MicroStar, which operates as Kegstar in Australia and New Zealand, and Konvoy are the only suppliers of keg leasing services in this part of world. Keg lending allows brewers to rent kegs on a short-term basis to supply beer on tap to licensed venues. It’s an integral part of the market here but the ACCC said the proposed acquisition would make Kegstar too big a player in the market.
Konvoy hit financial troubles earlier this year when its main lender cut funding, and Kegstar stepped in to buy the business. The New Zealand equivalent of the ACCC, the Commerce Commission, is still taking submissions on the issue and is due to make its decision in December.
“Our investigation has found that MicroStar acquiring the assets of Konvoy, the only other provider of keg pooling services in Australia, would be likely to substantially lessen competition,” ACCC Commissioner Dr Philip Williams said in a statement.
“Without competitors, MicroStar could increase prices above a competitive level and reduce services or quality of service for customers,” Dr Williams said.
“Higher prices for keg pooling would have a significant impact on many independent brewers.”
The ACCC noted that as Konvoy is in receivership its assets may ultimately be liquidated.
“Our view is that if the proposed acquisition does not proceed, the Konvoy business is likely to continue, whether under new or existing ownership; however, we recognise that liquidation of the assets is also a potential outcome,” Dr Williams said.
“If Konvoy’s assets are liquidated, they would likely remain in the market and be available to new or emerging rivals to MicroStar, or to independent brewers.”
Kegstar disappointed and confused
In a statement, Kegstar said it was “very disappointed by the decision, we are confused and also concerned for the future of the [keg] pooling market within Australia.
“Throughout this entire process, we have provided extensive evidence and facts to the ACCC that directly addressed their concerns about the proposed transaction. This evidence was also substantiated by Konvoy’s Receivers and numerous parties within the industry.
“While New Zealand is a separate jurisdiction, it presents a very similar market structure and lack of density to Australia. The public submissions made to the NZCC by Konvoy representatives and external economists clearly outline why the proposed transaction is a positive outcome for the market.
“At this stage, we can’t confirm what will happen to the Konvoy business or assets. However, there is now a real risk that these assets, including kegs, may be split up and sold off to various parties. Which is what we were trying to avoid from the outset.
“If anyone within the industry is concerned about their keg supply, particularly over peak season, or is looking to engage with a reliable and sustainable partner, we encourage you to reach out to the team at Kegstar.
“In New Zealand, we will continue to work collaboratively with the NZCC as their process progresses.”
For its part, Konvoy said it was “assessing the available options and will provide further direction in due course”.
Ironically the business said it was on track for a record month.
“We want to assure you that this decision does not impact our day-to-day operations or our commitment to serving you. We continue to deliver the same service you’ve come to expect, and we’re pleased to report that we’re on track for a record month.
“Your business and partnership remain our top priority. We look forward to meeting your requirements through what we hope is a busy peak summer period for the industry.”
Background to the decision
Concerns about a shortage of kegs in New Zealand have been averted after Kegstar concluded negotiations to purchase their financially-stricken rival Konvoy Kegs.
The two companies controlled the keg rental market in New Zealand and Australia until Konvoy went into receivership earlier this year.
Kegstar, which is owned by global business Microstar, still needs to gain approval from the Commerce Commission here and its Australian counterpart, ACCC.
In a statement, Kegstar said:
“We are reaching out … to inform you that negotiations around the sale of Konvoy have concluded, and that Microstar/Kegstar have been successful with their bid. As we’ve stated since the start of this process, our intention of this proposed acquisition is to build density within the market, so that we can become an efficient and sustainable supplier, and ensure keg pooling is an option for all brewers into the future.
“Supporting the ANZ craft industry is in our heritage, and we are always aware that brewers have choices and that keg ownership or leasing remains a viable and important option to the industry. Whilst the bid has been accepted, the transaction is conditional on a decision from the ACCC and NZCC, following their public inquiry and reviews.
“Whilst the ACCC and NZCC conduct their inquiries, it is business as usual for Kegstar. Our focus has always been ensuring kegs are available to brewers when they need them, so they can continue to get their products into the market, and this will not change. To support brewers and ensure we continue to achieve this goal, we can also announce that we have additional kegs getting on the water very shortly and landing in [Australia and New Zealand] over the coming months.
“For those brewers that we do not currently service, our goal is to earn your trust and support you through any transition period, with a focus on continuity of supply. We will continue to provide clarity to the market as and when we can.”
With Konvoy’s future in the balance since March, there were concerns in New Zealand that there might not be enough kegs to supply the market.
Breweries traditionally owned their own kegs, but it was always tough to keep tabs on them, so keg rental business such as Kegstar and Konvoy offer an alternative solution, with kegs pooled and distributed as required.