The Australian Competition and Consumer Commission (ACCC) has blocked MicroStarโs proposed acquisition of keg lending rival Konvoy.
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. Itโs 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.
โOur 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,โ ACCC Commissioner Dr Philip Williams said in a statement.
โWithout competitors, MicroStar could increase prices above a competitive level and reduce services or quality of service for customers,โ Dr Williams said.
โHigher prices for keg pooling would have a significant impact on many independent brewers.โ
The ACCC noted that as Konvoy is in receivership its assets may ultimately be liquidated.
โOur 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,โ Dr Williams said.
โIf Konvoyโs assets are liquidated, they would likely remain in the market and be available to new or emerging rivals to MicroStar, or to independent brewers.โ
In a statement, Kegstar said it was โvery disappointed by the decision, we are confused and also concerned for the future of the [keg] pooling market within Australia.
โThroughout 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 Konvoyโs Receivers and numerous parties within the industry.
โWhile 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.
โAt this stage, we canโt 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.
โIf 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.
โIn New Zealand, we will continue to work collaboratively with the NZCC as their process progresses.โ
For its part, Konvoy said it was โassessing the available options and will provide further direction in due courseโ.
Ironically the business said it was on track for a record month.
โWe 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 youโve come to expect, and weโre pleased to report that weโre on track for a record month.
โYour 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.โ
Kegstar’s bid to buy Konvoy
Concerns about a shortage of kegs in New Zealand looked to have been averted after Kegstar concluded negotiations to purchase their financially-stricken rival Konvoy Kegs in July
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:
โWe are reaching out โฆ to inform you that negotiations around the sale of Konvoy have concluded, and that Microstar/Kegstar have been successful with their bid. As weโve 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.
โSupporting 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.
โWhilst 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.
โFor 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.โ
With Konvoyโs 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.