Asahi’s deal to acquire P&N Beverages in Australia is in jeopardy after the country’s competition watchdog raised serious concerns about its effects on all areas of the soft drinks market.

The Australian Competition & Consumer Commission (ACCC) said today (2 December) that it is concerned the deal will lead to price rises for retailers and consumers due to a lack of competition in key areas of the soft drinks sector.

It has called for more feedback from the industry and delayed a final decision on the deal until February. However, the regulator’s preliminary report suggests that Asahi’s prospects of securing approval for its AUD364m (US$352m) takeover of P&N are slim.

Japan-based Asahi already owns Australia’s second biggest soft drinks player, Schweppes Australia. P&N is the market number three, although both companies are dwarfed by the dominance of Coca-Cola Amatil.

The ACCC said that it is concerned that a Schweppes, P&N tie-up will wipe out competition in carbonated soft drinks (CSDs). Private label CSDs is the biggest area of concern.

“The merged entity would likely face no major competitors for the supply of these products and, unlike P&N, would have a strong incentive instead to favour its higher margin branded products by increasing the price of its private label CSDs,” said the ACCC.  

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“The ACCC is also concerned that the proposed acquisition would result in the removal of an effective third competitor to Schweppes and Coca-Cola Amatil for the sale of branded CSDs,” it said. The watchdog added that the deal “may bring about a greater risk of coordination of pricing decisions by the remaining firms”.

It flagged similar potential pitfalls in juice and bottled water.

In addition, Asahi has told the regulator that it will not be able to supply private label colas to retailers if it acquires P&N. Schweppes already bottles Pepsi-Cola in Australia. “This will remove a significant supplier of private label cola CSDs from the market,” said the ACCC.

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