Brewing big guns are refused another drink

A JOINT venture between Edinburgh-based Scottish Courage and Carlsberg UK to take over the dispensing arm of a US brewing rival was blocked by competition officials today, in a move that could trigger a wider industry probe.

The news follows a provisional finding by the Competition Commission in January, when it said the brewers’ deal to buy equipment from Coors to dispense draught beer to pubs could increase their market power unfairly.

Scottish Courage, the brewing arm of Scottish & Newcastle, and its Danish peer formed their joint venture - Serviced Dispense Equipment Ltd (SDEL) - at the start of last year.

The business handles beer refrigeration, the running of pipes from cellars to bars and the fitting of beer taps on behalf of both companies. Industry customers were promised a technical "one-stop shop" for the dispensing of ale from cellars to pint glasses.

In today’s ruling on the proposed takeover of Coors’ technical services arm, officials said that "after considering alternatives, the Competition Commission has concluded that the only effective remedy to address the anti-competitive outcome is to prohibit the merger".

The commission noted that there were around 149,000 outlets in the UK with technical services equipment for draught beer dispensing valued at about 350 million.

It said the proposed tie-up would have increased SDEL’s share of that market and related servicing work to between 55 and 60 per cent, making it "several times larger" than it nearest rival.

Commission chairman and head of the SDEL/Coors inquiry group, Professor Paul Geroski, said: "Our view is that by blocking this merger it is more likely that a fully functioning market for technical services equipment and related servicing will develop. This will be good news for both pub companies and their customers."

He added: "Independent suppliers of these services are slowly starting to emerge but competition is currently limited, in particular, by the brewers’ strategy of bundling the provision of the equipment and services in with the price of beer, and their ownership and control of this equipment.

"We have suggested that the Office of Fair Trading consider whether an investigation into the pricing or supply of beer may be appropriate, with reference to these and related market features."

A Scottish Courage spokesman said: "We are clearly disappointed that the merger has been blocked. We felt it would have brought a number of benefits to the trade customer, including flexibility and better hours of operation. However, the existing joint venture we have with Carlsberg UK is unaffected."

SDEL agreed last August to buy Coors’ UK pub dispensing equipment and provide maintenance in the UK for the US brewer, whose British operation is based in Burton-on-Trent, Staffordshire.

Coors makes the UK’s biggest selling lager, Carling, as well as Grolsch and Bass. Scottish Courage encompasses S&N’s beer businesses in the UK and Ireland, and is responsible for a number of leading brands including John Smith’s, Kronenbourg and Newcastle Brown.