ACCC to investigate Lion’s buy of craft beer maker Stone & Wood

The ACCC will probe Lion’s deal to buy the maker of Stone & Wood, as another craft beer maker is swallowed by a multinational.

Stone & Wood’s brewery at Byron Bay. The ACCC is looking into its sale to Lion.

The insatiable thirst of global brewers to buy up independent Australian craft beer makers to seize some of the fastest-growing brands in the country will be the subject of an investigation by the competition regulator, as it looks into Lion’s grab for Fermentum, the maker of Stone & Wood.

The Australian Competition and Consumer Commission on Wednesday announced it would seek submissions and views from the nation’s craft brewers as it investigates this month’s deal for Lion to acquire the Byron Bay-based Fermentum and its portfolio of craft beers.

Fermentum’s range of brews is led by Stone & Wood, which has around 1 per cent market share of the beer market.

In the last few years dozens of craft beer brands, once proudly independently owned, have been swallowed up by brewing giants such as Lion, owned by Japanese multinational Kirin, and Carlton & United Breweries, owned by rival Japanese multinational Asahi.

The big brewers’ moves pose questions for Australian drinkers who turn to craft beer as they support small and independent players, but also raise the issue of the definition of a craft brewer. Are you a craft brewer if you are owned by a Japanese conglomerate that also makes cars or electronics?

The buying up of fast-growing craft beer brands by Lion and CUB comes as sales of the traditional beers that made them famous - such as Tooheys or VB - are flatlining.

CUB, now owned by Japan brewing giant Asahi, agreed in 2019 to buy start-up Gold Coast beer company Balter, which was part-owned by professional surfers Mick Fanning and Joel Parkinson. This added to its extensive craft beer shopping list that now sees it own Mountain Goat, 4 Pines, Green Beacon and Pirate Life.

Not to be outdone, Lion has spent around $1 billion picking up its own selection of craft brewers, led by the $380m purchase nine years ago of Little World Beverages, with its beer brands including Little Creatures and White Rabbit. In 2007 Lion paid $325m for Tasmanian premium craft brewer J Boag & Son and acquired Byron Bay Brewing.

A beer festival in Queensland, with Ellen McDonald riding a giant can of Sydney beer Young Henry’s . Picture: Richard Gosling

Lion’s play for Fermentum is just the latest move, and has triggered the ACCC investigation.

Lion and Fermentum primarily overlap in the of supply beer and cider products. Fermentum‘s brands include Stone & Wood, Fixation, Two Birds, Little Dragon and Sunny Seltzer. Lion’s brands include XXXX, Tooheys, Iron Jack, Furphy, Little Creatures, Hahn, James Squire and many others.

Since its establishment more than 13 years ago, Fermentum has spruiked its independence and craft beer credentials. Based in the alternative town of Byron Bay in New South Wales, it had decried the disappearance of craft brewers as they were bought up by major companies.

According to its latest financial report lodged with ASIC, Fermentum posted revenue of $62.3 million in 2020, up from $59.87m, while its profit weakened to $5.09m from $6.83m in 2020. The profit was hit by Covid-19 in the final quarter of fiscal 2020 but co-founder Jamie Cook said revenue and profitability has bounced back strongly through 2021 and that its annual sales were now fast approaching $100m.

The ACCC is now seeking the views of the industry over the proposed acquisition by Lion.

In a letter sent to industry players and published on the ACCC website, the regulator says its investigation is focused on the impact on competition.

“In particular, we are seeking your views on: whether Lion and Fermentum compete closely for the supply of beer, the likely impact of the proposed acquisition on the price or service levels for the supply of beer, and the availability of alternatives to customers and the ability of these alternatives to expand,” the form letter to be sent to industry participants reads.

The ACCC is seeking industry views on any independent beer suppliers it considers would be able to expand to replicate the volume and product offering of Fermentum (in particular Stone & Wood) if there was an increase in the price of Lion and/or Fermentum brands.

The regulator is also asking about the extent to which large customers such as supermarket chains currently supply craft beer, and the extent to which they could sponsor entry or expansion by rival suppliers. The regulator will consider too the impact of the proposed acquisition on the markets for the manufacture and supply of alcoholic cider, alcoholic seltzer and kombucha.

The closing date for submissions is October 5. The ACCC expects to announce its findings on December 9.