E-Malt.com News article: Australia: Restrictive supply contracts prevent small brewers from selling beer to pubs and hotels

The Australian Competition & Consumer Commission is investigating brewing giants CUB and Lion over their use of "tap contracts" to prevent hotel owners from selling rival beers, after a number of small operators complained that they could not sell their beer to pubs, The Australian reported on January 22.

The Commission has written to several small brewers asking for information "to better understand aspects of the supply conditions within the wholesale draught beer market" so it can assess whether "certain conduct" might be prohibited under the Competition and Consumer Act.

It is understood that the letter goes on to question the brewers on whether they have been unable to sell to venues because the publicans had signed restrictive supply contracts with the major brewers preventing them from stocking competitors' beers.

Queensland brewer Wade Curtis, who posted his letter from the ACCC on Facebook and Twitter this week, said he had complained to the regulator three years ago about being unable to sell his Four Hearts beer to pubs because all of their taps were under contract.

"I had just started my own craft brewing business and had a launch at a venue in Brisbane -- we got through two or three kegs, they were really excited and the manager was saying 'we'll have to have it on tap', but then they suddenly went cold on the idea because they said they had a 50-50 tap contract with Lion and CUB," Mr Curtis said.

In return for rebates on beer prices, the tap contracts generally stipulate a minimum proportion of sales that must be sourced from the relevant supplier -- often 60-80 per cent of volume, but sometimes up to 100 per cent.

By operating on a percentage basis, pubs with 100 per cent contracts cannot even stock competitors' beers if they install additional taps -- something several brewers contacted by The Australian said they had offered to pay for, only for publicans to refuse as it would breach their tap contracts.

One brewer in Melbourne said its craft cider was selling well at a Melbourne venue until CUB "bought" the venue's taps for its Bulmers cider brand. "They told us what they were paying and we just couldn't see how it was economic," the brewer said.

Tim Cooper, managing director at privately held South Australian brewer Coopers, said his company generally only took out contracts for event venues and festivals, and in pubs frequently had to fight for space with CUB and Lion.

"Because we're only 4.5 per cent of national beer volumes, we've historically been happy to have those taps that publicans keep aside for guest beers," Dr Cooper said. "But over the last year we've been more worried because we hear of cases where one or the other of the majors is trying to get contracts over 100 per cent of the taps.

"We understand we can't expect 20 per cent of the taps, but when publicans are being offered 100 per cent contracts then consumers will miss out."

But Dr Cooper said even pubs that had contracts allowing some "guest" beers to be sold could be restrictive for smaller operators.

"One of the large publicans in Sydney said to me a few years ago: 'Your Pale Ale is a problem - we've got it on only three taps but it's still infringing my 90 per cent volume contract with Lion.' And I said, 'That's presumably because your customers like drinking Pale Ale', and he looked at me as if that was utterly irrelevant from his point of view."

A CUB spokesman said the "vast majority" of pubs bought beer from several sources, and denied the company sought to lock up pub distribution to prevent smaller brewers from entering the market.

"As far as we are aware, all brewers, including CUB, offer some form of incentive to stock their products, such as volume rebates, maintenance of taps and equipment and so on," the spokesman said.

A spokesman for Australia's largest pubs group, ALH, said the firm did not have tap contracts at any of its 325 hotels.

An ACCC spokeswoman confirmed the regulator was making market inquiries on wholesale beer supply but declined to comment on the probe other than to say it did not involve a merger.


22 January, 2014