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(i) the names of the merger parties;
Heineken International B.V. (“HIBV”) and GAPL Pte. Ltd. (“GAPL”).
(ii) a description of the transaction;
This notification relates to the acquisition by HIBV of the entire issued and outstanding ordinary share capital of GAPL, which HIBV (through its subsidiary Heineken Asia Pacific Pte. Ltd. which will be referred to as “HAP”) did not already hold (the “Acquisition”).
(iii) a description of the business activities of the merger parties worldwide and in Singapore;
HIBV
HIBV is an international investment holding company within the Heineken N.V corporate group of companies (“Heineken Group”). The Heineken Group is generally involved in the production, distribution, and sale of beer. In Singapore, the Heineken Group, which includes Asia Pacific Breweries (Singapore) Pte. Ltd. (“APBS”), is involved in the production, marketing, sale, distribution and supply of various brands of beer, ale, lager and stout in Singapore, including brands of beer which are held by the Heineken Group and third party brands which have been licensed to Heineken Singapore entities (HAP and other Singapore-registered corporates under the Heineken Group will be referred to as “Heineken Singapore”) for supply in Singapore.
GAPL
GAPL is registered in Singapore, and holds the brand licences for ABC Extra Stout, Guinness Draught and Guinness Foreign Extra Stout (“Guinness Stout”) in Singapore. GAPL does not directly produce or distribute the ABC Extra Stout and Guinness Stout brands in Singapore.
(iv) a description of the overlapping goods or services, including brand names;
The direct overlap in the activities of Heineken Singapore and GAPL is the licensing of brands of beer (including all ale, lager and stout) for the production, marketing, sale, distribution and supply in Singapore.
(v) a description of substitute goods or services;
There are no substitute goods for beer, as consumers of beer are generally not likely to switch to other types of liquor due to the product differentiation and inherent product characteristics of beer.
(vi) the applicant’s views on:
a. definition of the relevant market(s);
For completeness and for the purposes of this notification, the relevant market is the production, marketing, sale, distribution and global supply of duty-paid and duty-free beer (which includes all ales, lagers and stouts) to Singapore.
b. the way in which competition functions in this market;
Competitors are likely to continue to compete for customers with, or without, the Acquisition. Competition in the relevant market is intense, with the presence of many other major global beer brewers such as Carlsberg, and the increasing popularity of craft beer, which is easily imported into the relevant market in Singapore. Competitors compete in branding and image, pricing, taste and sponsorship of equipment.
c. barriers to entry and countervailing buyer power; and
Barriers to entry
It would be relatively quick and easy for a brewer or distributor to enter the duty-paid market. For a brewer or distributor to enter the market to gain market share, the brewer would have to invest on various items, such as advertising and promotions, listing fees, marketing support fees, etc. For example, a brewer or distributor wishing to sell its beers to establishments could easily hire promoters, or print flyers and posters for their beer brands. Such investments would usually apply equally to all existing brewers and distributors. A new market entrant may not remain for long if the brands are not competitive, which may be a function of the ability of the new entrant to market its brand in a manner that would appeal to customers.
It would be more difficult for a brewer to enter the duty-free market, as it is closed and less accessible as compared to the duty-paid market. The amount of time taken includes the time taken to negotiate contracts, build relationships with intermediate direct-customers, and market the brand. However, these entry costs are usually easily recoverable from sales within a three year period.
Countervailing buyer power
There is strong countervailing buyer power in the relevant market as the intermediate direct-customers of the merger parties are able to switch suppliers with relative ease based on the availability of various beer brands at competitive prices.
d. the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant).
The constraints on the coordinated and non-coordinated effects are similar:
(i) Global competitors: existing and potential competing beer brand owners, breweries and distributors in Singapore and globally who can, and do, supply and distribute beer in Singapore;
(ii) Barriers to entry not significant: there are no prohibitive barriers to entry for the import of beer for sale in Singapore. The import of beer for sale in Singapore is relatively easy and non-prohibitive in view of currency trends, economic outlook and various free trade agreements;
(iii) No change to the nature of competitive pressures: the Acquisition will not fundamentally change the consumption patterns of end-customers, or corresponding, intermediate direct-customers. Existing competitors will continue to subject the merged entity to price competition. There will also continue to be competitive pressure from potential entrants who could enter Singapore easily due to the low barriers to entry; and
(iv) Any coordination would be unsustainable in a buyer driven market: competition for beer sold through intermediate direct-customers and to end-customers takes place along a number of dimensions, such as price, taste, reputation, quality and branding. As these involve qualitative and subjective measures, it would be difficult for competitors to monitor and sustain any coordination.
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