities for abusive behavior that, in other sectors, would be punished by consumers before antitrust enforcers.

That’s because most household brands, from detergents to butter, can only dream of the kind of market power that allowed AB InBev to build a moat around its home market in Belgium.

EU officials today fined AB InBev for limiting imports of its Jupiler brand into Belgium, where it was sold at a mark-up compared with neighboring countries. The infringements ranged from redesigning Jupilers sold in the Netherlands to remove French labelling — which is required in the bilingual Belgian market — to making discounts conditional on the beers being sold in the Netherlands.

So hell-bent was AB InBev on blocking imports into Belgium, the commission officials found, that its efforts sometimes led it to undermine other corporate priorities.

For example, during the 2014 football World Cup Jupilers to be sold in the Netherlands were painted orange in support of the Dutch national team and carried the slogan “Jup Holland Jup” — a play on football song “Hup Holland Hup” — in the hope, officials discovered, that they would be effectively un-exportable to Belgium.

That was despite AB InBev being the official sponsor of the Belgian national team. And indeed, for last year’s World Cup, cans of Jupiler sold in Belgian shops were rebranded simply as “Belgium.”

— Food sector —

AB InBev ultimately settled the commission's probe and committed to include mandatory nutritional information in both Dutch and French on all beers sold in Belgium, France or the Netherlands for the next five years. The limited discount of 15 percent reflected that it started settling late in the process and only offered binding commitments to remedy one of the infringements.

The task force that led the inquiry into AB InBev was assembled in 2012 to investigate competition in the food sector. Despite the existence of a single rule book for the European Economic Area, food prices diverge significantly across the bloc.

For years, citizens and farmers have urged antitrust action against retailers and the makers of consumer goods. But EU-level action has been sporadic at best. Food markets are often seen as carved up along country borders and therefore the preserve of national enforcers.

Some national authorities, including Belgium's, have urged the commission to take action against practices that cross borders and are beyond the reach of smaller agencies. That’s what makes the AB InBev probe exceptional, effectively tying in three countries to one broader market.

The inquiry into AB InBev began, paradoxically, with a commission raid against one of the victims, Dutch supermarket Albert Heijn. Officials were searching for evidence that food or drinks brands may have been restricting the supermarket’s ability to offer Dutch prices at its Belgian outlets. The evidence collected led them to AB InBev, which owns the Jupiler, Leffe and Stella Artois brands.

— Loyal drinkers —

Its market shares in Belgium are particularly high: it sells 55 percent of all beers in the country, two thirds of which are Jupiler.

In the retail industry, beer brands enjoy rare levels of popularity and loyalty.

Supermarkets’ own brands represent just a fifth of the market in Belgium and their share is falling. They tend not to carry the generic label of the supermarket but are given specific branding, such as Cara-Pils for Colruyt's lager or Kaiser for Carrefour's. To succeed in the Belgian market, discount supermarkets like Lidl have been forced to sell branded beers.

According to the commission, which quizzed supermarkets on what brands they considered indispensable, that loyalty created an environment that was ripe for abuse.

When Albert Heijn imported Jupilers bought in the Netherlands into Belgium, AB InBev presented it with a choice: Curb the cross-border transfers of Jupiler or lose access to other “must-have” AB InBev brands.  

Commission officials concluded that AB InBev had a dominant position and that Albert Heijn had little choice but to accept.

But few brands elsewhere in the retail business enjoy that kind of market power, save perhaps for other major crowd-pullers like Coca Cola or Nutella. While all brands would love to engender that degree of loyalty among consumers, few are as successful as the big Belgian brewer.

In recent times, bargaining power has shifted from the brands to retailers and their buyer alliances.

So while today the commission sent a clear message to the industry, in practice only a few general counsels need order a stiff drink.

ABA 2019