Heineken set to become third largest pub group in the UK.

Posted on: July 17th, 2017

A consultation published this week by the Competition & Markets Authority (CMA) has appeared to pave the way for Heineken, the Dutch brewer and second largest beer producer in the world, to become the third largest pub group in the UK.

In December 2016, Heineken agreed a deal with the shareholders of Punch Taverns to acquire 1,900 pubs across the UK for a reported £403m. The transaction adds to the existing portfolio of approximately 1,000 pubs that Heineken already operates in the UK through its Star Pubs & Bars business.

Following the acquisition, in February 2017, the CMA announced that it was investigating the transaction as it had concerns that the purchase would result in a “substantial lessening of competition in certain areas of the UK”.

The CMA did not have concerns in relation to competition at a national level due to the combined portfolio of Heineken and Punch Taverns pubs only making up around 6% of the market share in the UK. Instead, however, the CMA raised potential concerns at a local level. The CMA found 33 local areas in which, following the acquisition, Heineken would control over 35% of the drinking establishments in a particular locality. The CMA was concerned that this lack of choice to drinkers may have caused prices to rise in these localities.

Heineken has now proposed to give undertakings to the CMA to dispose of 30 pubs, made up of 15 of the 1,900 acquired Punch Tavern pubs and 15 of Heineken’s existing portfolio predominantly in the areas identified by the CMA in Scotland, the Midlands and the North East. The CMA has invited interested parties to make their views known in relation to Heineken’s proposed undertakings but has stated that in the view of the CMA “the Proposed Undertakings are, in the circumstances of this case, appropriate to remedy, mitigate or prevent the competition concerns”.

Following a number of acquisitions in recent years by the large pub groups, for example the acquisition of Spirit Pubs by Greene King in 2015 (which also attracted the attention of the CMA), the leading three pub groups, Heineken, Greene King and EI Group (formerly Enterprise Inns), now operate around 20%, or 1 in 5, of the pubs in the UK. We think it is likely therefore that future acquisitions may also be investigated by the CMA to ensure the UK pub market remains competitive. We have experts at Coffin Mew who are able to advise on competition law issues and would welcome the opportunity to discuss any issues you may have with us.